Shujauddin Qureshi

Karachi – Pakistan's business hub – is undergoing digital transformation that will revolutionize the way people shop. The amazing expansion of e-commerce companies is not restricted to South Asia and Silicon Valley but the story of Karachi's booming domestic e-commerce market is just as compelling and very Pakistani, reports WealthPK.

Most of Pakistani people have experienced shopping from Daraz, a leading e-commerce Pakistani company, but many more companies like Krave Mart have also entered the market, offering online shopping a new trend. Even traditional brands like Bata shoes, stitched clothing brands like Khadi, Limelight, and Nishat offer online purchases. Besides, their huge outlets are available at major malls in Karachi.

A lot of new and small businesses are at the centre of this e-commerce book in Karachi. They are taking advantage of the city's huge customer base by selling a wider choice of goods, locally made or imported from China. However, the primary cause of this spike is not just people using cellphones or advertising on social media, but the manual payment system – "Cash on Delivery" (COD).

“Customers all over the world commonly pay for internet businesses using credit cards, digital wallets, and mobile payments, yet many buyers in Pakistan still deal in a partially documented and digital economy, which has led to less confidence in online payments,” said Muhammad Ali, a banker at a private bank in Karachi. Reports of digital fraud have discouraged e-transactions in Pakistan, Ali told WealthPK.

Most people in Pakistan seldom use credit cards, as they still lack trust in online payments, and online banking is not as common there as it is in other countries. This is where COD comes in, and it is used conveniently for online purchases. “Our company even allows the customers to open the parcel, check the products, and if it's what they ordered, they can pay in cash to the courier,” said Muhammad Aliyas, the owner of an e-commerce company.

He told WealthPK that although some credit and debit card companies and banks offer attractive discounts for digital payments, most customers still prefer the COD option when purchasing products. According to him, the COD gives purchasers peace of mind, especially those who are new to shopping online or are worried about being scammed online.

While the COD model offers convenience for buyers, many emerging businesses find it challenging to operate within its constraints. Companies need to pay delivery partners every day, handle refunds, and pay for the products that were not delivered. They have to keep track of all the transactions, especially those that are returned for any reason.

Some business owners engage third-party logistics companies that are good at handling COD payments. These companies accept money from purchasers and send it to the merchants regularly. This part of the infrastructure is increasing quickly, and a little industry is starting to form around urban logistics.

In the Finance Bill 2025-26, the federal government has tried to discourage people from making purchases through the COD model costlier. A 2 percent withholding tax and another 2 percent sales tax have been imposed on COD transactions. But e-commerce companies feel that COD will always be the best option to buy anything online in Karachi.

Credit: INP-WealthPk