Alibaba and Amazon Entry to Accelerate E-Commerce in Pakistan?
Media reports suggest global e-commerce behemoth Amazon.com could purchase substantial stake in Pakistan's e-commerce site Clicky.pk. This comes on the heels of a Bloomberg story that quoted anonymous sources indicating Chinese e-commerce giant Alibaba is in serious negotiations to acquire Daraz.pk. Online sales in Pakistan's $152 billion retail market are doubling every year, according to Adam Dawood of Yayvo online portal. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.
Amazon's Presence in Pakistan:
Amazon already owns about 33% stake in Clicky.pk through its acquisition in 2017 of Dubai-based online retailer Souq. Souq acquired this stake in the Pakistani company in late 2016.
In March this year, Bloomberg cited sources saying that Alibaba and Daraz.pk are negotiating a a price for the acquisition. It said that the "deliberations are an early state and no decisions have been made".
E-Commerce Market Growth:
Online sales in Pakistan's $152 billion retail market are growing much faster than the brick-and-mortar retail sales. Adam Dawood of Yayvo online portal estimates that e-tail sales are doubling every year. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.
E-commerce in Pakistan is being enabled by increasing broadband penetration and new online payment options. Ant Financial, an Alibaba subsidiary, has just announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.
Payment Options:
Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.
Summary:
Online sales in Pakistan's $152 billion retail market are doubling every year, according to Adam Dawood of Yayvo online portal. The country's retail market is the fastest growing in the world, according to Euromonitor. Expanding middle class, particularly millennials with rising disposable incomes, is demanding branded and packaged consumer goods ranging from personal and baby care items to food and beverage products. Strong demand for fast moving consumer goods is drawing large new investments of hundreds of millions of dollars. Rapid growth in sales of consumer products and services is driving other sectors, including retail, e-commerce, paper and packaging, advertising, media, sports and entertainment. Potential downsides of soaring consumption include increased amount of solid waste and decline in domestic savings and investment rates.
Related Links:
Haq's Musings
Pakistan Retail Sales Growth
Advertising Revenue in Pakistan
Pakistan FMCG Market
The Other 99% of Pakistan Story
PSL Cricket League Revenue
E-Commerce in Pakistan
Fintech Revolution in Pakistan
Mobile Broadband Speed in Pakistan
Amazon already owns about 33% stake in Clicky.pk through its acquisition in 2017 of Dubai-based online retailer Souq. Souq acquired this stake in the Pakistani company in late 2016.
E-Commerce Market Growth:
Online sales in Pakistan's $152 billion retail market are growing much faster than the brick-and-mortar retail sales. Adam Dawood of Yayvo online portal estimates that e-tail sales are doubling every year. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.
E-commerce in Pakistan is being enabled by increasing broadband penetration and new online payment options. Ant Financial, an Alibaba subsidiary, has just announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.
Payment Options:
Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.
Summary:
Online sales in Pakistan's $152 billion retail market are doubling every year, according to Adam Dawood of Yayvo online portal. The country's retail market is the fastest growing in the world, according to Euromonitor. Expanding middle class, particularly millennials with rising disposable incomes, is demanding branded and packaged consumer goods ranging from personal and baby care items to food and beverage products. Strong demand for fast moving consumer goods is drawing large new investments of hundreds of millions of dollars. Rapid growth in sales of consumer products and services is driving other sectors, including retail, e-commerce, paper and packaging, advertising, media, sports and entertainment. Potential downsides of soaring consumption include increased amount of solid waste and decline in domestic savings and investment rates.
Related Links:
Haq's Musings
Pakistan Retail Sales Growth
Advertising Revenue in Pakistan
Pakistan FMCG Market
The Other 99% of Pakistan Story
PSL Cricket League Revenue
E-Commerce in Pakistan
Fintech Revolution in Pakistan
Mobile Broadband Speed in Pakistan
Comments
Sarfaraz A. KhanUpdated March 26, 2018
https://www.dawn.com/news/1397446
Pakistan’s e-commerce market has witnessed phenomenal growth recently.
The number of registered e-commerce merchants has risen by 2.6-times and e-commerce payments have surged 2.3-times in a span of just twelve months, as per a State Bank of Pakistan (SBP) report. But this is still a young market with significant room for growth.
Pakistani businesses have embraced e-commerce. Hundreds of retailers, ranging from clothing outlets to electronic equipment stores, are now using websites to sell goods to customers.
The emergence of several online marketplaces, such as Daraz.pk and OLX Pakistan, has made it easier for retailers to sell goods on the web. At the same time, a number of new online businesses have also propped up.
As per the SBP’s Payment Systems Review (Q2FY18), there were a total of 344 e-commerce merchants in the country registered with banks at the end of 2016. By the end of 2017, that number had climbed to 905.
This growth was accompanied by a surge in e-commerce transactions from these merchants from Rs3.9 billion in the last three months of 2016 to Rs9.1bn in the last three months of the previous year. The central bank’s report also indicates that around 800 million payment transactions totalling Rs4.5bn were booked in the last three months of 2017. That’s also considerably greater than the Rs2bn e-commerce payments that happened in the same period of 2016.
The actual value of e-commerce sales, however, is likely several times larger than the above-mentioned numbers. That is because the central bank’s report only shows those transactions that occurred through debit or credit cards.
But Pakistani consumers mainly use the cash-on-delivery (COD) system to buy goods online. As per one estimate, almost 85 per cent of online sales occur through COD. Using this, we can speculate that roughly Rs25.5bn e-commerce payments may have occurred in the Oct-Dec period through the COD system.
It wasn’t long ago when the Pakistan Telecommunication Authority noted in its annual report for the previous fiscal year that the size of Pakistan’s e-commerce market could grow from $60m-$100m in 2015 to $1bn by 2020.However, industry experts now believe that the country could hit the key milestone by as soon as this year.
If the country continues to witness e-commerce sales of Rs30bn in every quarter from electronic card and COD system, just as it likely did in the last three months of 2017, then the total sales for the ongoing fiscal may clock in at Rs102bn, or $1.1bn at the current exchange rate. If however, Pakistan witnesses an increase in online sales, which could be driven by the Eid shopping season, then the market could go way past the $1 billion threshold in 2018.
At $1 billion, however, the size of Pakistan’s e-commerce market will still be tiny. Global e-commerce retail sales are expected to be around $2.8 trillion in 2018, as per data from Statista, a provider of market and consumer data.
China is the world’s largest e-commerce market where the online retail sales are forecasted to be around $600bn for 2018, followed by the US with $461.5bn of expected sales. India could report $25bn of retail e-commerce sales in the current year.
That being said, Pakistan is still a young e-commerce market where less than one-fifth of the total population uses the internet.
As per latest data from Internet Live Stats, the global internet penetration rate is around 46pc. In developed markets like the US, the metric is over 80pc. In Pakistan, however, a little less than 18pc of the population has access to the internet. That’s less than half of the global average, which means that there’s significant room for growth although internet penetration in the country has already grown significantly from just 8pc in 2010.
https://www.reuters.com/article/us-rocket-internet-divestiture-alibaba/alibaba-buys-rocket-internets-pakistan-ecommerce-platform-daraz-idUSKBN1I90N0
Alibaba Group (BABA.N) has bought the entire share capital of Rocket Internet’s (RKET.DE) South Asian ecommerce platform Daraz Group, Rocket Internet said on Tuesday.
Daraz, founded in Pakistan in 2012, operates online marketplaces in Pakistan, Bangladesh, Myanmar, Sri Lanka and Nepal. The unit will continue to operate under the same brand following the sale to Alibaba, Rocket said.
https://asia.nikkei.com/Business/Companies/Alibaba-s-entry-in-Pakistan-hailed-as-boost-for-digital-economy
KARACHI -- Alibaba Group Holding's recent purchase of a Pakistan-based online retailer has positioned the Chinese technology conglomerate to make inroads in e-commerce across South Asia, but the acquisition has raised expectations of robust growth in an industry that many experts say performs well below its potential.
Gaps such as the absence of a global online payments system can now be filled through Alibaba's Alipay service, said Shuja Rizvi, a Karachi based senior stock market analyst at Al-Hoqani Securities. "With the entry of a major player like Alibaba, Pakistan's policies will be molded to face global competition and our environment will hopefully improve," Rizvi said in an interview with the Nikkei Asian Review, citing one of the most commonly discussed benefits of Alibaba's arrival in the country.
Alibaba announced earlier this month a deal to buy Daraz Group, a Pakistani digital marketplace company, for an undisclosed amount. Since it was founded in 2012, Daraz has steadily expanded its services to Myanmar, Bangladesh, Sri Lanka and Nepal, say analysts who regularly track the e-commerce sector.
The acquisition comes as Pakistan prepares to receive more than $60 billion in Chinese investment under the China-Pakistan Economic Corridor -- a cornerstone of Chinese President Xi Jinping's Belt and Road Initiative. Alibaba's arrival in Pakistan also has been preceded by significant growth in cellular phone services and high-speed internet across the country in recent years, analysts say.
According to the Pakistan Telecommunication Authority, or PTA, the official regulator of the telecom sector, more than 73% of Pakistan's population, or roughly 149 million people, have cellular phone subscriptions. Especially important for the growth of digital businesses is the estimate of 56 million people, or more than 27% of the population, who subscribe to broadband services -- a key figure indicating the number of internet users, many of whom will be potential future online customers.
"Today, the number of internet users in Pakistan are more than the entire population of many countries around the world," a senior official with the Ministry of Information Technology and Telecommunication in Islamabad who requested anonymity because he was not allowed to speak to journalists, told Nikkei. "For investors like Alibaba, there is fertile ground for a strong future expansion."
Other PTA officials said that online retail businesses in Pakistan have much room to grow as they have an advantage over traditional retail outlets that have to invest heavily in commercial real estate to sell their products to consumers.
"In the most prized commercial markets of Pakistan -- in big cities like Karachi, Lahore or Islamabad -- rents have more than doubled for the top-end premises just in the last 10 years," said the Ministry of Information Technology official. "And the overhead costs -- especially rents -- continue to rise."
Barkan Saeed, chairman of the Pakistan Software Houses Association, the main representative body of the country's software industry, welcomed Alibaba's purchase of Daraz and entry into the country "as a major milestone" for Pakistan's e-commerce sector. Saeed said that while the government estimates the annual value of e-commerce transactions in Pakistan at approximately $600million, the actual figure could be five times that amount.
Alipay, a subsidiary of Hangzhou-based Ant Financial, has been cleared by the Competition Commission of Pakistan (CCP) to acquire a 45 percent stake in Pakistan's Telenor Microfinance Bank.
The investment of over US$184 million will expedite widespread adoption of digital payments in Pakistan. With internet penetration continuously on the rise, there are an estimated 60 million subscribers of 3G and 4G in the country that can become potential users of the service.
Several mobile payment services are presently operating in Pakistan. Primarily, these have been offered by telecom operators with a large number of cellular subscribers. However, limited international application has kept the penetration rate of the payment portals relatively low. Entry of Alipay, the world's largest mobile payment platform, will intensify competition higher, improve the quality of service and reinvigorate the entire landscape of the industry.
Pakistan's growing young population makes it suitable for embracing cashless payments on a large scale. People under the age of 30 form 64 percent of the population who are always the most likely to take up any new technology. On top of that, high cellular phone use will be a facilitative factor, since the mobile-first strategy for internet-based businesses is very valid in Pakistan.
Commencement of Alipay's operations in Pakistan will also provide a major push to e-commerce. eBay CEO Devin Wenig recently identified emerging economies like Pakistan as the fastest growing e-commerce hubs of the world. The trend is spreading like wildfire across the country with new online shops emerging constantly. A reliable e-payment gateway with worldwide collaborators is all that Pakistanis need to streamline their online transactions.
Alibaba had already acquired Pakistan's leading e-commerce platform Daraz. Utilizing the reach of Alibaba, Pakistani sellers will now be able to connect with global buyer.
The digital payment boom will be most beneficial for small and medium-sized enterprises that form the backbone of the national economy. Many of these businesses face difficulties in financial transactions due to being located in rural areas. Alipay might prefer to focus on them as the Pakistani government wants to reduce their business costs and difficulties.
Across the border in China, a new policy is on the cards to increase e-commerce purchases from overseas. Around 63 additional categories are being added to a product list of what can be imported duty-free through online platforms. Moreover, 22 cities, such as Beijing, Nanjing and Shenyang, are also being included in e-commerce pilot zones.
With several food items in the revised e-commerce import list, there is much potential for Pakistani farm produce. Fruits like mango and the mandarin hybrid kinnow can gain extended reach in the Chinese food market and the recent push to increase meat and poultry production could further boost Pakistan's exports.
The targeted online shoppers in China are increasingly focusing on foreign brands. Large businesses and premium brands from Pakistan can reach out to these buyers through Tmall Global – another Alibaba operated e-commerce platform allowing Chinese consumers to purchase products from abroad. Pakistan's small to medium businesses might not have the logistic prerequisites for this platform, but international-standard large companies certainly can.
Ant Financial is coming to Pakistan at a time when trade between Pakistan and China is touching new heights through the flagship project of Belt and Road Initiative (BRI) known as China Pakistan Economic Corridor (CPEC).
https://www.bloomberg.com/news/articles/2021-12-01/alibaba-s-south-asian-partner-aims-to-double-orders-every-year
Daraz has invested more than $100 million in Pakistan and Bangladesh over the past couple of years. Some of that has gone into building its own delivery network. It now handles about 70% of its deliveries and has delivered more than 150 million packages since it started. It plans to offer logistics as a separate service as well, and is testing buy-now-pay-later services in Sri Lanka before a wider rollout.
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Daraz Group, the e-commerce retailer backed by Alibaba Group Holding Ltd., expects to continue doubling retail volume over the next 5 years thanks to its lead in emergent South Asian markets.
Daraz should maintain a compound annual growth rate of about 100% in e-commerce deliveries, sustaining the pace of the past four years, Chief Executive Officer Bjarke Mikkelsen said in an interview. Revenue growth has also doubled on average in the same period, he said.
South Asia’s e-commerce markets are picking up as venture capital firms ramp up investment. Online retail accounts for just about 2% of the gross domestic product in the five countries in which Daraz operates -- Pakistan, Bangladesh, Sri Lanka, Myanmar and Nepal -- compared with 20% in Indonesia, the former Goldman Sachs Group Inc. banker said.
“We really see the digital economy take off,” Mikkelsen said at his Karachi office overseeing the Arabian Sea. “There’s plenty of runway.”
Daraz has amassed 35 million users in the five countries and expects to hit 100 million active customers well before 2030, he said. They will feed into Alibaba’s target of reaching 2 billion global consumers by 2036, about a quarter of the world’s current population. The Chinese e-commerce leader has built a portfolio of companies from Turkey to Russia and Asia to help achieve the target.
There is no active plan but “it’s a possibility” that more investors may be brought into the company in the future, said Mikkelsen. Alibaba-backed Trendyol drew capital from SoftBank Group Corp. and two Gulf wealth funds in August.
Daraz was the largest player in South Asia excluding India, said Ali Farid Khawaja, chairman at KTrade KASB Securities Ltd. “In Pakistan, there is no e-commerce company that even comes close to them,” he said. “Besides the scale, they are the only one which has made supporting infrastructure, including warehouses and logistics.”
Daraz has invested more than $100 million in Pakistan and Bangladesh over the past couple of years. Some of that has gone into building its own delivery network. It now handles about 70% of its deliveries and has delivered more than 150 million packages since it started. It plans to offer logistics as a separate service as well, and is testing buy-now-pay-later services in Sri Lanka before a wider rollout.
But competition is intensifying. Pakistan’s startup industry has drawn more than $300 million of funding this year, most of that going to potential rivals in e-commerce.
“Even though there are competitors coming up in different verticals, our biggest growth opportunity is from the digital economy to grow,” Mikkelsen said. The industry is “still at an early stage.”