I remember ordering a pair of sunglass from one of the online stores of Kathmandu, Daraz in 2014 and I apparently liked the service they provided. Most of my friends were skeptical to buy from the “Internet” back then and some of them are still are. What prompted me to buy from the internet while my peers absolutely loathe it? In this article, I am going to shed some light on this aspect: the scopes and challenges of e-commerce in Nepal.
Use of the internet hasn’t just confined to communication but news, entertainment, and day to day business activities. As per January 2017, there are 15 million active internet users in Nepal. While, in most of the countries in West today, people depend on the internet or everyday transactions, we are still reluctant to give it a go in Nepal albeit there are few exceptions in highly developed societies of Kathmandu. But sighting the high engagement of populace in social media, college graduates are trying to tap into the potential of e-commerce in Nepal.
So what are the scopes of e-commerce in developing countries like Nepal?
There are a couple of e-commerce websites like Muncha and Thamel.com which started the business with the turn of the century. These sites mostly focused on sending gifts to relatives in Kathmandu from abroad.
But after 2010, when the internet and communication took a giant leap with the rise in Android phones and cheap internet, e-commerce started to emerge.
I’ve listed the few recent happenings in the e-commerce sector in Kathmandu which shows that e-commerce sectors are really getting some momentum.
- Talking to New Business Age in 2016, then CEO Asia of Kaymu ( now Daraz), Niroshan Balasubramaniam stressed on the high use of mobile internet in Nepal as one of the reasons their company is getting success in Nepal. Started as a B2C business model, Daraz now connects the vendors with the customers directly offering the customers a wide range of options to purchase from.
Because of its rising popularity in South Asia, Alibaba group of China took over the Daraz in early 2018.
- Nikita Acharya, CEO of Urban Girl which provides the unique opportunities to marginalized women through their cake factory and apparels, believe in the business model compatible to our society will be in the forefront of the e-commerce leaders in Nepal.
- Recently, Sastodeal.com, one of the Nepal based e-commerce sites, established in 2011 got an investment from Dolma impact fund. They provide the consumer with a wide range of options when it comes to purchasing the day to day products maintaining a healthy competition with Daraz.
- The likes of Foodmandu, Bhojdeal and other B2C e-commerce dealing with the food in Kathmandu are getting momentum.
Even though more than half of the population in Nepal are active internet users, e-commerce doesn’t account for 10 percent of the total financial transactions. These statistics pose a serious challenge to any startup-minded person. I have outlined a few major challenges that the e-commerce startup are likely to face in Nepal.
Challenges of E-commerce in Nepal:
Traditional Shopping Habit:
If you have a typical Nepali upbringing, you must realize that it’s our moms who do shopping for us. Come Saturday or any occasion (which are likely in Nepal), mom is ready to do some shopping, it’s their favorite chore. To go to the bazaar, chat with vendors, bargain to the fullest and get things done. Guess what, e-commerce isn’t for them. Ordering something they can’t touch, feel or bargain doesn’t appeal to them despite many of the youngsters love doing so.
Lack of trust:
If there’s one thing, online business has failed to achieve in Nepal, it’s the inability to develop the trust among the demographics. People strongly believe that they don’t do business fairly when it comes to the quality of the products. Imagine buying shoes which look awesome in the photo but real douche when delivered, it will certainly not give a good feeling. And once the trust is broken, it takes an awful lot of time to regain it.
Lack of Investment:
Unlike in most of the countries, hedge fund and Venture capital fund are very few in Nepal or are non-existent. When it comes to investment in the e-commerce sector it is practically non-existent with some exceptions. Also, the startup culture hasn’t gained much momentum which has resulted in the insolvency of the startup in the e-commerce sector.
Lack of an effective payment gateway:
All of the locally based e-commerce sites have been using cash on delivery payment system which though seems the country compatible is not an effective one. Even though various online payment services like esewa, Khalti, ipay are prevalent in Kathmandu and few cities, they have not been effective since most of the people are still skeptical about them. Also, most of the Nepali still do not possess bank accounts and are ignorant about e-banking.
Lack of e-commerce friendly rules:
Nepal government hasn’t come up with the rules that favor e-commerce business. One of the difficulties lies in the payment gateway during a trans-country transaction. An e-commerce business based on Nepal cannot open a PayPal account until it has a dollar account abroad. Also, the lengthy bureaucratic process and unstable economic policy of Nepal Rastra Bank are the major hurdles.
E-commerce in Nepal has just started to develop from its infancy and requires a lot of infrastructures before it can really penetrate the large population using the internet. A careful analysis and perseverance will surely pay off as the country is finally over its transition phase.