Ecommerce shines as pandemic bites
The second wave of the coronavirus pandemic devastated the global economy in 2021. Industries across the sector were realigning their strategies and making efforts to recover. Amid all the gloom, the e-commerce industry saw a significant increase in demand during the first and second waves of the pandemic.
As the world gets used to virtual meetings, social distancing and face masks, and the Covid-19 vaccination campaign spreads widely, the year 2021 will be seen as a redefining year for the online market and consumers.
The number of Nepalese e-commerce users started to increase after the first lockdown imposed on March 24, 2020. As people were grounded at home, a growing number of consumers started shopping online during the second lockdown. which started on April 29, 2021. and lasted four months. Although markets opened up after stay-at-home orders were withdrawn in September, online retailers have been successful in retaining customers and their business has not declined.
E-commerce entrepreneurs said demand for online services was high during the second lockdown compared to last year as people became more confident in the service provided by online retailers.
“The demand for online services hit an all-time high during the lockdown as more and more people started to trust e-commerce platforms,” said Lino Ahlering, managing director of Daraz Nepal in a recent interview.
The growth is supported by multiple factors such as the growing adoption of social commerce, faster and more timely deliveries and the growing adoption of digital payment coupled with greater internet penetration.
Digital payments doubled this year in mid-October and mid-November compared to the same period last year, mainly due to an increase in the number of people adapting to online payment.
According to the Nepal Rastra Bank, online transactions in mid-October and mid-November 2021 reached 4.93 trillion rupees, compared with 2,000 billion rupees in the same period last year. The number of transactions also increased to 48.66 million during the reporting period, compared to 34 million transactions previously.
Digital payment entrepreneurs say digital literacy, the digital divide and trust are the main challenges for the industry. “When it comes to trust, it’s about changing behavior, because people still believe in cash transactions. But it’s a gradual process, and online payments will increase in the coming days, ”said Amit Agrawal, director and co-founder of Khalti digital wallet service in an interview this year.
Electronic payments have gained traction since the first lockdown in March 2020, with internet banking, mobile banking, e-wallets, and QR-based payments gaining popularity among customers.
We see banks promoting digital payment because it increases efficiency, reduces transaction costs and promotes transparency. The cost of interbank fund transfer decreases. It also saves the cost of printing paper money. It will also help submit transactions to the tax system due to transparency, the central bank said.
Internet penetration had reached 116.91% by mid-November of this year, up from 80% at the same time in 2020.
Fast-moving consumer goods, personal care products, and groceries are the key segments driving e-commerce growth, followed by consumer electronics, fashion and accessories, and wellness.
Ecommerce companies like Daraz and Sastodeal grew 100% in volume and value respectively in 2021.
This year, the Daraz 11.11 sales campaign generated financial transactions worth Rs360 million in the 24 hours it was opened with 12,000 sellers. “This shows that e-commerce is really important now,” Ahlering said.
The popularity of online shopping is not limited to the Kathmandu Valley, as Nepal’s biggest e-commerce companies, such as Daraz and Sastodeal, have seen increasing demand from different parts of the country.
“New customers from new cities like Pokhara, Biratnagar, Butwal, Itahari, Janakpur and Chitwan, among others, have increased demand by 40% from 30% before the pandemic,” Thapa said. “The number of orders also increased by around 5% from around 3%, which shows the growing confidence of people in online shopping,” he said.
Daraz says 50 percent of his orders come from outside the valley.
With the emergence of e-commerce in the market, the pandemic and lockdowns have given rise to the trend of direct to consumer with different brands launching their own websites.
E-commerce companies like Doormeet went into business amid the second wave of the pandemic.
Nischal Niroula, co-founder of Doormeet, said they entered service amid the pandemic this year after observing that customers wanted faster and cheaper delivery.
“We were inspired to enter the market after seeing poor reviews from disgruntled customers on well-known e-commerce platforms,” Niroula said. “We entered service to provide cheaper and faster deliveries that other e-commerce companies were unable to do,” he said.
According to Niroula, the company delivers the goods within 48 hours of ordering and charges Rs80 for the service. In three months of activity, the company receives around 70 orders and records a turnover of around Rs 250,000 per day.
Low ecommerce margins and rising customer expectations for faster delivery times are forcing brands to build a strong supply chain.
Although 2021 has been a year of growth from a business perspective, it has been quite a difficult time with challenges facing the industry in many areas.
Despite the efforts made earlier this year, the government was unable to enact an e-commerce law. The Ministry of Industry, Trade and Supply prepared an electronic commerce bill in January which was sent to the Ministry of Law, Justice and Parliamentary Affairs for input and approval for its Implementation.
In the absence of a law governing e-commerce, customers have complained of being cheated in terms of getting damaged products, getting a product other than the one they ordered, differences in price and no seller’s return and refund policy, consumer rights activists said.
“We hope the law will come into effect in 2022,” Thapa said. “But at the same time, there is also uncertainty due to the political situation the country is going through,” he added.
“E-commerce businesses were brought to a standstill during the second lockdown as the new government failed to understand the importance of online delivery and prioritize it,” Thapa said.
“For example, when the government issued the first prohibition order which went into effect on April 29, it said nothing about what type of products online stores would be allowed to deliver, on time or on delivery. the type of vehicle or commuter license for their staff, ”industry sources said.
Online stores were confused about providing services due to the lack of clear government guidelines regarding e-commerce. They were allowed to make deliveries to a very limited number of places, and also only at certain times. This has made life difficult for both sellers and buyers.
Even the police administration stopped the vehicles making their delivery rounds.
Thapa said the government prioritized e-commerce during the first lockdown in 2020, but with a change of government during the second lockdown in 2021, e-commerce entrepreneurs felt they were not a priority.
“Recently issued restrictions on the importation of different goods to save foreign exchange reserves will have a negative impact on supply and on what to sell when there is no supply of goods,” he said. asked Thapa. “We are import-based with little domestic production, and stopping imports is the biggest threat to platforms like us.”
As the number of infections was high during the second wave of the pandemic this year, there was a strict lockdown and customers were looking for online stores so that they could buy daily essentials on time and safely.
Maintaining the supply chain and logistics remain major challenges for e-commerce companies. Supply chains have been disrupted globally, creating commodity shortages and rising prices that have affected the market.
As Omicron has started to spread to neighboring countries India and China, there is a good chance that the new variant will also enter Nepal. Building on past experience, e-commerce entrepreneurs say they are ready if a third wave hits the country.
“Supply chain and logistics management are two key factors we are prepared for. It will be easy for companies like us compared to previous years, ”said Thapa.
E-commerce entrepreneurs say logistics is one of the biggest challenges in e-commerce and that a huge budget is needed to manage the logistics infrastructure.