What’s next for e-commerce in Nepal? 

Now that the pandemic grows weaker and markets reopen, do Nepali consumers continue to buy online? Or have they reverted to old ways? And, what does this mean for the Nepali e-commerce industry?

Bidhyalaxmi Maharjan

  • Read Time 4 min.

The March of 2022 is the first March that Nepalis have not been in a lockdown since 2020. The government announced a nationwide lockdown for a week around this time in March 2020. And we all know how long that lasted. Since then, our lives have been punctuated by several other lockdowns, of various degrees of severity, as we see-sawed to the curves of the Covid-19 infections.

The past two years have taught us many new things—no, besar pani does not prevent Covid-19, nor does it cure the infection—and many new habits. Among the new habits we adopted, one that really took off was shopping online. The urban and internet literate households turned to e-commerce platforms, like Daraz, Sastodeal and Thulo.com to buy the most essential supplies. Now that the pandemic grows weaker and markets reopen, do Nepali consumers continue to buy online? Or have they reverted to old ways? And, what does this mean for the Nepali e-commerce industry?

To answer the first two questions, let’s look at some statistics on online payments we made to e-commerce platforms.

According to the earliest data on online payments made available by Nepal Rastra Bank, Nepalis made payments worth NRs 1,201 million to e-commerce platforms, solely by using cards, from mid-July to mid-August 2020 (2077 Shrawan). This was the month after Nepalis came out of four months-long lockdowns, which ended on July 21, 2022. However, payments halved to NRs 561 million immediately after the first lockdown, only to rise steadily. Payments eventually peaked at NRs 1,058 million in mid-March to mid-April 2021 (2077 Chaitra). This was around the time the second wave of the Covid-19 was gaining momentum, with Nepal locking down in April end.

Although this chart only includes payments made via cards, it is an important indicator of overall cash flow into e-commerce. Despite the sharp drop in the volume of payments since mid-May-mid June 2021, low but steady transactions in the recent few months could indicate that the e-commerce sector has retained a certain segment of its consumers.

On to my second question, what does this change in consumer behavior mean for Nepali e-commerce?

But before we draw any action points for the e-commerce industry, what is quite obvious to everyone is that everyone feels safer. Unlike during the lockdown, the consumers can shop in a store nearest to them without the fear of the virus. So it is only reasonable that people are buying less online, more in physical stores and markets.

Then, what about that particular segment of the consumers that continue to shop online? What and why are they buying online? According to e-commerce platforms, they have noticed a shift—consumers are buying fewer groceries and more non-essential items, like electronics, cosmetics, decors, and so on. This change in what people are buying is again only reasonable. After all, why would you order rice and fruits online, when you know it will take at least a day, if not two to get them delivered to you? 

If you have shopped online from any e-commerce platform, you must have noticed how long the delivery takes. For example, a little more than a month earlier, I ordered an electronic item from one of the leading e-commerce websites. It took me less than five minutes to place the order. However, the delivery partners took forever to get the product to me because I kept missing their calls. Now you may say I am to blame for it and I may be at fault, partly. But, I’d like to believe that I could have avoided this problem, simply if I had received clear information on what day and time I can expect to receive my order. Needless to say, e-commerce platforms can do much better in offering consumers a smooth shopping experience, including making deliveries faster and more reliable. 

For Nepali consumers to truly benefit from the e-commerce industry, they need to be able to buy and sell products online from every part of the country.

Another important factor that is keeping people from shopping online is the delivery costs. The cost of delivery remains fairly expensive. Consumers still have to think twice before ordering a product because of delivery costs, or ordering their lunch at work. One of the ways to reduce the cost is by bringing more vendors or merchants on the platform. This can allow platforms to create a hyperlocal delivery model, where consumers have the option to buy from vendors closest to them. Small businesses and retailers currently face growing pressure to sell online. By serving them, e-commerce platforms have the opportunity to serve their customers. 

All the problems discussed so far are specific to the operation of the e-commerce platform, which can be resolved by the platforms themselves. However, the e-commerce industry is more than just a handful of e-commerce platforms. It is an ecosystem of online marketplaces, retailers, delivery and shipping companies, internet service providers, payment gateways, and so forth. As pointed out by Amun Thapa, the CEO of Sastodeal in a podcast by Samriddhi Foundation, for the e-commerce industry to grow all of these players need to be equally ready and efficient. 

Of all the players important to the growth of e-commerce are the government and its regulatory measures. The government and local bodies’ frequent arbitrary restrictions on mobility during different lockdowns left both platforms and consumers confused. Apart from creating a stable operating environment, there is a need for a clear e-commerce policy, a draft of which was shared publicly in December 2020 and has not been finalized yet. Similarly, in the absence of a comprehensive data protection law, the personal data of e-commerce users remain vulnerable to breaches and its safeguarding and usage are completely left to the discretion of e-commerce companies. 

For Nepali consumers to truly benefit from the e-commerce industry, they need to be able to buy and sell products online from every part of the country. For the e-commerce industry to achieve this expansive growth, beyond the confines of a few urban centers and select segments of the consumers, the whole ecosystem needs the push. The ecosystem needs more driven players, more competition, more investment, and a government that does not meddle in people’s businesses. 

Bidhyalaxmi Maharjan is a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. Views expressed in this article are the author’s own and do not represent the views of the organization.

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