I am writing this during the lock-down due to the pandemic COVID-19. What I have seen is the increase of Nepalese youths attracted in the idea of starting an eCommerce business.
What is eCommerce? Simpy, eCommerce means commercial transactions conducted electronically on the Internet. This means buying and selling things over the internet and carrying the transactions for those sales and purchase over the internet as well. eCommerce simply means doings stuffs over the internet.
What is the current scenario of eCommerce business in Nepal?
Online shopping in Nepal dates back to 2000 with the launch of Muncha and Thamel Dot Com the same year. Thamel dot com used to sell Khasi (goats) online during Dashain. Nepalis living abroad would order Khasi for their family back home and make payment (remit the money). After receiving the money, Thamel dot com would deliver the Khasi to the doorstep of their family. Although this was limited to just Kathmandu Valley, this marked an start of ecommerce business in Nepal.
Currently, there are few eCommerce websites that are operating in Nepal (Kathmandu, to be more specific). The notable ones are Daraz, HamroBazar, SastoDeal, SmartDoko, FoodMandu, Muncha, InternetPasal and MetroTarkari. They are primarily focused in Kathmandu valley. Many online shops are also starting to operate outside Kathmandu. Daraz has delivery networks over Butwal, Biratnagar, Pokhara, and some major cities. Also, many businesses have their own standalone eCommerce system in place like Bhatbhatenionline (now esewapasal), 911foodexpress, ugcakes, etc. These are simply the additions to their existing stores and mechanism for delivery rather than a full-fledged online store. We don’t have exact data about the total Investment, transaction, and profit of those online marketplaces but can easily assume that they are struggling in many facets; delivery and refund policy being the major ones.
The giant among the online shops of Nepal; Daraz, claims it saw traffic of 7 lakhs in a month and expects the monthly average visit of 25 lakhs in the next 3-4 years. (2018, ) This a decent amount of traffic if the claims are true. However, the real question of how many of these visitors actually get converted into buyers? This is discussed in the challenges section below.
There are different kind of eCommerce model. Let me explain the most popular ones:
- B2B model: Business to Business. Here the platform acts as a middleman between businesses. Typically, retail businesses can buy from factories in bulk from such platforms. Some of the major B2B platforms are Alibaba, IndiaMart etc
- B2C Model: Business to customer. This is the most common type of eCommerce business model. Here businesses sell their products direct to the end consumers. Aliexpress, Daraz, sastodeal etc are examples of B2C eCommerce platforms.
- C2C Model: Consumer to consumer eCommerce (customer to customer) business where the platform acts as a bridge between consumers. Some examples are eBay, hamrobazar etc.
- C2B Model: C2B eCommerce is also known as consumer-to-business. This change heralds a complete reversal of the traditional model, with those who would normally be end-users creating products and services that are consumed by the businesses and organizations they themselves buy from.
- Hybrid eCommerce: This is where the platform combines two or more of the above-mentioned forms. Amazon is a perfect example.
What are the challenges?
- Nepalese have a lot of free time in Hand. They can walk to the store and buy things anytime. This is one of the major challenges of the eCommerce business.
- Shopping is a group activity most of the time. Whenever one has to buy something, he/she goes to the shop with a bunch of friends. This experience is also another challenge for eCommerce sites.
- Delivery is another huge challenge.
- Technology and literacy of Technology.
- People are using eCommerce platforms merely to check the prices so that they can bargain while buying the product from an offline vendor. So, they are used more as a reference tool than a buying platform.
- Lack of credit card and wallet system. However, this challenge is being reduced due to many e-wallet providers such as esewa, khalti and imepay. Also, banks are attempting to increase the use of credit cards.
- The global problem; missing the touch and feel of products you are buying. This problem acts as a challenge in Nepal as well.
- Lack of proper street maps is also another major challenge for delivery.
The vicious cycle of poor products and user’s dissatisfaction: I have figured this interesting cycle. Running an online store on a big scale is quite a challenging business in Nepal. Unlike small stores set up on Facebook, you can’t simply say “we can’t deliver your product there if someone from Kamalbinayak orders something. To stay in business and create a brand name online stores operate at a slim margin (if any) or even at the break-even point for initial years. Like any trade-offs, there is a compromise for that. To operate and survive in such a tough environment, online stores seem to over-promise or sell inferior products now and often.
Also, they do everything to lure visitors to buy the product. For this, they need to present their product in a fancy manner. When the users receive what they have ordered; the products won’t meet their expectations because the portal displayed the product in the fanciest way possible boasting the features and quality. This is a common experience among online shoppers of Nepal. This dissatisfaction gave birth to the belief “its risk shopping online” and “they display something and deliver something else”. This reduces the consumer’s confidence hence they move away from online shopping. And the cycle continues.
How to break this cycle?
Well, there are two ways I can think of:
1. Money; I mean a lot of money
Running an eCommerce platform is not as easy and simple as many people think. Most people overlook other aspects of the platform like delivery, customer handling, refunds, payment management, product sourcing, and only think about the website/app aspect. A good and sustainable online shop is a blend of all these and many other things. Almost all of the eCommerce platforms run at loss in the beginning. There are tons of things to set up like delivery channels, websites, promotions, offers, etc. To grab a good customer base, you need to operate at a tight margin initially. So, if you can pour money and create a buzz around your marketplace, you can make it a success. The beast among all; Amazon waited nine years to make a profit. You might aswell be prepared to burn some cash initially.
However, if your plan to sell niche products or services, you can expect to make profits from the beginning.
If you can bring something really exciting or new to the table (I mean the internet), there are chances that you start making a decent profit from the day of the launch of your platform. If I were to start an eCommerce platform, I would make a list of things that I could include in my eCommerce platform that stands out from the rest. Creating stunning website is not the answer, I guess. Although User experience and Interface matter, there are other aspects that will give more competitive advantages.
Do I need to be a programmer to start an online shop?
NO. If you have some knowledge of coding or IT, that is definitely better but this is completely optional. There are tons of readymade solutions that can help you open your online business in no time. Few of the best solutions are:
- Woocommerce (WordPress. Can start for free but the theme, hosting will cost you some money)
- Magento (One of the most powerful opensource software for eCommerce.)
- Shopify ( everything is done for you)
- OpenCart (I don’t know)
Is it worth it? Is starting an online store or eCommerce business a good idea in Nepal?
There is a very slim chance of success if you go the traditional route; sell everything to everyone. The big names like Daraz and esewapasal might get successful because they have the capital to invest in the development of infrastructure and marketing so if you have deep pockets or an investor has agreed to invest in your eCommerce business, you may choose this.
If that is not the case, B2B or C2C model is seen as more suitable in the context of Nepal. Delivery, lack of IT knowledge among consumers, and various other challenges become fewer obstacles in these business models. In B2B you can purchase in bulk and sell in bulk so logistics can be managed or handled in an economic way. In C2C model, you can simply provide the platform and the burden of delivery can be passed to the buyers/sellers.
Here are few of the industries and models which I think can work fine in Nepal:
- Farmer to consumer (eliminating the middlemen who are sucking the farmers. This is a real problem that can be solved with technology. The possible best solution can be opening agromarts (physical) at various places and also selling the agro products to other similar vendors. Delivering fruits and vegetables directly to consumers (like Metrotarkari) can be difficult but, it can be sold to small vendors is doable with fewer difficulties.
- Personal Collection. This can work well in apparel and accessories. If you have a good social media following or fan-base, you can explore this model as well.
- B2B: Still, businesses from all over Nepal source their products from importers who are located in Kathmandu (Ason, Mahabouddha, Koteswor). If you can create a solution in which small businesses can watch a digital catalog of products and can order directly without having to travel to the capital might be a good business. Credit, warranties, returns, etc are the things to consider if going with this model.
How can I start an eCommerce business in Nepal?
To start eCommerce business in Nepal, you can either register a firm or a company. If you are planning to make the business diverse or plan to scale it, we highly recommend you go with the company. You need to specify online transactions, delivery and digital marketing in the objectives while preparing documents for company registration. For details about company registration, you can refer to this article: https://bizsewa.com/company-registration-nepal/company-registration-process-of-private-company-in-nepal/