competitive &industry analysis of amazon in pakistan

Project Part II: Amazon.com

Submitted to:

Sir, Muntazir Haider

Submitted by:

Muhammad Khan (1425115)

Farrukh Mustafa (1425109)

Date of Submission

28/10/2015

Amazon.comOnline shopping trends in Pakistan

The fact that the new online marketplace is expanding and consolidating itself is reflected in the growth of numerous C2C (consumer-to-consumer) and B2C (business-to-consumer) startups, focusing on online marketing and selling and offering a wide range of products - fashion-wear, footwear, casual clothing, jeweler, electronics, computers, handsets, books, gifts, toys, and what not - to be sold and bought online.

The major catalyst of this changing trend are mostly foreign investors, who see enormous potential for the online retail business to grow in a country with a large population of 180 million people and a burgeoning urban middle class and a massive youth bulge.

“The investments made by the global firms show their confidence in the future of e-commerce in this country,” argues Ahmed Jahangir, managing director of kaymu.pk, one of the fast growing online marketplaces in Pakistan, in an interview with Dawn.

As popularity for E-commerce nurtured in Pakistan and a number of online shopping websites popped up, Pakistan started experimenting with other models of payments as well, which provided the convenience for job. People are perpetually short of time and want to devote their focus on compelling activities rather than having to do mundane tasks like doing groceries, spending time at the mall shopping for items. Especially when they have the option of online shopping, if you are a working woman living in Pakistan, you would understand that managing both the house as well as the office drains out all your energy. It is for this reason online shopping is picking up in countries like Pakistan. Now you can leave the hassle of tangible purchase and carriage of shopping to the seller. With a simple laptop, cell phone and a Wi-Fi you have the world in your hand

There are several factors that have impacted growth of e-commerce industry in Pakistan; some f them are, availability of fast-speed internet to a limited segment of population, power shortages, lack of public trust on portals conducting e-commerce and awareness about the online marketplace, payment solutions, and delivery logistics infrastructure. Since most people do not have access to credit or debit cards or do not want to use plastic money for shopping only owing to security concerns, majority of e-commerce companies like kaymu.pk have adopted the ‘cash on delivery’ model.

Demographics of Online shoppers:

2.1 Age Groups

Through the research it can be observed that the younger population - between 18-34 years - is most actively involved in e-commerce trade, as compared to the rest of population. Moreover, those falling between the age brackets of 25-34 years account for the highest number of users, with the 18-24 brackets falling at second place. One of the most significant reasons for this observation is the fact that people above the age of 35 are less inclined towards technology and its uses, whereas youth between 18-34 years are at forefront of the technological revolution and are more open towards online shopping.

Percentage of User by Age

2.2 Gender

If we look at the overall e-commerce activity in terms of gender and compare the males vs females ratio for e-commerce in Pakistan, we can observe that out of the total e-commerce activities carried out, 70% comprised of males, with females involved in only 30% of the total. However, if we compare the average e-commerce conversion rate1 between the two genders, we will be amazed to figure out that it was nearly similar.

Male

Female

E-commerce Conversion Rate: The percentage of website visitors that actually buy online. For example, if hundred visitors landed on a website and only two of them purchased the product, the e-Commerce conversion rate would be 2%.

2.3 Geographic Trends

Lahore being the capital city of the province of Punjab and the cultural heart of Pakistan, prevails the list of yearly e-commerce activity in the country with 21% of total traffic, and is closely followed by Pakistan’s largest metropolitan city Karachi at 20%. Islamabad (the capital city of Pakistan) and Rawalpindi, which are collectively less populated as compared to Lahore and Karachi, stands at third place with 15% of the country’s total e-commerce activity each year. Other cities with the highest inclination towards e-commerce following Lahore, Karachi and Islamabad include Gujranwala, Sialkot, Multan, Faisalabad, Peshawar and Rawalpindi respectively.

http://www.kaymu.pk/research/#glossary

More than 50% of the e-commerce transactions2 are carried out in three major areas of Pakistan.

Lahore Karachi Islamabad & Rawalpindi

3. User Interests

3.1 Affinity

By classifying modern day e-commerce trends in Pakistan with respect to users’ interests, Kaymu observed that technophiles3 lead the list with 8% of the total e-commerce activity in the country, followed by movie lovers at 7%, music lovers at 6%, shutterbugs4 at 5%, TV lovers at 5%, entertainment & celebrity news junkies at 4%, avid readers with 4%, sports fans at 3%, shopaholics / shoppers at 3% and political junkies with 3% share of the total e-commerce activity across Pakistan.

3.2 In-Market Segment

E-commerce trends across Pakistan pertaining to in-market segment have remained much inclined towards electronics and mobile phones lately. The facts show that online customers in Pakistan are mostly interested in searching about and purchasing Consumer Electronics & Mobile Phones, followed by Employment Queries, Online Education & Counseling, Sale / Purchase & Information Gathering for Autos & Vehicles, Computers & Accessories, Financial Services, Laptops & Notebooks, Motor Vehicles by Brand, Test Preparation & Tutoring and last but not the least, Apparel & Accessories.

Consumer Electronics / Mobile phones

Auto Vehicles / Motor Vehicles

Auto Vehicles / Motor Vehicles by Brand/Suzuki

Computers / Accessories & components

Computers / Laptops / Notebooks

Apparel & Accessories

Employment

Education / Post-Secondary Education

Education / Tests preparation & Tutoring

Financial Services




4. User Behavior

4.1 New vs Return Traffic

While conducting analysis of Pakistan’s e-commerce trends with respect to user behavior, it has been concluded that the conversion rate of returning visitors5 has remained double than the first time visitors. To be more specific: it is 98.5% more than that of the new customers.

Moreover, the average session duration for the new visitors6 is 3 minutes, whereas for the returning visitors, it is 5 minutes. There are several reasons for high session time7 and better conversion rate for return visitors. A few important reasons are:

Out of the total e-commerce visits in a year, 56% are estimated to be new visitors, whereas the remaining 44% are returning visitors. One of the reasons for considerably good percentage of returning visitors is the low number of e-commerce competitors in Pakistan. Visitors have limited options available for online shopping stores.

2. 5 Major Competitors

Symbois.pk

Kaymu.pk

Daraz.pk

Home Shopping.pk




Huge Variety of Products Ability to cater large orders Up-to-date technology and software High brand name recognition Corporate culture High inventory turnover Large warehouse

High inventory risk - seasonality Lack of Customer Database Unfamiliarity with culture Unestablished Delivery Network Small number of vendors

Emerging online shopping trends Rapid increase in internet users Customer spending increased Broadband access technology Online sales predicted to increase

Law and order situation Poor infrastructure Low Protection against Cyber Crimes Aggressive competition High interest rate

Feasible modes of Payment Offers Ubiquity to customers Diverse branded products in clothing

category Familiarity with the Culture Partnership with DHL to make international Presence

Low Profit Margins Operates in fewer categories Poor After sales services Small number of vendors High Delivery time (5-7)

Through their own Delivery system

Emerging online shopping trends Rapid increase in internet users Customer spending increased Online sales predicted to increase Broadband access technology


Diverse branded products in electronics category Familiarity with the Culture Own Delivery Network Owns some of the Outlets

Low Profit Margins Operates in fewer categories

(Electronics and Fashion) Small Ware houses



Had first e-commerce portal in Pakistan (2009) Offers fast delivery all over the country (24-48

hours) (TCS, Leopard, Blue EX) Web portal offers easy and fast access

(30,000 visits daily) Source products from Singapore and Dubai to

offer best prices.

Small Ware houses No Physical outlets Slightly Higher Prices Low Marketing Budgets



Marketplace community for sellers.(Technically they don’t sell anything of their own rather charge commissions to sellers who use their platform).

Huge number of sellers on the platform Offer Service Deals. To use a Professional delivery platform is pre-requisit for

sellers.

Mode of Payment (Only COD). Less control over quality checks. Less control over Prices. Less Marketing campaigns Dependency over sellers

(To fulfill customer orders)

Emerging online shopping trends Broadband access technology Rapid increase in internet users Customer spending increased Online sales predicted to increase


Exclusive Products/deals for Women and Kids Variety of Payment Options Different Delivery Partners for different type

of Products.

Less Marketing campaigns Charges much higher prices Poor after sales services/responses

(Warranty claims). Poor sales teams’ communication skills

Emerging online shopping trends Broadband access technology Rapid increase in internet users

Law and order situation Poor infrastructure Low Protection against Cyber Crimes Aggressive competition

Customer spending increased Online sales predicted to increase

High interest rate

Competitive Mapping

Quality Quality

Price

Price

Daraz.pk (branded)

HomeShopping.pk+Symbios.pk (Electronics)

Amazon.com (Electronics)

Amazon.com (Sale items)

ishopping.pk (Fashion items)

Kaymu.pk (clothing)

ishopping.pk (Electronics)Kaymu.pk (Footwear)

High Price & low Quality High Price & High Quality

Low Price & Low Quality Low Price & High Quality

Kaymu.pk (Accessories)

Financial Competencies:

High Availability of funds

(US$ 88.988 billion revenue (2014)

Technical Competencies:

Advanced technology

Up-to-date technology

Operational Competencies:

High operational competency level Due to

Ability to cater to large orders Advanced technology Experienced work force


Good Financial support (Owned by Rocket Internet) $25 million Investment to be done in Pakistan


Better Technology (Relatively better Than other online shopping stores in Pakistan)


Majorly depending on the suppliers to cater the demands of customers.


Good financial position (Low dependency on Suppliers)


Better Technology (ERP System)


Experienced work force Fast delivery System (Personally experienced) Own warehouse and outlet


Operates on Margins from suppliers (Works as an intermediary)


Use Basic Technology


Heavily depend over sellers to fulfill orders.


Financially strong (As they were the first to have e-commerce portal in Pakistan)

They procure products from Dubai and Singapore in order to offer best prices.


Moderate level of technology


Ability to cater large orders. (As they have some of their own warehouses)

Ability to lower prices (Supplier relations/Bulk Buying and Economies of scale).

Mainly focuses on selling branded Products.

Price Beating Policy

Let suppliers access to their web portal and assist them to place their products on their site.

First mover advantage (2009)

Marketing Strategies of Amazon.com

Product: Selling products in the category of books, clothing, footwear, jewelry, accessories of Men, Women and Kids, tools, technological gadgets and much more.

Price: It offers products at low prices. (As they claim “everyday low prices” and follow cost leadership strategy)

Place: It brings products form different manufacturer to their warehouse and then to their online web portal and then delivers directly at the doorstep of customers.

Promotion: It promotes through advertisements on various websites, Social Platforms, via providing discounts/offers and through weekend, annual and seasonal sales.

References:

http://www.pakistantoday.com.pk/2013/07/01/business/onilne-shopping-the-new-trend-in-pakistan/

http://www.pakistantoday.com.pk/2013/07/01/business/onilne-shopping-the-new-trend-in-pakistan/

http://www.cnbc.com/2015/10/27/amazoncom-dominance-of-retail-industry-hits-high.html

http://www.ishopping.pk/

http://www.symbios.pk/

http://www.amazon.com/

http://tns.thenews.com.pk/shop-online-from-home/#.VjDynLXnHIU

http://www.slideshare.net/aftabssm/amazon-ppt

http://www.slideshare.net/search/slideshow?searchfrom=header&q=Daraz.pk

https://www.daraz.pk/?wt_s1=13707722663_56673391703&wt_sk1=Exact_13707722663_daraz+pk&gclid=Cj0KEQjw5MGxBRDiuZm2icXX2-sBEiQA619bq1G0E8SJeOLKYKVfk_SlhpVYmvO2EL6xC7hj4hA_MnYaAjGd8P8HAQ

https://www.google.com.pk/?gws_rd=cr,ssl&ei=HPMwVtmxHcaPsgHGlKboDA#q=Kaymu.pk

http://www.dailymail.co.uk/wires/afp/article-3006186/No-Amazon-No-problem-Pakistans-e-commerce-pioneers.html

http://tribune.com.pk/story/924038/e-commerce-growth-proving-to-be-a-steady-breadwinner/

http://tribune.com.pk/story/924038/e-commerce-growth-proving-to-be-a-steady-breadwinner/



https://www.google.com.pk/?gws_rd=cr,ssl&ei=HPMwVtmxHcaPsgHGlKboDA#q=Kaymu.pk




http://www.slideshare.net/search/slideshow?searchfrom=header&q=Daraz.pk

http://www.slideshare.net/aftabssm/amazon-ppt

http://tns.thenews.com.pk/shop-online-from-home/#.VjDynLXnHIU

http://www.amazon.com/

http://www.symbios.pk/

http://www.ishopping.pk/

http://www.cnbc.com/2015/10/27/amazoncom-dominance-of-retail-industry-hits-high.html

competitive &industry analysis of amazon in pakistan

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