The road less travelled. Pakistans likely export angle (Amazon, Ebay & Others) and how local businesses can benefit from it.

No, I don’t have any outsider, let alone insider info on Amazons plans on the Pakistani market. I also have no pictures of meetings with Amazon staff, past present or future. What I have is the media view on the tough love Amazon is getting in India and the relative change of direction Mr Bezos is orchestrating by  stating that the e-commerce giant will use its global footprint to export $10 billion worth of ‘Make In India’ goods by 2025.

This gives a good insight of whats to come and the directionality of the market. Interestingly Bezos also stated that Amazon is going to invest $1 billion in digitising the small and medium businesses in India. By that measure keeping that their GDP is roughly 7 times larger than ours, we need about a 150M$+ run rate to ramp up our own digitization and infrastructure to get similar export access. But what is missing is, we have no Amazon in Pakistan.

Our sellers cant even really, authentically sell or setup fulfilment by Amazon unless the use intermediaries or ship and store with Amazon state side or other nearshore destinations where Amazon is engaged in FBA. Other complications include, identifying the product, listing it, setting up a legal entity to collect the payments, exporting from Pakistan and other launch based items that gate the average person, exporter, product developer to really not get in to the value chain, instead they offset their product by consigning it to some body smarter, more resourceful and some one who can take their product at 35c a dozen and mark it up to 5$ a Dozen and sell on Amazon/Ebay. This value addition doesn’t see the FX delta come to Pakistan and doesn’t add any special value addition skills to the net-producers domestically.

With amazon ads business nearly in full swing allowing a company to customize and curate a multipage digital storefront, our producers are missing out. They will continue down the path of middlemen. Stores aren’t new, but the company has added features like shoppable images and the ability to schedule updates like new releases or seasonal changes. Imagine if just for the textile industry or additional traditional large scale non value added exporters this channel was made available?

The simple view would be that you would have an Ideas Store on Amazon or an Al-Karam store on amazon plus all the others who are engaged in selling bed-sheets and towels and others D2C(Direct to Consumer). They can continue down the export path to be vendors of record for Macys and others but once they start earning US D2C margins the ball game will change. This is just in the higher end of the value chain. Imagine all others who are not as large but want to explore the global market(s). Imagine if they could hold inventory at FBA and others used this to drop ship using their own brands? You now become a multiparty supplier as apposed to just a manufacturer of record. The game changes significantly as does the growth multiple. Not like no ones doing this already from Pakistan. Shan has a store on Amazon, but the average Shan Masala retailing in the US at under $2 and selling on the Shan Amazon store for over 6$ doesnt Make sense. Interestingly Shan has 800gs pink salt for $3.50 Whilst competing stuff sells for higher. https://www.amazon.com/Shan-Himalayan-Natural-Grain-Powder/dp/B07XTN7DMB/ref=sr_1_1?crid=1AXN3MQRNBHT8&keywords=shan+pink+salt&qid=1580720515&sprefix=shan+pink+%2Caps%2C336&sr=8-1 and more confused pricing for amazon prime and refined salt etc. Also most competing products are listed in Ounces and Lbs. Its interesting but clearly shows the disconnect even large brands seemingly have. So there is a lot of upside potential here.

So where do we start? Amazon isn’t coming to Pakistan just yet, based on what ever data they are crunching, their bet has been India and GCC (Amazon.ae). But can we get smarter, can we use the .AE route to reduce one more middle man and get on to the Amazon bandwagon? Lets back up a little bit, before we get down to having visions of grandeur we must learn from the Amazon example in India and them digitising small businesses to the tune of 1bn$, in its simplest form it means having accurate product information data, moving toward Harmonized System (HS) for classifying goods is a six-digit code system. It means getting the producers ready to make the product Amazon (export) ready, in turn making it globally ready.

It also means linking the money chain, from export to bank to return payment to FX transfers. I would be shocked if Amazon didn’t get into a Stripe model to allow direct merchant on-boarding, albeit a localised version because they are present in India. Hypothetically a vendor could sign up locally, price in USD/INR equivalent, collect the net sales proceeds locally and the only person doing FX conversions is Amazon, imagine the float and the local payments play, if Amazon got in to a captive wallet and expanded it into a system to pay for inputs by local manufacturers and vendors.

Only time will tell where this is headed but sadly looking at the state of our export chain and value addition we are almost stuck in what we did generationally without really taking the leap of faith on doing some thing different, the only thing that has grown is the countries over reliance on the same sectors to export to earn FX.

Even the domestic market is too big to ignore long term. In the short term there are other bigger bets to make and Amazon is making those, we should no less be prepared and be ready to exploit these companies and these systems when they are accessible to us. Or figure out smart ways to plug in to the existing FBA value chains and store fronts. As a starting point all the Pakistanis Immigrating to Canada/Australia and other locations, nothing is stopping them from setting up a bridges to provide cheaper arbitrage for the Made in Pakistan Narrative. Kamyab jawan should find plug-ins to extend beyond just rhetoric .

We need to bring our own plug-in for selling on Amazon, instead of buying into dubious VPN based setups and being completely out of the value chain and at the mercy of the evangelical church equivalent of used car sales people promising our manufacturers sunny outcomes. By getting on to FBA programs and taking unassuming college kids to partake in get rich schemes of doing Drop ship form China to Amazon store fronts. Granted some of those work, short term for the person researching top selling products/categories on Amazon and doing drop shipping etc, but it adds no value to local manufacturers and to our FX items. In turn most of the money made this way is retained offshore.

We have to think of a longer term play, starting from working to increase over all exports, to increasing the value addition. Simple example is Pakistani Pink Salt, imported in to Dubai by Indian players, re-branding and adding world class packaging and marking up by 200% for retail sale in the US and Canada. This phenomenon is still on-going. https://www.npr.org/sections/thesalt/2019/10/03/763960436/pakistan-wants-you-to-know-most-pink-himalayan-salt-doesnt-come-from-india (This article will you give you some more insights) We have yet to protect such things, lets take a que from New Zealand AND Manuka Honey ( http://theconversation.com/manuka-honey-who-really-owns-the-name-and-the-knowledge-105508) Some other things now that we have gone down this path that the government or other individuals should consider are Kashmiri Chai (Either ready to brew like instant Cofffee) or As a solidified crystal or using other packaging mechanisms for delivery and even popularising some thing local. Along with brand protection for an entire segment.

We have some amazing startups in Pakistan that are working hard to bring unfair advantages to businesses both local and international in the global trade space. From knowing your markets to one click research to expanding your footprint, data is your friend. One such startup http://www.tradeforesight.com/ is a hidden gem. If you have access to figuring out whats selling where, how since when along with trade based regulation and laws, half the battle is already won. Not sound like a product endorsement but if would truly help a new generation of exporters online.

Its not just Amazon, but if for instance you saw the pink /Himalayan salt exports go up from Pakistan and you could enhance the upstream value chain in real time by packaging and then re-exporting would you not try to take a go at it? Coupled with having the ability to sell on amazon or ebay for that matter? But the first you need a view into the space. Whilst research on Amazon tells you whats selling on Amazon, it also gives you additional insight if you can see country by country, region by region, export and import types and vendors/manufacturers etc.

For instance, Traderjoes the notoriously famous food chain out west in the US has an entire team that does global food sourcing. Has any one even tried from Pakistan? https://www.traderjoes.com/contact-us/new-vendor-requirements are we just too lazy and too focused on traditional trading partners and markets? Are we ready to enhance our value chains.

All the money the govt and aid agencies are dumping into stupid projects should be redirected towards helping local industry achieve export related certification , local presence and certification outfits etc so we can up-skill and up-scale at the same time. Kudos to those who using their scale have already done FDA and other certifications and exporting into those markets. None of this will happen by waiting on international players to come to our door step. Some international players who have come, come at a price of giving exposure to Chinese led products even on their market places(I explored that in an earlier post). So whilst the Chinese have it right, they came to our market and allowing their exporters to export in to Pakistan, we have to figure out a way to export our goods out of Pakistan into other markets. If we continue to let others treat us only as an import first destination we will have no control over our trade deficits.

The time is now to really revisit what we have to offer as exporters and figure out a sustainable path to value addition. Waiting for others to come and disrupt our market, will lead to a different kind of disruption that we are likely not prepared to handle.

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