Kathmandu, Nepal – The bustling online shopping scene that once surged in Nepal has taken a hit, reversing the trend back to physical stores. The economic downturn has eroded people’s incomes, making the once-thriving e-commerce sector vulnerable to shutdowns and layoffs.
In the Kathmandu Valley, the once-common sight of ‘To-Let’ signs in storefronts—an indicator of the shift towards online shopping during the Covid-19 pandemic—has started to dwindle. However, now, it is the e-commerce businesses hanging on by a thread.
Market insiders reveal that the economic slowdown has spared few, and e-commerce is no exception. Online marketplaces that saw tenfold growth during the pandemic are now grappling with a steep decline in demand.
One notable casualty is Sastodeal, a major homegrown e-commerce company. Co-founder Amun Thapa announced the closure of Sastodeal three weeks ago, resulting in 200 job losses. “There is no demand. Consumption has sharply declined,” said Thapa. Sastodeal, which entered the market in 2011 and boasted 10 million users, received a $1 million investment from Dolma Impact Fund in 2020 and formed exclusive partnerships with Myntra and Flipkart. Yet, facing Nepal’s harsh economic reality, the company decided to shut down temporarily, hoping for future improvements.
This shift back to physical shopping marks a significant change in Nepalese buying habits. The country’s transition from a cash-based economy to a digital payment ecosystem was accelerated by the pandemic, leading to increased financial inclusion and economic development. However, the surge in online shopping was accompanied by a rise in online fraud, leaving many customers wary.
Consumer rights activists highlight the lack of monitoring as a key issue, causing customers to question the reliability of online shopping. Additionally, issues such as untimely deliveries and cumbersome refund processes have eroded consumer trust. Thapa acknowledged that Sastodeal struggled with timely deliveries, losing its customer base to fierce market competition.
The challenges are not unique to Sastodeal. Daraz Nepal, part of the Alibaba Group, announced layoffs in February, reflecting the broader difficulties faced by the sector. Bjarke Mikkelsen, CEO of Daraz Group, cited a tough market environment with geopolitical tensions, supply chain disruptions, inflation, increasing taxes, and the removal of essential government subsidies as reasons for the workforce reduction.
The absence of a comprehensive e-commerce law has further complicated the situation. Drafted in 2021, the e-commerce bill aimed at regulating the market has been stalled in Parliament for months. This legislative vacuum has allowed unscrupulous market practices to flourish, with customers frequently complaining about damaged products, incorrect deliveries, price discrepancies, and the lack of return and refund policies.
E-commerce entrepreneurs like Surakchya Adhikari, co-founder of Thulo.com, have noted a significant decline in online demand. “The overall online demand for goods has declined by 40 percent,” said Adhikari, pointing to a sharp drop in luxury goods and electronic items, with consumers opting for cheaper alternatives.
The 2021 Connectivity in the Least Developed Countries Status Report underscores that e-commerce performance is linked to a country’s development level, partially explaining Nepal’s struggles. Despite higher internet penetration, awareness and trust in e-commerce remain low in least developed countries (LDCs) like Nepal.
In a recent panel discussion organized by the Kantipur Media Group in Birgunj, experts highlighted the loss of confidence in the private sector, with factories shutting down and economic challenges intensifying.
As Nepal navigates its economic recovery, the shift back to physical stores may offer a temporary respite, but the future of e-commerce remains uncertain amid a complex and evolving business landscape.