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Chinese ECommerce Giant Alibaba Enters Pakistan Market

Alibaba Group (BABA.N) has bought the entire share capital of ecommerce platform Daraz, Rocket Internet said, according to Reuters. American ecommerce giant Amazon is already in Pakistan via its investment in another ecommerce platform Clicky.pk.

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.

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.

Media reports suggest global e-commerce behemoth Amazon.com could purchase substantial stake in Pakistan's e-commerce site  Clicky.pk.

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.

Today, Alibaba Group (BABA.N) announced the purchase of the entire share capital of ecommerce platform Daraz, according to Reuters.

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.

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Comment by Riaz Haq on May 14, 2018 at 5:03pm

Between the 18th and 19th centuries, the industrial revolution re-configured global economic and political power. As machines in Manchester began to spin the bulk of global textile production, within decades, India went from the world’s top textile exporter to a net importer. Between 1750 and 1900, India’s share of global industrial production slumped from 25% to 2%. It was not just because of western command over science and technology. It owed as much to political power and exploitative economic and trade policies. The impact of that shift – let us call it the historic ‘Manchester moment’ – still significantly determines where India stands vis-a-vis the developed world. India continues to regret missing out on the industrial revolution in time.

It is ironical then that we may right now similarly be losing out on another revolution. This contemporary ‘Manchester moment’ is about digital technologies and digital economy. As industrial revolution automated mechanical power, digital revolution is about automation of intelligence. Both represent fundamental shifts in human affairs. The digital revolution will as thoroughly transform our economic, social and political organisation as did industrial revolution.

This tragedy is unfolding right in front of our eyes, in a nation supposed to be in good political and economic control of itself. It also has sufficient basic competencies in digital technologies and conducting modern business. As it was in 18th-19th centuries, India’s failure is primarily political.

Missing the digital revolution

A decade or so ago, China trailed India in terms of IT or software technologies. How has China then suddenly become a digital super-power, posing a challenge even to the US? Digital technologies build over and subsume traditional IT and software, but are centrally about next-generation data-based systems.

It is simple. Just examine where in China (or US) all the cutting edge development of digital technologies – like artificial intelligence (AI), Interent-of-Things and blockchain – takes place. It is within super-large domestically-owned digital ecosystems like Baidu, Alibaba, Tencent and Didi. (In the US, these are Google, Amazon, Facebook, Apple etc). Unlike industrial technologies, digital ones are socially-iterative technologies that develop in real-world social and business settings, and not so much in laboratories. Innovating start-ups too get routinely bought and integrated into these ecosystems.

Over the last decade, China created ideal conditions for development of such large domestically-owned digital ecosystems, which catapulted China to global digital leadership. Both Chinese and US governments devote considerable public funds to partner with their private digital ecosystems for digital R&D.

And India? It first allowed Amazon to dump billions of dollars to close in on the domestic e-commerce market leader Flipkart. Not only were many other Indian e-commerce platforms suffocated in the process, domestic leaders like Flipkart had to off-load considerable equity abroad to obtain capital for matching Amazon’s cash burn. And now, most unthinkably, India is ready to sell its top e-commerce platform Flipkart to Walmart. Very soon, India’s two largest digital ecosystems will be foreign-controlled.

It is difficult to understand why India is inviting foreign corporations to own its digital ecosystems that are epicentres both of digital economy and development and control of digital technologies. It is difficult to think of a quicker path to total digital dependency.

Despite what most people think, digital platforms aren’t just ‘more efficient’ marketplaces. They are monopolistic intelligent agents that reorganise and control whole sectors, as they form backward and forward linkages – from manufacturing, inventory management and logistics, to payment and delivery. 

https://thewire.in/economy/does-flipkarts-sale-represent-a-manchest...

Comment by Riaz Haq on Tuesday

#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-Pakis...

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.

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