The impact of e-commerce on business

activity
Selling through websites is the fastest growing method of trading worldwide. There are two main forms of ecommerce:

Business to business (B2B) trading where companies trade and exchange

Business to consumer (B2C) trading where companies deal directly with customers
through web pages, and ordering is carried out online.
There are many different types of products and services that are traded on line including books, CDs, cars,
holidays, and insurance.
In response to e-tailing and e-trading, most businesses have now set up their own websites.

Trading online
Trading online enables businesses to reach much wider audiences while cutting the costs of traditional retailing
methods. For example, an e-tailer does not have to spend so much on an expensive High Street presence.
Although the outlay on developing a good website is substantial the potential benefits can be enormous. One
group of businesses that have been particularly successful as a result of the development of the web are
specialist suppliers of items such as paintings, photographs, confectionery, and other items. An individual
working from home can now advertise and sell their produce worldwide.

E-commerce: barriers to its growth in Pakistan

Doing business online is yet another application of internet, which is changing the way business is done. The term electronic
commerce or E-commerce may loosely be defined as doing business over the internet, selling goods and services which are
delivered offline as well as products which can be digitised and delivered online such as computer software, videos, and music.

E-commerce in its wider sense encompasses all transactions involving business organisations, governments, or consumers that are
done online through internet. However, the narrower view of E-commerce focuses only on transactions between Business and
Consumers (Business to Consumer E-commerce or B-to-C E-commerce) and among two or more businesses (Business to
Business E-commerce or B-to-B E-commerce).

Banking, entertainment, telecommunications, and manufacturing industries globally have already started using E-commerce
business models, and have been reaping the benefits in terms of greater revenues and lesser costs.

Within these industries, Internet is used for four major tasks with respect to E-commerce: Firstly, attracting new customers through
online marketing and advertising; secondly, serving existing customers via customer service and support function; thirdly,
developing new markets and distribution channels for existing products; lastly, developing new information-based digitised
products, which are then transmitted online.

Like every new technology, the potential uses of E-commerce were at first over-hyped, leading to the Dot Com Boom of 1996-2000,
which was briefly followed by a crash that kicked many companies out of business; thereby, temporarily tarnishing the promising
role of internet as an effective and state-of-the-art medium of business. However, with the survivors of the crash and the new
comers doing well these days, the quantum of business online is expanding with rapid pace.

In Pakistan the size of E-commerce is small and uncertain at the moment. Yet as in most developed countries of the world, it is
expected that with the realisation of full potential of this new mode of commerce in future, it is bound to gain a sizable chunk of
business in Pakistan as well, due to the several potent advantages that E-commerce enjoys over the conventional mode of
commerce like its open structure that surpasses all geographical barriers, low costs of transactions, low barriers to entry and
improved access to information, besides more efficient management of supply and distribution.

However, currently the growth of E-commerce in Pakistan is hampered by a number of factors, which are discussed below. These
barriers must first be removed for E-commerce to grow in the country.

1. MISCONCEPTIONS ABOUT E-COMMERCE IN PAKISTAN Most people in Pakistan have developed wrong conception of Ecommerce. They take a very limited view of E-commerce, restricting it to only those products which may be digitised and
transmitted online through internet and the payments for which is also made online through credit cards.
This narrow view excludes the other three main functions of E-commerce outlined above ie attracting new customers, serving
existing customers, and developing new markets and distribution channels for existing products. This misconception is among the
main reasons that have held most Pakistani entrepreneurs with existing conventional business back from entry into the
cyberspace.

2. MISTRUST: Among the most important impediments to the growth of E-commerce in Pakistan is the issue of trust. Counterfeiting
and distribution of below par products in the face-to-face transactions is a common problem in the country. How can people be
expected to trust the sellers whom they do not know, and who would deliver goods online/offline after the payment is made.
The issue of trust is further aggravated by the lack of confidence people have with respect to the security and privacy of their
personal information like credit cards, home addresses, phone numbers etc. The emergence of trustworthy web-based companies,
with support/guarantees from Government or trustworthy multinational companies, in the county is required to dispel these fears of
the consumers.

3. TRADITIONALIST NATURE OF PAKISTANI SOCIETY: A large number of people in Pakistan will take a long time to come
round to the idea that they can order goods and make payments through internet from their homes without physically going out. This
is due to the fact that on-site commerce has a socialising effect, which is altogether absent from E-commerce. In a strongly
relationship-oriented society like Pakistan, people tend to form individual relationships and long term associations with the
businessmen and vendors.
These relationships are maintained over the years and may not be easily replaced by the anonymity of the E-commerce
transactions. Moreover, most of the retail business in Pakistan is conducted through small local enterprises rather than chains of

departmental stores. These small local businesses are run by relatively less educated entrepreneurs who are least eager to
embrace the new technology.

4. LOW LITERACY RATE The literacy rate of the country, according to official figures, is around 54 percent. Out of these 54
percent literate people at least 50 percent are computer illiterate. Thus, with around 75 percent of the population without computer
literacy, the growth of E-commerce in the country cannot be expected to progress at any faster pace.
5. ACCESS TO TECHNOLOGY: In order to undertake E-commerce transactions, one must be connected to the World Wide Web,
for which possession of a personal computer (PC) or a laptop is a basic requirement. Although the prices of computer hardware
have declined in the past few years, yet a personal computer is still not affordable by vast majority of the people of the country.
Besides a personal computer, a telephone line or cable line are also required for a user to get connected to the World Wide Web.
Thus, high costs of computer hardware are proving to be a bottleneck to the growth of the E-commerce in the country.
6. ACCESS TO INTERNET SERVICES: It is true that in the past few years there has been a significant increase in the number of
internet users in Pakistan, with some observers claiming that in Pakistan the internet access is now available to 800+ cities, towns
and villages covering almost 97 per cent of the population.
Even if this, seemingly exaggerated, estimate is accepted, the per hour cost of internet use in Pakistan, along with the common
problems of low speeds and getting disconnected frequently, render this wide accessibility of internet useless. For e-commerce to
flourish we need high speed, cheap and reliable internet connections available to the vast majority of the population.

7. LACK OF E-TRANSACTION SUPPORT IN PAKISTAN: Online payment systems are an essential part of e-commerce, which
require, inter alia, possession of personal credit cards by consumers. However, few people in Pakistan have personal credit cards.
Among the various reasons people avoid getting credit cards from banks include possibility of unnecessarily getting into the debt
trap.
The unpopularity of personal credit cards in Pakistan is responsible for the weak e-support infrastructure, forcing the use of old
mechanism of money transfer like, cash payments, cheques, and postal orders which may work as viable substitutes to credit card
for a short term to accommodate limited existing commerce of the country but cannot be relied upon for long.

8. POOR TRANSPORTATION/DISTRIBUTION CHANNELS An essential part of e-commerce is establishment of cheap, quick and
reliable transportation channels for the physical distribution of those products which cannot be digitised and distributed online. In
Pakistan, the Pakistan Postal Service, despite its extensive network and large number of employees is inefficient, to say the least;
hence, unreliable. The private courier services, on the other hand, are expensive.
In the absence of any reliable and economical distribution channel, the web-based companies in Pakistan will be faced with the
challenge of delivering their products at the doorsteps to their consumers without adding to price of the product.

The current scenario of e-commerce in Pakistan

The idea of e-commerce isnt new. However, keeping our countrys current position in mind, it is a developing
concept. We are still accustomed to the same old way of buying things - going to the market, visiting shops,
bargaining to get a good deal, and coming home with the product. This trend is rapidly changing; customers
and businesses are switching to e-commerce, because it provides a brand new experience of buying and
selling.3

Online transactions have made serious head way in the past few years, convincing more consumers to digitize
their shopping experience.
We still arent at that point where people order the smallest of things online, like grocery and food items, but we
have seen people buy things from online retailers mostly due to the convenience, but also because in some
way it is trusted more than a physical distributor (that might not always be the case).
Consider this example: I recently purchased a phone from homeshopping.pk, because they were offering it for
a reasonable price and with a warranty. They even offered to have the phone delivered to my doorstep.
Long story short, I got the phone without the hassle of going to the market, going from one shop to another,
asking about the price and other details. Thats the benefit of e-commerce, you waste less time and you can
carry out transactions from the comfort of your home.

Boxes from Amazon.com are pictured on the porch of a house in Golden, Colorado in this July 23, 2008, photo.
- Reuters Photo
The point is to show how businesses in Pakistan are actually coming towards the e-commerce side and even
giving up on physical businesses, while some are continuing both activities simultaneously.
Of course, theres a reason why businesses arent totally switching to e-commerce, and thats because of some
obstacles.
Firstly, theres a significant lack of awareness among the masses regarding e-commerce. Most of us still think
of web transactions as a risky activity, while some think seeing is believing and one should always have a
physical dealing.
This is not always applicable and as I mentioned, people in foreign countries even get their groceries from
online stores, so why cant we port our activities to the web?
Most of us also experience hesitation while trying something new. In reality, e-commerce is quite convenient.
Since we havent tried it yet, we are always hesitant in doing so. All this is due to the fear of being scammed
over the web or not getting the right product without visiting the actual market, or looking at the advantages of
buying from a shop, instead of buying online.

Next, theres the ultimate dilemma- if a business restricts itself to e-commerce only, it will be targeting a
relatively small group of people who are aware of the online buying & selling phenomenon (not to mention,
theyre a fraction of the total number of people who know how to use the internet). So thats why the transition
to e-commerce is taking some time.
once business will take initiative, customers will be attracted towards it, and thats how the use of e-commerce
will rise.
After all, e-commerce is no rocket science, in plain terms, its all about buying/selling from the comfort of your
home, so start now!