The future looks bright for e-commerce businesses in Nepal and the government should not stand in the way of their growth.
Globally, e-commerce is one of the few businesses that have prospered during the time of the pandemic. In Nepal also, restrictions in the movement of people to contain the transmission of coronavirus have accelerated e-commerce activities as people shifted to shopping online to buy essential items. Currently, Daraz and Sastodeal are considered to be the largest e-commerce platforms in Nepal with Thulo.com, UG Bazzar, Gyapu, Foodmandu, Smartdoko and Hamrobazzar being the other major players in the digital marketplace.
With the market growing bigger, e-commerce companies have resorted to various growth strategies over the years. After the acquisition by the Chinese e-commerce giant Alibaba in 2018, Daraz has upgraded its entire infrastructure, expanded its user base and increased its online assortment with around 600,000 products. Lino Ahlering, managing director of Daraz says, “We used to be a small e-commerce player, now we run the largest e-commerce company in Nepal registering over 1000 percent growth in the last three years.”
After receiving a series of investment from companies like Dolma Impact Fund over the last few years, the home-grown e-commerce company Sastodeal is all set to receive investment from IME Group in 2021. While the amount has not been disclosed yet, Sastodeal has said it will utilise the fresh investment to expand operations and services across the country. In early 2020, the company entered into a strategic partnership with the Indian e-commerce major Flipkart. It has enabled Sastodeal to sell about 7,000 products of Flipkart to Nepali customers. “It has opened new avenues of cross border business opportunities for both companies and has widened our market,” says Prajol Tamrakar, senior business performance manager of Sastodeal, adding, “We are also exploring options on how our vendors can sell products through Flipkart.”
Similarly, another e-commerce company Smartdoko received an undisclosed amount in investment from the business house IMS Group in June 2020.
The Rise of New Players
The recent years have seen new companies like Gyapu Marketplace, Smartdoko and Socheko jumping into the growing e-commerce sector. Rather than going into direct competition, the new players have focued on doing things differently and filling the gaps in the market. For instance, Gyapu Marketplace, which started its operation a year ago during the four-month long lockdown, is working in a different way than other platforms. “To make sure that the prices of products on our site are the same as those available in the physical stores, we are operating with zero percent commission and deliver orders free of cost within the Kathmandu valley,” claims Gyanendra Khadka, founder of Gyapu. According to him, the company is also putting its efforts into providing the fastest delivery service to customers by fulfilling their orders within a day.
Opportunities for Market Expansion
Those in the e-commerce business agree that there is enough potential for the online marketplace to grow given the rate of internet penetration which is poised to increase in the coming years. Official statistics show that the rate of internet penetration increased to 36.7 percent in 2021 from 34 percent in 2019. “The e-commerce market is largely concentrated in urban areas. But even consumers in many major cities like Pokhara are still far away from adapting to the e-commerce culture, so there is a promising future ahead for the growth of the e-commerce market,” opines Tamrakar.
In the meantime, with people in rural areas gradually getting connected to the internet due to the increasing use of smartphones, the market of e-commerce platforms could expand beyond the urban areas. According to Tamrakar, Sastodeal believes equal access needs to be provided to all consumers across the country. “People living in the far western districts should have similar access to e-commerce goods like the people living in Kathmandu. So, we have stepped up to expand our presence across all provinces,” he shares.
Lately, electronic payment has become one of the driving factors of e-commerce in Nepal as the pandemic has accelerated the use of modes of payments such as digital wallets, QR codes and e-banking. According to data published by the Nepal Rastra Bank, Rs 105 million was transacted via electronic payment systems between mid-March to mid-April of 2021. According to e-commerce operators, for a majority of customers of e-commerce platforms cash-on-delivery used to be the most preferred way of payment before the pandemic. While the exact share of payments made for e-commerce in the overall electronic payment is not known, e-commerce operators say that during last year’s Dashain and Tihar, digital payments accounted to 50 percent of the total payments which was about 15 percent in the festive season of 2019. “Electronic payments used to account for 15-20 percent of the overall payments before the pandemic. This has now increased to 40 percent,” says Tamrakar.
For e-commerce companies, efficient logistics management is an integral part of their business to ensure that goods and services are delivered to the customers as soon the orders are placed. Many companies operate their own fleet of vehicles while others rely on logistics services providers to ship products. One such company is Upaya City Cargo which caters to the delivery needs of e-commerce companies. It has been providing logistics services to top e-commerce platforms such as Daraz and Sastodeal. While Daraz operates its own logistics service ‘Daraz Express’ with more than 300 employees, the company has partnered with other logistics companies to keep up with the growing market.
Impact of Covid-19
On the one hand, the Covid-19 pandemic has become a turning point to make the transition from physical shopping to online shopping, while on the other, the government’s decision to restrict the operation of e-commerce businesses during the lockdown last year and prohibitory order period this year has disrupted this transition, say e-commerce operators. They claim that if the government had allowed e-commerce marketplaces to operate fully, it would have helped to reduce the spread of coronavirus by enabling consumers to buy products safely, and also would have helped to keep the e-commerce ecosystem running.
Gyapu founder Khadka says that it is important for the government to know that issuing clear guidelines for e-commerce businesses not only provides support to economic activities but will also help to break the chain of coronavirus infection to some extent. “E-commerce has proven to be the safest in terms of health safety reasons during the ongoing pandemic. But we have found Nepal as the only market where questionable restrictions have been placed on home delivery services,” says Daraz MD Ahlering.