Thriving on word of mouth
By: Tariq Ahmed Saeedi
Social commerce is a business thriving mainly on word-of-mouth of internet users on social networking websites. Those who operate business-to-consumer (B2C) companies as well as business-to-business (B2B) ventures pitch new offers to visitors of these sites to spark a debate. This, in turn, helps them generate new customers, increase sales and create brand awareness.
Social commerce is all the rage now throughout the world. Especially, small and medium businesses (SMBs) that have low advertising budgets prefer to exhibit their products on these platforms to interact with and take direct feedbacks from their potential local and international customers.
According to an estimate, there are nearly 600 popular social networks on the internet. Majority of them are open to all. People can go there, catalogue their profiles, create groups and engage their target audiences. Never in history was real-time people interaction so easy and simple.
UK-based digital marketing researcher, eConsultancy, revealed in one of its reports: “90 percent of consumers trust recommendations from people they know.”
Facebook, Twitter, and LinkedIn are famous social media forums where buyers and sellers meet. Among them, Facebook is leading with 900 million users. Not even one is fake, claims the site. In its latest statistics, Facebook disclosed 1.13 trillion likes, 140.3 billion friend connections, 219 billion photos, and 17 billion location check-ins. Twitter also records 400 million tweets a day.
With such huge business opportunities that social media tools and microblogging (Twitter) provide, what are SMBs in Pakistan up to?
Union of Small and Medium Enterprises (Unisame) President Zulfiqar Thaver said that they were successfully using social media. “Almost 5,000 members of Unisame have accounts on Facebook, LinkedIn, etc. The association represents 7,000 small and medium enterprises (SMEs) of Pakistan. Majority of them belong to the medium sector,” he added.
While large and medium companies are capitalising on internet and communication technologies to expand their businesses, small firms are relatively backward due to many reasons, including unfamiliarity with and slow adoption to new technologies.
Zulfiqar admitted that small companies should increase their presence on social networking sites, which are cost-effective channels for market expansion. “Originally, they were reluctant to get themselves registered with any association,“ he said.
They should be educated of innovative ways of doing business, he added.
According to official figures, there are 3.2 million SMEs operating in the country. Unquestionably, a large number of home-based industries are undocumented despite the fact that SMEs account for over a half of the commercial activities taking place in the country. They are vital for Pakistan’s economy.
Social media provides self-employed persons or entrepreneurs with the exhibiting platform to market handicrafts, garments, sportswear, auto parts, and several other products.
The use of Facebook is rapidly increasing in Pakistan. An estimate said that approximately 7.3 million users log in on Facebook nationwide. Of that, 70 percent is male and 30 percent female.
Majority of Facebook users are youngsters. According to Menlo Park, the median age of Facebook’s global users is 22. Therefore, consumer product makers are designing messages that would attract the young population. Pakistan has a burgeoning population of 65 million under the age of 25.
Language is no more a barrier because of local-language supported applications and plug-ins. Besides, Roman script is generally used to convey messages on social forums.
Although Pakistani businesses have started to use social media tools to promote their brands, they are slowly making inroads into e-commerce. Due to numerous hurdles, observed Tariq Aziz, a senior lecturer at the Institute of Business Management (IoBM). “The biggest one is an issue related to payment transfer,” he said.
Firstly, a B2B or B2C company has to have an online presence in order to get the following from a social networking site. The real issue arises when a customer agrees to buy online. If the lead is generated locally, only cash on delivery can be offered to the customer, since they cannot make online payment to a merchant in Pakistan. Surprisingly, a local merchant running an internet-shopping portal is not privileged to a bank account to receive online payments. “No bank is allowed to open a merchant account,” confirmed Syed Wasimuddin, chief spokesperson of the State Bank of Pakistan. He declined to comment any further.
Earlier, CitiBank could facilitate digital payments through a business account of a merchant.
Aspiring to receive online payments from foreign internet shoppers, a local e-commerce website has to have an account in an internationally recognised payment gateway. One of the most expansive payment gateways is PayPal with 113.2 million active registered accounts and availability in 190 markets.
San Jose, California’s PayPal does not offer its payment facilitation services to Pakistan, although it has its presence in some underdeveloped markets of Africa as well as in neighbouring India.
For that reason, a Pakistani internet retailer must have an additional foreign identity if they want to avail PayPal’s services. “I have a PayPal account in Dubai. But I cannot see my earned money remitting into Pakistan. And, I ought to roll it over digitally for purchases,” said an internet retailer operating from Pakistan. Global e-commerce (B2C) sales reached $900 billion in 2011. JP Morgan estimates that global e-commerce revenue will cross $963 billion in 2013 and $1.4 trillion in 2015.
Seemingly, the concerned authorities in Pakistan are not realising the effectiveness of e-commerce in rescuing the sagging economy. On the other hand, IT leaders have become victims of the status quo. Ironically, the top three IT experts this scribe talked to said they were not updated of social media developments.
The significance of social media sites can be gauged from the sudden growth in their revenue. According to Gartner, global social media revenue is likely to grow 43.1 percent to $16.9 billion in 2012 from $11.8 billion in 2011. Where does Pakistan stand?
Local businesses can tap at least 565 million English-speaking global internet populations (netizens) once Pakistan is integrated into the international payment system. Growing presence of SMBs on social networking sites can lead to healthy price competition, increase product choices and boost the domestic economy.