This might be one of the reasons ECOM is failing in Pakistan, not many people trust online transactions and consider payment through online channels unsafe. COD is the way to go but then there are problems in the quality of good being delivered, I recently ordered a deal for three gym tops for Rs 1100 from Kaymu.pk (local alibaba-ish platform), in the first attempt, they ended up delivering the package to someone else and made me order again, after having done so, when the order did arrive, the colours were wrong and the product was totally different than the one illustrated. I paid Rs 1100 for three vests!
These problems are expected, India was exceptionally lucky to have Flipkart as pioneering and Keystone ECOM company which delivered quality above all else and was exceptional in post sales service issues like returns/replacement.
First impression and positive word of mouth publicity can go a long way in establishing the trust and reputation which is the primary thing in markets like India/Pakistan where people don't trust online options due to lack of exposure or some anecdotal experiences shared by others.
These issues are however solvable:
1.
Quality and Service Delivery:
a. ECOM companies should start with a large and comprehensive catalog of products usually in a single product category. Flipkart started with Books, This way they can build expertise in ECOM and at the same time simple supply chain due to dealing with a single product category involving two or three major vendors would ensure quality is maintained.
b. In Pakistan ECOM is not as competitive or mature as in West/India so they can focus for fist few years focus should be on quality and market reputation, no need to spend big bucks advertising - word of mouth will do
2.
Pricing Advantage: As is obvious ECOM cuts down on middle men like Carrying and forward agents, district level distributors and street level retailers.
In White Goods Margins attributed to middlemen are 40%, In FMCG Margin for middlemen is 20%, In Electronics margin in 30-40%. This is some impressive saving which can be passed on to consumers to attract them.
For eg A must have books for Economics during my MBA costed me 1500 bucks in my college book-shop but was able to buy it from Flipkart at 450 Rs. This along with COD was a primary factor which influenced my first ECOM transaction.
3. Funding Issues: We have to accept that during first 5 years any ECOM venture is not going to be profitable, start with this mentality and a low start-up investment. After establishing yourself by word of mouth visit VCs to get funding. They are primarily based in Silicon Valley - and would invest 100/200k if you show them a sound business plan and exit route via IPO etc. Believe me it is not tough to get couple of 100ks .
Profitablity is still not a factor and VCs primary focus is gaining market share and cashing out by selling their stake to PEs hence they would support your quality and service related expenses/hiring expenditure.
I believe above few points address how to maintain quality and market reputation, lack of faith on online transaction is indeed a major issue but addressable through COD as you have suggested.
Broadband access has increased by 344% in the last year thanks to 3G but coverage is still somewhat limited.
One thing which can help out the limited penetration is kind of free internet service for ECOM websites only, it raises net neutralization aspects but that is a topic for another thread. Some large companies are behind Internet.org project which offers free connectivity to promising start-up websites by compensating the ISPs.
The ECOM companies should above all take care not to over-reach themselves, As your namesake
@Icarus they should be careful of not flying too close to the sun and burning of their wings. I have read too many horror stories about crash and burn of ECOM companies and I myself was a part of a doomed start-up.
@VelocuR
