As any marketer would tell you, buying behavior is tough to break. It can get easily disrupted due to convenience issues, conversion from window browsing to online sales, and so on and forth. Also, this digital ecosystem comes to a screeching halt when you end it with a physical cash transaction. Cumbersome return policies and doubts pertaining to purchases are other factors causing the marketplace trust deficit.
The question remains if the marketplace is just a middleman between the buyer and the vendor, and exactly how much visibility into the supply chain does the customer really have? Or how much control does the marketplace itself have for that matter?
Let’s take a look at the cash challenge first. You are shopping for a new gadget online. You research one, read the reviews, recommendations and like it. You try the online purchase to see what it is which has so much of the world addicted to virtual marketplaces. You create an account, plug in your details, hit the checkout button and get a plethora of options to pay: cashless (credit card, mobile wallet, the works) or cash on delivery. For many Pakistanis, cashless still seems scary.
Cash is physical and full of attachment, withdrawal and emotion. You can feel it in your wallet and run your fingers through it. It is also the huge bump in the speed of a digital ecosystem.
Cash on delivery (COD) carries logistical problems both for the retailer and the customer. For the retailer, there is the real risk of the customer rejecting the package upon arrival. For the customer, they need to stick around to pay for the package. Retailers and courier services will gauge the customer’s ‘readiness’ to accept their order prior to its dispatch, however the involvement of courier services in the mix makes the exchange of cash a more complicated and, in some cases, a more expensive matter.
Cash On Delivery works because using a ‘credit card’ and ‘internet’ in the same sentence seems full of stereotypical mistrust. Let’s take a look at Daraz who took, for the better part of, 3 years to build its reputation, allowing them to reduce the 90% cash transactions down to 20%. Customers who want to pay through their credit or debit cards end up making the transactions at least a dozen times before giving up in frustration and just placing their order as cash on delivery. Issues from bank authority to issues with the interface, seem to be beyond the control of both the online retailers and customers. The onus actually resides with the regulatory bodies. Most banks simply do not provide robust facilities to customers who want to make online purchases and regulatory bodies still have their heads buried under sand.
To circumvent this limitation, online retailers such as Daraz and Yayvo incorporated alternative means of digital payment such as mobile wallets. This makes sense since a vast majority of Pakistanis have access to smartphones and the internet, which means that more online transactions will take place. They can top up their digital wallet and keep up with their purchasing spree. This limitation and frustration is also a clear indication as to why there are so many fintech solutions popping up – the user base in the growth economies is massive and ready to spend money; they just need a convenient platform to spend it through.
Visibility and Trust
The dreaded refund policy is a real pain point for customers. While refunds in the international, online marketplaces can take place in 24-48 hours, in Pakistan, a refund can take anywhere from 2 weeks to 90 days. The whole process can ruin the trust that has been built between the customer and the online retailer. different online marketplaces have varying refund timelines. Various marketplaces offer anywhere from 3 days to 2 weeks for a return policy, however, banks can take up to 90 days to return the customer their money back. Circumventing the problem by issuing vouchers doesn’t help because the customer just wants the money back.
Countries such as Malaysia have far a better penetration in their online market, in a report published by PwC. India made over $20 million in retail e-commerce sales. Singapore made $3542 million in 2017 alone. China made $533 millions in retail e-commerce sales. This means netizens have a high trust level in putting their money online.
Telecommunications sector has enabled users to connect instantly with their banks enabling a hassle-free and quick intervention in time. They have allowed this through sms messaging, internet services which can be accessed through phone and PC and specific apps for Iphone and Android. Every transaction update is sent to users immediately on their cell phones and email. Users can check balances, pay bills, move money among accounts, and perform just about any other routine banking transaction. This makes it easier for the user to stay updated and track recognised and unrecognised activity.
Case in point is Bangladesh that overcame its trust deficit in online retail marketplace by boosting local firms so they were able to play a key role in the global market, among other things. Government of Bangladesh allowed increased connectivity, reduced internet costs and promotion of post offices as a distribution channel for products. They involved private logistics firms to allow products to reach remote areas and gather a larger customer base. They also boosted the SME sector through their digital platform to create more jobs and train people. A lot of economies provide incentives to promote a cashless economy.
The problem Bangladesh was having in reducing their trust deficit with customers was inadequate access to finance, inefficient delivery system and lack of skilled human resource. Venture capitalists play a critical role in boosting the e-commerce industry allowing the SMEs access to funding sources, eventually leading to better systems. The rest of the world has embraced mobile payment solutions, and according to Visa over half of all transactions will take place over the phone by 2020, even in countries with advanced digital banking.