As E-commerce has arrived in Pakistan, it has seen wide acceptance among residents of major cities. Cities like Lahore and Karachi in Pakistan have fully embraced E-commerce platforms like Daraz and AliExpress, but not much is said of Tier 2 cities. In fact a myopic view of the situation would entail disregarding their value entirely. However, as E-commerce in India demonstrates, this is a grave mistake.
Flipkart, Amazon India and the new Paytm Mall are channeling their efforts to gain a dominant market share of India’s Tier 2 cities. A recent survey has shown that small town shoppers made up 41% of India’s online shoppers in 2017. That is a number that can’t be ignored.
To facilitate shoppers in small towns, e-tailers have joined hands with offline partners like local shops. Amazon’s Project Udaan puts shopkeepers in touch with rural Indians to help them shop online. This began with 15 stores across two locations in Maharashtra and Rajasthan and now has thousands of stores in 650 locations. Indeed, Amit Agarwal, Head of Amazon India, revealed that 85% of their customers come from Tier II and smaller cities.
Other projects to reach out to rural India include Flipkart’s no cost EMI (equated monthly instalment), available to customers who don’t even have credit cards. These endeavours have had quite the impact; 55% of all online shoppers now come from non-Metro cities and the total size of E-commerce in India has risen by 19.1% in 2017 to $33 billion. RedSeer, an advisory firm, predicts that there will be 185 million online shoppers in India by 2020.
This growth has been observed by the likes of Alibaba, the second largest online retailer in the world. To take advantage of the $565 billion grocery market in the country, they, along with Paytm, have announced investment into BigBasket, an e-grocer.
While this increase in online adoption is exciting to see, there is a realization that huge growth spurts do not last long. In 2015, there was a 180 percent growth in online retail due to increased adoption in metros but it has leveled off to 11%. Similarly, the brick and mortar model still stands in the way of total online adoption. The suspicion and resistance to new technology amongst rural dwellers still drives them to local stores instead of the online marketplace. What’s more, brick and mortar stores are expected to go through a revival in the coming fiscal quarters. Hence, a partnership with these stores is a great way to move forward for online shopping.
In Pakistan, the situation is quite similar, second and third tier cities and towns have great spending power but they are largely disconnected or sometimes even unaware of the online marketplaces. This is a great sector that can be utilized to grow new businesses instead of waiting for the arrival of giants like Amazon and Alibaba to exploit these opportunities.