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E-Commerce in Nepal: A Snapshot

Globally, e-commerce has been growing by 20% a year for a decade. Today, it comprises of 8.7% of all retail sales worldwide, and is expected to reach 15.5% by 2021. The increasing pervasiveness of e-commerce, with the rise of e-commerce giants such as Amazon and Alibaba indicate that the technology and business community in Nepal will not be immune to the current. However, we do have some things against us: namely our poor digital and logistics infrastructure and risk-averse culture.

In the context of Nepal, is the rise of e-commerce inevitable or unfeasible? Has the enthusiasm for e-commerce been translated to sustainable growth? Is e-commerce only viable in Kathmandu or can work in the rest of country as well? What are the developments in Nepali e-commerce and what does the future look like? There are a lot of open questions.

With this article, we have tried to provide an in-depth picture by compiling interviews and write-ups in various publications to share available knowledge on this topic.

 

E-commerce Timeline

  • 2000: Muncha.com.np opened in 2000 (6 years after Amazon.com) as the online version of the departmental store “Muncha House”.
  • 2001: Thamel.com started selling goats online. People abroad could pay for goats to be delivered to their family in Nepal.
  • 2005: Hamrobazar, a free online classifieds portal opened.
  • 2007: Muncha.com launches it’s own online payment gateway iPay.com.np.
  • 2009: ESewa, an online payment gateway is launched.
  • 2011: Foodmandu, restaurant food delivery was launched.
  • 2011: Sastodeal, an e-commerce platform specializing in “deals” is launched.
  • 2012: Urban Girl, an online accessory store starts as a Facebook shop.
  • 2012: Threadpaints, an online store for apparels is launched.
  • 2014: Kaymu (Daraz) is launched in Nepal.
  • 2014: Anthropose, a for-profit, social-good sunglasses company is launched.
  • 2015: Sastodeal starts Sastobook
  • 2016: Nepal Express Delivery (NED), a logistics company is launched.
  • 2017: Khalti, a digital wallet is launched.
  • 2017: Tootle, a two-wheeler ride sharing company is launched.
  • 2017: Threadpaints co-founders Aashish Acharya and Sabin Bhandari make it to the Forbes 30 under 30 list.
  • 2017: Khalti wins Google Business Group Storytelling Contest.

 

Types of E-commerce Activities

Retail e-commerce: Muncha.com and Thamel.com started as online portals to send gifts to Nepal. Hamrobazaar gave a free online Customer-2-Customer platform for buyers and sellers to get connected. SastoDeal and Daraz have been successful retail aggregators. There are also a lot of online retail stores in Nepali market , mostly concentrating on electronics and clothes: UrbanGirl, 101monkeys, olizstore, sudrz.com, SmartDoko, Rojeko, Nepbay nepkart, clothesnepal

There are also online retailers selling niche products: cheers.com.np selling alcohol, Metrotarkari selling groceries, and SastoBook and bookworm selling books.

Online payment, e-ticketing and billing: With advent of online payment gateways such as e-sewa, ipay and khalti, businesses have provided e-ticketing and online billing services. There is e-ticketing for movies ( QFX Cinemas , Q’s Cinema, BigMovies, BSR Movies, View Cinemas Butwal and F-Cube Cinemas), flights ( Yeti Air, Buddha Air, Shree Air, Surya Air, Simrik Air), utility bills (telephone bills , electricity bills , water bills, newspaper subscriptions) and also provisions for online payment of school and college fees.

Service e-commerce: E-commerce does not need to be limited to trading goods and consumer products, and can encompass services. Foodmandu and Tootle are examples of e-commerce services that have added convenience in Kathmandu.

 

Nepali products in Nepali e-commerce

Most e-commerce retail stores have focused on bringing goods from abroad that are unavailable in the Nepali market. This raises the concern that e-commerce accentuates the already imbalanced import culture of Nepal, flooding our market with foreign goods. But, online platforms can be a boon to local production.

E-commerce platforms such as Threadpaints and Nepalify exclusively feature products made in Nepal. Aggregators such as SastoDeal also feature and promote Made in Nepal. There is an emergence of companies producing high-quality niche products ( mheecha, kolpaworld , wildearthnepal , Lavanya). These new and niche companies are able to use online platforms to reach a wide audience inside and outside the country, even with limited resources.

Online platforms are also suitable for companies like Anthropose that combine commerce with social-good. For every 10 pairs of Anthropose sunglasses they sell, they donate money to their giving partner, Tilganga Institute of Ophthalmology, to sponsor a cataract surgery for one person in a rural area of Nepal.

In this way, by mixing online platforms and social media, small and experimental startups can bring their products and messages to the global world.

 

E-commerce outside Kathmandu

Most of the e-commerce activities have been limited within Kathmandu. While lack of digital and logistics infrastructure are obvious limitations, e-commerce ventures are becoming aware of the opportunities that lie outside Kathmandu. Esewa has tried to reach as many districts as possible and Khalti is also following the lead. Retails such as Muncha, SastoDeal and Threadpaints have also extended their delivery service beyond Kathmandu.

In a 2017 Republica article Threadpaints co-founder Sabin Bhandari says that throughout their idea generation process and most of their journey, their main focus was Kathmandu. However, one of their biggest learning experiences was when they received a bulk order of Rs 13,000 from Mustang. The order included shoes, pants, t-shirts, and a variety of other apparels. He adds “We have been living under the illusion that people out of the valley live a marginalized life and don’t take them into account when planning things. I remember how dazed we felt after receiving the money, trying to figure out a way to get the order to Mustang,”. After that situation, they now have things figured out and offer free shipping all over the country.

Amun Thapa from SastoDeals says “Of course, there are people who would want to buy Adidas shoes in Surkhet or Rolpa or Gulmi. But there isn’t an Adidas outlet there. SastoDeal has made it possible for those people to buy them without having to travel from there to Kathmandu just to buy a pair of shoes. We are in a transition phase where internet services are not reachable to rural areas of Nepal. Internet is reaching out slowly in rural parts of Nepal and the price of smartphones is decreasing. In this condition, people can now have access to website of e-commerce. ”

Aarlaki.com is an e-commerce site based on Waling, Syangja. Aarlaki means “to sell” in Magar language. The site seems to be discontinued though.

Manish Modi from Khalti says: “It’s quite challenging to build a mobile eco-system in Nepal. But, we are taking it as an opportunity. We need to teach our users about our services and even teach the people in an incentivized way. In villages, we might need to start awareness campaigns to teach people about digital transactions, and build trust among them.”

In Nov, 2017 Khalti co-organized #DigitalBirgunj , an event for digital awareness in Birgunj, where they trained residents of Birgunj on digital and financial literacy.

 


Creating E-commerce Culture and Ecosystem

Lack of e-commerce culture, e-commerce ecosystem and proper logistics seem to be major challenges for e-commerce to thrive in Nepal.

Amrit Tuladhar from Muncha.com, a pioneer in Nepali e-commerce says: “When we started Muncha.com, in 2000, the market fundamentals were markedly different. The concept of e-commerce was not popular in Nepal; even in the developed countries it was only in its introduction phase. Before starting the business, we had thought that all we would need for Muncha.com was a standard website. But we soon realised that there were other factors that were going to affect its workings. There were no support structures for payment systems and online advertising networks, among others. Also, people were not open to the idea of shopping online because of trust issues. I realised that Muncha.com had been created a little too early for the Nepali market.”

Astha Chand from M&S writes “Nepalese are usually conservative shoppers. Most are not early adopters of technological trends and many take time warming to the possibilities offered by online platforms. This might perhaps account for why although Muncha.com started as early as Amazon—which ought to have given it a first mover’s advantage— has not been as big as it could have been in the Nepali market. It’s a problem that many of the e-commerce ventures deal with, especially in their early days. The biggest challenge for nepali e-commerce companies was building a culture of trust.” Also, logistics and lack of digitization are challenges.

Manohar Adhikari from Foodmandu says they had to face various hurdles. Identifying the correct houses in our city with no proper culture of using street addresses was no easy task. An underdeveloped digital payments infrastructure and a weak logistics framework are big limitations when it comes to e-commerce. More than that, lack of e-commerce culture seems to be the biggest challenge.

Kim Smith from Harilo has mixed feelings about working in Nepal. She says that the government officials aren’t very helpful. It’s hard to even find a place where the laws are clearly written down for the regular person. A lot of it was trial and error, and it took some time just to figure out what we’re supposed to be doing. But sometimes it’s easier to deal with the government here in Nepal because in the US, there is no one you can talk to when you’re doing something unique and need to figure out special cases.

Ena Shrestha writes “E-commerce businesses have not had an easy way up. From poor infrastructures, abysmal governmental plans and policies to lack of proper payment gateway, business have had to deal with great barriers. One such barrier has been in terms of delivery system. Sellers were having trouble finding the right and efficient way to get to their customers, and without the delivery system, an online retail store is sure to roll down the hill.”

Market Moghul writes “Most “e-commerce stores” or “online retailers” don’t accept credit cards via a payment gateway like PayPal or Stripe. Most of them come up with “creative” ways for receiving payments. Even the most popular payment gateway Esewa is still no way near the seamless convenience and security levels of PayPal and Stripe. Esewa mostly works as an e-wallet, where customers can add money and use it to purchase online or via mobile. Introduction of integrated payment gateways is crucial as it’s the only way to truly utilise and benefit from the new e-commerce world. In Nepal, PayPal users are limited to receiving money and can’t connect with local bank accounts to withdraw or deposit. Nepal desperately needs investors in payment gateways that will work seamlessly with online stores and the banking system.”

 

Financial Rewards and Risk Management

While Nepali customers are being open to the idea of e-commerce, financial viability is still big concern. Are the e-commerce companies that have become household names profitable? How long do they need to wait to break even and what are the ways they manage risks and survive.

Foodmandu’s Manohar Adhikari says: “Today, Foodmandu gets orders worth over Rs 150,000 every day. Foodmandu only stopped incurring operational losses after 2015, but the company still hasn’t made profits because of the losses it has accumulated over the years. ”

He adds “Before we kicked off, I remember crunching the numbers, doing extensive research to figure out if we could sustain this business. I did a lot of homework before we began and I had already realized back then that it was going to take a lot of patience and determination. But I believed in our concept and that it would work in our community. This was an important factor. The starting days were incredibly challenging for Foodmandu. Partnering with the restaurants and getting people interested in our services was very difficult. But we kept at it. I think that was crucial. There will be severe lows in business but you can’t let give up in these moments. It’s been six years that we have been working on this idea and it was only last year, in early 2015, that I got the confidence to let go of my other company and wholly invest my time here.”

Hamrobazar’s Prabal Saakha says that depending solely on revenue from advertisements HamroBazar hasn’t been successful in terms of profit. “The company has grown, but we are still not making the kind of money that justifies the growth,” says Saakha adding, “We could have made money from the site by introducing plug-ins and buy options, but we thought that would dilute the site, and we want to keep it simple.” However, he does have a plan to monetize the popularity of his site. Keeping Hamrobazar’s USP intact, he is working on other sites that use the network of Hamrobazar but provide services that generate revenue. Currently they are working on a travel site. “Once we have a site that is popular and which people trust, we have options,” says Saakha.

Nikita Acharya from Urban girl says “I was still doing my bachelors when I started UG. I wasn’t sure if it would work but now we have a sustainable business. We have moved from a small 300 square feet office to a 2300 square feet office at Minbhawan. In the current market place, it is a challenge to find employees who want to work long term for your company. However we have 17 dedicated in house staff and most of them are women. It is really encouraging to see how far we have come. ”

To learn more about the struggles and strategies of the founders, you can watch their interviews: Amrit Tuladhar from Muncha.com, Manohar Adhikari from Foodmandu,, Suraj Shrestha from Anthropose, Bal Krishna Joshi from Thamel.com

Growth, Competition and Innovation

The global e-commerce giants Amazon and Alibaba have become conglomerate monopolies, stifling competition. Arrival of Amazon in India has created face-off between the local champion Flipkart and Amazon, which has set the competition to explosive level with smaller players being swallowed or out of business. E-commerce in Nepal is still in infancy and we have yet to see how the game of monopolies play out here.

But given that e-commerce is still in its infancy here, having more players will create a robust ecosystem and a shift in consumer culture. Also, healthy competition will create a culture of learning and innovation.

Sasto Deal’s Amun Thapa points out that more players in the e-commerce industry will be necessary to ensure that there is competition and improvement in business models and service delivery.

Darwin Suwal in gadgetbyte claims that E-sewa got a new website and an updated app, with the entrance of new competitor Khalti. E-sewa had almost a monopoly in online payments. After Khalti launched with an exceptional user-interface, e-sewa had to step up its own design.

Amrit Tuladhar from Muncha.com says: “I think the competition has been really helpful. With the increasing competition, we understand that we need to position ourselves differently from other businesses. Expanding our services all over Nepal and addressing the unique needs of Nepali customers, in places like Biratnagar, Dharan, Chitwan and so on, are among our priorities.”

Manish Modi from Khalti writes: “Until and unless people are digitally aware about the digital payment system in detail, it’s hard to sell our products. One cannot build up an ecosystem alone, and there should be multiple players to build the ecosystem. If all the digital payment service providers go collectively, it will help build the ecosystem with ease. We have always taken other FinTech companies in Nepal as collaborators rather than competitors.”

 

Future of Nepali E-commerce

Nepali consumers are warming up to e-commerce.  Foodmandu says that initially, almost 70 percent of the orders came from the expat community, who were more familiar with online businesses. Although expats and tourists make up a large chunk of the company’s total customer base even today, there is an equal proportion of Nepali customers using the service now.

Nepali e-commerce initiaitives such as Threadpaints and Khalti getting international recognition are a matter of optimism. We cannot expect a meteoric rise of e-commerce given our inherent cultural, financial and logistic realities. If government plays a constructive role, we can definitely expect a more vibrant scenario for e-commerce.

Prabal Saakha of Hamrobazaar says that for the e-commerce industry to grow, there needs to be an overall improvement in the Internet infrastructure and government regulations, which would create cheaper and more reliable online services and better payment gateways.

Sonia Awale from Nepali Times writes: The IT industry, especially, needs strong financial mechanisms for e-commerce and cross-border payments. This limits the full potential for growth of ventures like Sagoon and Tootle. The good news is that the government is coming up with a new draft regulation National Intellectual Property Policy 2016 and an Umbrella Act for IT which should streamline e-commerce regulation.

Niroshan Balasubramaniam, CEO Asia of Kaymu says: “E-commerce in Nepal is likely to become the main shopping trend. E-commerce is a fraction of the way people do shopping in countries like Nepal, India, Bangladesh and Sri Lanka where the market has developed into traditional bazaars and shopping malls. It will be cheaper to operate an online market compared to building large shopping malls. Nepal is a prominent market for Kaymu. We launched here believing in the country’s business potential supported by factors such as, a growing number of internet users and no market competition. We have also been receiving a positive response from Kaymu users. Despite a tough business environment here, we see good prospects in Nepal.”

Amrit Tuladhar from Muncha.com says: “The reason I stuck with Muncha.com was that I believed that the internet was the future and that the place for e-commerce in the world was assured. It was just a matter of time. In the beginning, I had hoped that it would take some two to three years for the Nepali market to evolve and for our business to be accepted by Nepalis. But it took a lot longer than that. Even now, e-commerce hasn’t reached its full potential. The offerings from companies are also limited, and people still don’t make use of all the services. But the strengths of e-commerce far outweigh the weaknesses, and that is what keeps us going.”

The Market Mogul writes: “Being a landlocked nation, Nepal faces many disadvantages, which includes the restricted resources to develop a healthy and thriving e-commerce industry. China’s decision to include Nepal in its One Belt One Road (OBOR) initiative might well provide the much-needed infrastructure to help propel Nepal onto the e-commerce center stage.”

Sharad KC from M&S writes: “Nepal is a developing country without an adequate retail infrastructure in place. Concurrently, growing income, fuelled by remittance money and international exposure through media and television, has increased demand for consumables. In such situations, e-commerce could prove to be an alternative to traditional retail stores. Specific data regarding how e-commerce in Nepal has changed over the years is not available. However, most market watchers agree that there is enough potential because of the large number of youth we now have who embrace change, the increase in the number of internet and mobile users, increasing number of e-commerce startups, and the slowly digitising financial landscape. E-commerce of any form is directly affected by consumers’ access to the internet as the first step to buying online is to be online. The number of internet users in Nepal is growing rapidly annually. The ‘Management Information System’ report by Nepal Telecom Authority released in November 2015 revealed an internet penetration rate of 44.11 per cent compared to 34.09 per cent a year before. Such rapid growth is set to continue as demand for the internet is growing across the country. Furthermore, the cost of internet access is going down, with more than 43 registered ISPs vying for parts of market share in the competitive market. New technologies like fibre-to-the-home are further helping reduce the cost of internet access. All of these factors converging to help bring Nepali businesses to their customers closer by a click. ”

On winning Google Business Group Storytelling Contest, Manish Modi from Khalti writes : “Nepal, though popular in tourism and other sectors, has not been able to leave its mark on the technology sector. We want to give a message to the world that though crushed in between two giants China and India, we are doing some innovative works in technology. ”

 

Conclusion

After going through the available publications on e-commerce in Nepal, I would like to congratulate the early adopters for taking the risk and putting the effort in creating an e-commerce ecosystem in Nepal. Though still a long way to go, there is now fertile ground for new e-commerce companies to thrive and push the boundaries. Nepali customers are becoming more aware and accepting of e-commerce. Similarly, Nepali businesses have also found an optimal way to launch their products and services on the global market. E-commerce need not be just a platform for choices, convenience and productivity and profits. It can also be a platform for innovation and alternative choices and Nepali entrepreneurs are already exploring in that direction.

 

Further Readings:

 

Dovan Rai

Author: Dovan Rai

Dovan is passionate about education technology and worked at OLE Nepal, where she designed educational software for public schools in Nepal. She has a PhD in Computer Science from Worcester Polytechnic Institute, USA

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