Interested in knowing the challenges being faced by e-commerce businesses in Nepal?
This detailed blog post contains all the answers you are looking for to the problems of running an online business in Nepal – all explained.
The story
Let me start with my story – in my undergraduate study of computer science, I took the “e-Commerce” subject as an elective in one semester.
Not because I wanted to establish an e-commerce business in Nepal but I was interested to know what e-commerce is, the concepts and basics and everything I could understand about e-commerce globally.
I discovered it is a very interesting and innovative sector. Later I got curious to know about the current status of e-commerce in Nepal.
I knew that this concept was still in the infant stage in Nepal but still I wanted to know what other fellow Nepali think of this. So in January of 2018, I made a post in one of the popular entrepreneurial groups of Nepal:
What are the challenges to run an e-commerce business in Nepal? Other than a payment gateway. It would be great if you could share your experiences.
I got lots of comments and suggestions on this topic.
About four years later I am writing this post listing and explaining in brief the problems and challenges businesses are facing to provide an online shopping experience in Nepal.
Even though a lot has changed in these four years, still most of the challenges are the same with a few added to the list.
What are the major challenges faced by e-commerce businesses in Nepal?
The major challenge faced by businesses in doing e-commerce business in Nepal is logistics. It is a big problem prevailing in the Nepali market to deliver goods, acquire goods and maintain proper supply chain management.
Also, the government rules aren’t updated and friendly for the betterment of the online shopping experience in Nepal.
Other than these there are several problems and challenges, which I have listed by category.
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Consumer
Not all Nepali consumers are ready to easily accept online shopping for many reasons. It is the traditional shopping habit of Nepali people who like to go to the market, see the product by self before purchasing and there is a friendly relation between the vendor and the customer.
Most Nepali are used to shop in this way and still like this way of shopping in Nepal.
- perception and acceptance
Many Nepali think visiting shops and stores physically and purchasing products is more convenient and “used to” thing than shopping online.
Other than youths, the youngest and the older generator isn’t ready to easily accept the idea of buying things online. - shopping behaviour and trust
Because of the shopping behaviour and habits of visiting stores physically, Nepali customers believe and trust their local shopkeepers instead of trusting someone sitting behind the computer in the next part of the city of the country. - ease
While purchasing online is relatively easier than buying things physically but still, there are few things we need to consider here.
Purchasing online is efficient if you have all the technologies and you know what you are doing.
And after purchasing online you have to wait for at least a few couples hours before being delivered. But when you go to the store physically you can get the product instantly.
Technological challenges for e-commerce businesses in Nepal
Nepal being a developed nation is rapidly marching ahead in the field of adapting and getting used to new technologies. The communication sector has boomed significantly over the last decade.
But for any e-commerce business to flourish well, it is essential that its targetted customers are able to access the technology to go online, which isn’t an easy job for many people still.
- internet penetration
The Internet penetration rate in Nepal is at 36.7% in January 2021. This means still a lot of people haven’t got easily accessible internet service in Nepal, which is vital for any e-commerce business. - availability of devices capable to do online shopping from
While the technology has rapidly evolved to make it possible to shop online from a range of devices, many mobile phone users in Nepal haven’t got a browser on the phone.
Meaning lots of phones connected for telecommunications are just for calls and texts.
Payment
Payment can be considered a simple challenge but there is something here if you look closely.
- hard to perform international payment
We know that Nepal Rastra Bank’s regulation doesn’t easily allow sending money overseas from Nepal.
If you are doing international e-commerce business you might have to take additional steps and documentation to make it happen.
- too many payment wallets
In the Nepali market, there are already more than dozens of payment wallets in operations. The big ones being eSewa, Khalti, IMEpay, PrabhuPay etc.
With the market overlap of numerous payment wallets, it is a headache for the e-commerce business to decide which payment wallets should they be integrating into their platform. Also not to forget the individual banks and debit cards.
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Supply chain management
One of the important challenges being faced by Nepali entrepreneurs is finding, building and maintaining the relationship between the suppliers and distributors.
This plays a major role in the sustainability of the business in the long run and saves the company from running into additional expenses and losses.
As managing and maintaining a proper warehouse with the latest technology comes with costs and manpower, not all e-commerce businesses in Nepal have been to utilise the latest technologies and automation to make the process smoother and faster.
- reliable supplier source for long term sustainability
- warehousing and automation technology
Policies and regulations
If there were more friendly policies and regulations for e-commerce business operations in Nepal, Nepali businesses would have already reached a different height by now.
It requires enormous efforts, pressure, lobbying and time to pass enact any new relevant laws in Nepal which directly hampers the eCommerce businesses as most of the regulations need to be updated and adapted.
- unfriendly e-commerce regulations
- unable to adapt to changing technologies and trends
- lack of capable and skilled manpower in the government system to understand e-commerce and regulations
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Product delivery challenges for e-commerce in Nepal
Well, trust me one of the major hurdles of operating a business in e-commerce in Nepal is nothing other than delivering the product to the customer.
It is not because of the product or process but because of the postal and navigation system of Nepal.
Stay with me! There’s a lot to explain.
In Nepal, not all houses are numbered and even if the houses are numbered they aren’t numbered properly.
And what about the streets?
Well, not all the streets are named or even if they are named which may be just a local name, there aren’t proper street signs!
So here arises an obvious question – so how are the deliveries being done currently?
The answer is quite simple but the process is complex and cumbersome. Most of the deliveries are done by giving the nearest landmark like school, hospital and directions like turn left from that school and you’ll see a 4 storey blue coloured house…
Let’s talk about the government’s postal service now.
Nepal Government has its own postal service and offices across all districts and local governments over Nepal with huge manpower.
The problem with this postal system is they are snail-paced – not always though, and operate under the same old methodology.
The government’s postal service can’t be always relied on to deliver online shopping products in Nepal which needed the quickest delivery.
The solution here is either having your own delivery team or outsourcing this job to a delivery partner – both of which will cost money.
Using delivery partners also has some problems – not all delivery operators in Nepal are reliable and startup-friendly.
- varying geographical terrain
- transportation infrastructure is not easily available everywhere
- House numbering and street addresses
- Almost dead and snail-paced national postal system
- delivery partner’s reliability
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Problem management
- fake orders
There can rarely be another nightmare than receiving a fake order for your online business. Imagine becoming happy that you are receiving an order but later it turns out to be just another fake order.
- high return rate
It is a common scene for any e-commerce business to receive the delivered product returned for many reasons. These reasons could be customer wasn’t satisfied with the product or might have received a different product.
When a product is returned it stresses the businesses to refund the customer his/her money causing no flow of revenue to the business.
It is essential to find out the reasons why the products are being returned and how to increase the acceptance rate.
Customer service and satisfaction
Out of several factors determining the success of any business one is the customer service and satisfaction a business provides to its customers.
Here are few challenges in this topic in the e-commerce sector:
- service time
e-Commerce businesses in Nepal are struggling to keep their service time shorter. Starting from the order is places to delivering the product there are many things that determine the time taken. - online and offline support, after-sales support
Providing customers with necessary answers and support via different online and offline mediums like phone, chat, email and social networks are essential for an e-commerce business.
Also not to forget about the after-sales support. - customer retention and satisfaction rate
The success of any business relies on the customer satisfaction ratio and the retention of customers.
Competition
Healthy competition is essential in any business sector so that the customers can ultimately benefit and take advantage of it.
Recently there has been a big boom in the e-commerce sector in Nepal.
Numerous small and big businesses have entered the Nepali market with the aim of providing an online shopping experience to Nepali.
- too many e-commerce businesses are already in competition causing unhealthy competition
To the date of writing this blog, I can count more than two dozen of e-commerce businesses already in operation in Nepal.
It is a good thing for customers to have choices but nowadays some online businesses have been found to misguide customers hampering the overall e-commerce brand image in Nepal.
Also, some online sites run without proper registration and licensing, causing trouble when any issue arises giving hard time for the law enforcers.
- huge customer base and monopoly of few big e-commerce giants
I said earlier that there are many e-commerce sites in Nepal but there is something more to this story that you should know.
Even though there are numerous options to choose from, few big names like Daraz, SastoDeal, Gyapu have huge market share and customer base over others.
This gives an advantage to the big e-commerce giants as they have higher investment, manpower, technology, audience base, vendors and suppliers.
Service expansion beyond Kathmandu and core cities
More than half of Nepal’s population live at a distance from urban areas.
While almost one-third of the population is in urban and cities, it is always a challenge for an e-commerce business to cater its customer who lives at the nook and corner of the country.
There are many definite reasons for this common being the infrastructures:
transportation and communication being unevenly developed in rural areas, varying geographical terrain and the problems with delivering because of the postal system.
For and more reasons mentioned above, not all online businesses in Nepal have been able to expand their operation and service beyond the core cities like Kathmandu valley, Pokhara, Biratnagar, Butwal and Birgunj.
What do you think are the major challenges for running an eCommerce business in Nepal?
I am curious to know your opinion on this.
Let’s meet in the comments below. 🙂