Tuesday, April 10, 2018

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

6 comments:

Riaz Haq said...

Pakistan’s booming e-commerce market is just getting started
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.

Riaz Haq said...

Pakistan now has 53 million 3G and 4G subscribers, PTA

https://www.techjuice.pk/pakistan-now-has-53-million-3g-and-4g-subscribers-pta/

The number of internet users in Pakistan is rising fastly. According to report by Pakistan Telecommunication Authority (PTA), the number of 3G and 4G customers in Pakistan reach 53.24 Million by the end of March 2018. PTA observed the number of mobile users in Pakistan reached 149.10 million by March 2018 as compared to 147.204 million at the end of February 2018.

If you look at the individual mobile network count then Jazz is a top-notch telecom operator and its total count for 3G users stood at 14.98 million by March, compared to 14.88 million by end of February 2018, marking an increase of 0.1 million. Jazz 4G user numbers jumped from 2,590,092 by end February 2018 to 3,155,686 by 31 March.

Zong 3G subscribers elevated from 8.893 million by 28 February 2018 to 9.187 million by 31 March, whereas the variety of 4G customers jumped from 5,830,231 by February 2018 to 6,373,061 by 31st March.

The count of 3G customers of Telenor community jumped from 10.878 million by the end of February 2018 to 10.928 million by the end of March 2018. The number of 4G customers jumped from 2,154,238 by February 2018 to 2,451,057 by end-March.

Ufone added 0.147 million 3G users on its network during the month of March and the total count reached to 6.165 million by end-March compared to 6.018 by end of February 2018.

Teledensity for cellular mobiles reached 74.98 % and broadband subscribers reached 55,558,824 by the end of March in comparison with 53,554,231 by the end of February 2018.

The telecom sector of Pakistan has undergone through huge transformations after the arrival of 3G and 4G services in the country. However, the Pakistani government is going to introduce 5G technology as well that will be at least 100 times faster than the speed of 4G technology. The government has finally allowed the Pakistan Telecommunication Authority (PTA) to let telcos conduct 5G trials in Pakistan.

Riaz Haq said...

#Alibaba buys Rocket Internet's #Pakistan #ecommerce platform Daraz.

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.

Riaz Haq said...

#Alibaba's entry in #Pakistan hailed as boost for #DigitalEconomy. Experts predict #Islamabad likely to lower high taxes after #Chinese e-retailer's investment. #ecommerce #fintech #Daraz #AliPay #Telenor #Telecom #payments

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.

Riaz Haq said...

#Technology firms Avanza Group & Premier Systems announce investment of $5 million in the #payment #gateway to connect individuals with merchants and banks via joint venture as Avanza Premier Payment Services (APPS) in #Pakistan #mobilepayments #ecommerce https://www.techjuice.pk/two-technology-firms-to-establish-online-payment-gateway-in-pakistan/

Two technology groups in Pakistan have collaborated to develop a local online payment gateway system to take a share in the growing e-commerce market of Pakistan.

Avanza Group and Premier Systems announced to invest over $5 million in the gateway which is aimed to connect individuals with merchants and banks. According to sources, the two companies will set up the joint venture as Avanza Premier Payment Services (APPS).
Mahmood Kapurwala, CEO of Avanza Group said, “the size of Pakistan’s e-commerce market is estimated to be $1 billion, which should be $30-$40 billion in a country with a population of 207 million.’ He also partnered with NCR, Avaya, Microsoft, and IBM. He added, “We are looking at this gap as an opportunity.”

APPS claims to be the first Financial Technology (fintech) in the country to obtain payment system provider (PSP) and payment system operator (PSO) licenses from the State Bank of Pakistan (SBP). According to McKinsey and Company, a worldwide management consulting firm, Fintech will add about 4 million jobs, 93 million bank accounts and $36 billion annually to the gross national product (GNP), and $7 billion to the government’s net revenue by 2025.

The newly-founded company plans to incentivize brick and mortar businesses with free online services, like building websites and digital marketing. It will only take a certain share in the profit that comes through online businesses. Adnan Ali, CEO, APPS said: “It will move Pakistan towards digitizing major institutions, such as merchants, schools, billing industries, mutual funds and other corporate entities by providing a digital gateway.”

Avanza Group CEO said, Increase in e-commerce acceptance will also help grow the overall retail market when people will have the choice to buy products present in other cities, He said, “If everything remains on track, earning a revenue of Rs400 million will not be a big deal.”

Riaz Haq said...

‘Alipay to start operations in #Pakistan by end of 2018’.
#Alipay seeking approval from State Bank of Pakistan to pave the way for international payment gateways to enter in Pakistan. #payments #Alibaba #ecommerce https://tribune.com.pk/story/1780902/2-alipay-start-operations-pakistan-end-2018/

Alipay, the China-based third party mobile and online payments platform, will start operations in Pakistan by the end of this year, according to Irfan Wahab Khan, the Telenor chief executive officer.

Khan is also a board member of the Telenor Microfinance Bank in which Ant Financial, the parent company of Alipay and the financial services affiliate of Alibaba, acquired a 45% stake at an investment of $184.5 million in March 2018.

Currently, Ant Financial is in the process of taking approval from relevant authorities such as the State Bank of Pakistan (SBP) and Competition Commission of Pakistan (CCP) to commence financial services in the country.

As Pakistan embraces digital technology after the spectrum auction that saw the arrival of 3G/4G services in the country, a payments solution was the need of the hour. While mobile phone infrastructure and service penetrate 72% of the population, according to the latest data available with the Pakistan Telecommunication Authority (PTA), future growth will rely on digital payments becoming more accessible.

Khan agreed that the opportunity exists.

“The opportunity exists in data, digital payments and e-commerce,” Khan told The Express Tribune.

Pakistan has 58 million broadband subscribers including 56 million 3G/4G subscribers. Its e-commerce market is estimated at $1 billion, and gaining momentum.

Recently, Alibaba, the Chinese e-commerce giant, acquired Daraz.pk from venture capital company Rocket Internet, and is tipped to be expanding its footprint in the country.

Its financial muscle and experience will help it against competition that includes the likes of PayPak of 1link, Fonepay, and Avanza Premier Payment Services (APPS) that have also entered the digital payments space with investments to the tune of millions of dollars.

Telenor – with its network and infrastructure – is also looking at the next growth segment as mobile broadband penetration slows down in the next five years.

Additionally, as users opt for over-the-top applications that bypass the traditional calls-receiving and calls-making processes, cellular mobile operators (CMOs) are now eyeing growth in the digital payments segment.

“We are putting a site an hour on 4G and will complete 80% of them by the end of this year,” said Khan, who took over as CEO Telenor Pakistan on August 1, 2016.

Mobile payment firms struggle to dethrone cash in Southeast Asia

Telenor is currently placed second as the CMO with the highest number of subscribers. It has 43 million subscribers after Jazz, which is the market leader with 55 million.

Telenor also has a 23% market share in the Next Generation Mobile Services (NGMS) market, which puts in third place after Jazz (34%) and Zong (29%).

On the other hand, Telenor also invested in an agriculture sector-related app, ‘Khushhal Zameendar’, which provides location-specific weather forecast and agronomic advisory to small-scale farmers.

“It’s about incentive. Customers are sensible to adopt new technology when it offers incentives to them,” Khan said.

Published in The Express Tribune, August 15th, 2018.