A year ago, amid the raging Covid-19 pandemic, Aashish Rai, 23, a resident of Ramechhap, was desperate for a job. A foreign employment aspirant, he wanted to work briefly in Kathmandu before he could fly abroad. He searched for jobs – everywhere from hotels and restaurants to convenience stores. After desperate attempts, Rai landed a few jobs, but the paychecks were barely sufficient to make his ends meet.
Then he found out that one of his friends was earning decently from the ride-sharing platform Pathao. Seeing that his friend is earning a good amount of money through gig work, Rai also decided to become a Pathao rider.
It has been almost a year since Rai started to work as a Pathao rider. “I earn up to Rs 2,000 every day depending on the number of trips I make. Sometimes, it’s Rs 1,000, and other times it is almost Rs 2,000. I have earned up to Rs 45,000 a month. Although I will only work in Nepal for a brief period, the earning is good enough to make my ends meet,” shared Rai, who is flying to a Gulf country for employment in a few months.
Rai’s experience is just an example of how e-commerce platforms in Nepal are generating employment opportunities for young and inexperienced youths looking for jobs.
A Hiring Spree
In the midst of the pandemic, when most other companies in the country were laying off staff or slashing salaries, e-commerce platforms were on a hiring spree. As delivery orders from customers rocketed as many people hesitated to go to physical stores in fear of contracting coronavirus, the digital storefronts engaged in retail business hired many people to cope with the growing consumer demand. Though the exact size of the Nepali e-commerce market is yet to be determined, it is estimated that the size is around Rs 60 billion at present from Rs 25 billion in 2018. This massive growth clearly suggests the scope for digital marketplaces in terms of their business expansion as well as the generation of employment in the country.
According to e-commerce entrepreneurs, job opportunities in the sector have increased almost three-fold in the last two and a half years. Manohar Adhikari, founder & CEO of Foodmandu, a meal delivery platform, informs that his company currently has 300 staff, and is still looking for new people.
Sastodeal, a digital storefront, is also in search of new staff.
“As the business is on the rise, we are looking to hire new staff in every position,” said Bibas Aryal, head of human resources at Sastodeal.
Likewise, Gyapu Marketplace, which started operating after the government announced the first lockdown in March 2020, is expanding its presence in some of the major cities of Nepal. “We are starting operations in Chitwan and Pokhara. For this, we need new teams. So, we will hire staff for these two branches,” shared Surjani KC, head of operations at Gyapu Marketplace. “We are hiring technicians, digital market personnel, designers, business development officers, among others. But it is proving difficult to get the right people for the right position.”
The platform is also planning to start its services in India. Currently, Gyapu Marketplace is providing jobs to 100 people.
Likewise, Hamrobazar.com, Nepal’s first classified online marketplace, is also hiring new staff. “As the business has increased lately, we need more people,” said the company’s CEO Rohit Tiwari.
The Pandemic as a Boon
At a time when most business sectors were forced to bear the brunt of the global health emergency, e-commerce and some other types of digital businesses were the ones to come out of the crisis unscathed. Prior to the pandemic, when e-commerce was still in a nascent stage in Nepal, the global crisis became a turning point in terms of business expansion. “The business grew massively during the pandemic, thanks to the realization from consumers. With the increase in the demand side, e-commerce platforms started hiring,” said Adhikari, adding, “The demand for meals increased massively. But due to the Covid-related restrictions, we failed to meet the expectations of consumers on many occasions.”
Sastodeal also saw the number of staff increasing by 15-20 percent after the pandemic. “We hired more people to meet the growing demand of customers. Had there been no pandemic, it would have taken us a few more years to make people understand the convenience and reliability of online shopping,” said Aryal.
According to e-commerce platforms, their turnover is still soaring as people are switching to buying things online instead of making trips to the market. “Many people have gotten used to purchasing goods and services online in the last two years and the risk of contracting coronavirus has not gone away completely. Not only is online shopping the best alternative for consumers available at the moment, but it is the future of shopping,” said Aryal.
For Gyapu Marketplace, the pandemic was the perfect time to start the business. “We were planning to start the operation after some time. But after the pandemic started, we realized it was the right time. As the demand for groceries was high, and there were restrictions in the movement of people in place, ordinary consumers needed an online platform to buy groceries. But there were no online stores dedicated to selling grocery items, and we entered the market,” informed KC.
Gyapu started its operations with only seven staff. “Even during the lockdowns, we hired new staff. Currently, we have more than 100 employees,” said KC.
Besides providing job opportunities to unemployed youths, e-commerce platforms have also proven to be saviors for many small business owners and self-employed people during the crisis. For Subhash Adhikari, who owns a mobile accessories shop, Hamrobazar.com offered a lifeline to continue his business. “After the lockdown was imposed in late March 2020, sales came down zero. I then listed my products on the site, and thankfully it worked out,” said Adhikari, adding that the business kept on running even during the pandemic.
According to Tiwari, Hamrobazar.com has not only created direct job opportunities. “Many entrepreneurs have been listing their products on our site. And in the pandemic, the trend increased further. We have been getting a lot of positive responses from vendors who have been selling their products,” said Tiwari.
Backed by Internet Growth
Until a few years ago, there were only a few e-commerce platforms in the country as the internet penetration was low, and people were yet to be convinced about the benefits of the use of technology. In the last few years, the adoption of smartphones by the masses has been one of the major factors for the growth of the e-commerce sector.
“For e-commerce platforms to flourish, the internet and technology play a vital role. In the past decade, the number of internet users in Nepal has risen significantly every year, hence supporting the growth of e-commerce platforms,” observes Tiwari.
As per the latest Nepal Telecommunication Authority (NTA) data, internet penetration in Nepal stands at 116 percent. Of the total internet users, 74 percent use the internet on mobile phones, and 25 percent use fixed-line internet services.
Official statistics show that the number of internet users has increased by 14.6 million in the past two years.
According to operators of e-commerce platforms, most people who went on to become first-time buyers after the government announced lockdown in March 2020, have become their regular customers.
Similarly, the proliferation of electronic payments also has a massive impact on the growth of the e-commerce business. With the growth of digital wallets, QR-based payment systems and internet banking, ordinary consumers can now easily make payments of their purchases online.
According to the Nepal Rastra Bank, digital payments in Nepal doubled to Rs 1.22 trillion in the first quarter of the current fiscal year 2078/79 from Rs 630.85 billion in the corresponding period of the last fiscal year.
Since the inception of e-commerce in Nepal in the early 2000s, digital storefronts have faced a big question related to business reliability. Tiwari of Hamrobazar.com says that with time, Nepali e-commerce platforms have evolved. “There is a huge competition in the market, and competitive pricing of products is always a big factor,” he said.
KC of Gyapu Marketplace agrees with Tiwari. “The price of products listed on the website matters. It is because consumers around the world always compare the prices of the products and services they are looking to get. So, we make sure that the prices of the goods listed on our site are less in comparison to that of the market,” said KC.
In the meantime, the development of technology is another big factor, according to Tiwari. “In Nepal, there is an urgent need for the development of technology like payment systems, among others,” he said.
While social media has played a huge role in the popularity of e-commerce, operators of e-commerce platforms complain that small businesses based on Facebook and Instagram have ruined the market in terms of price stability. “They list products on their social media account without basic information like pricing. The whole concept of online shopping is hassle-free shopping. The consumers need to get every detail like price, among others,” they say.
According to Foodmandu founder Adhikari, the government is yet to realize the importance of e-commerce for the growth of the digital economy. “During the lockdown, we were delivering food to consumers’ doorstep following proper health safety protocols. The business was good, and the consumers were also receiving services during the difficult times. But we were forced to shut the service after the government did not allow home delivery,” he said.
According to e-commerce platform operators, digital literacy, the digital divide and issues related to trust are the major challenges for the industry at the moment.
E-commerce is Not Just for Low-skilled
Although e-commerce platforms are providing job opportunities to thousands of people, they are accused of only having the capability to provide jobs to low or semi-skilled people. “Yes, we are always accused of this. The number of employees for logistics management is always high in the e-commerce business. The online business is all about ordering and delivering. We need delivery guys for it. But having said that, we also need a lot of support staff, technical teams, developers to manage the site and apps,” said Adhikari.
Of the 300 staff employed in Foodmandu, 200 are delivery staff, he said. “The number of staff for managing logistics is high, but it is not like we don’t provide job opportunities to high-skilled people,” he said.
Likewise, Surjani KC said, “Of the total staff in Gyapu, only 20 percent are delivery guys. We need everyone-from low skilled to high-skilled people to run the business. Even our minimum salary is attractive. Even the interns in Gyapu get well paid.”
“The structure of e-commerce is such that the number of low-skilled workers is high. It is a myth that white-collar workers have no opportunity in e-commerce. We have to hire technicians, developers and other high-skilled people. And the salary is very attractive,” said Aryal of Sastodeal.
Changing the Economic Landscape
A recent report published by the Nepal Rastra Bank (NRB) shows that digital payments in the country reached a staggering Rs 5.14 trillion in the first six months of the current fiscal year 2021/22 which was Rs 1.68 trillion in the corresponding period of the last fiscal year. According to the central banking authority, the massive rise in the use of smartphones across the country has been the key factor for this growth of digital transactions. At a time when ‘digitization’ has become a rallying cry for the government, the central bank and the private sector, it is evident that the launch and adoption of mobile apps of QR code payment systems over the past one and a half years indicate how central smartphones have become in ushering a new era of the development of the digital economy.
In Nepal, where smartphone penetration was growing at a healthy rate prior to the Covid-19 pandemic, the start of the global health emergency became the biggest factor to boost the adoption of smartphones as many important daily activities of people such as banking, shopping and education went online.
“Such was the demand that retailers were selling mobile phones at maximum retail prices (MRPs) without any discount,” said Deepak Malhotra, president of Mobile Phone Importer Association (MPIA). Malhotra was referring to the period of FY 2020/21 when import and sales of smartphones hit an all-time high. A veteran in the mobile handset trade in Nepal, he is the Chairman of IMS Group, which is the national distributor of Samsung mobile phones in Nepal.
When other businesses were taking a beating from the pandemic, the business of mobile devices thrived as Nepalis went on a handset buying spree to stay connected and continue their study and work-from-home. “We are now using mobile devices not just for communication but for multitasking,” said Sanjay Agrawal, vice-president of MPIA. Agrawal, who is the vice president of Ramesh Corp that deals with the Xiaomi brand in Nepal, says this reliance on mobile devices will expand further as the country’s economy is digitizing rapidly.
To say the pandemic has become a blessing in disguise for the mobile trade in Nepal will not be an understatement. The domestic handset market has for years struggled with the sales of ‘grey smartphones’. But the last two years of the pandemic has helped authorized importers and sellers of mobile phones to recover some space from the illegal imports and gauze the actual size of the Nepali mobile phone market.
Before the pandemic, the mobile importers were not only facing the impacts of grey imports but also bearing the brunt of the removal of the 40 percent VAT refund provision in the federal budget of FY2019/20. Making the matter worse, the government also imposed excise duty on handset imports.
However, with online classes and work-from-home becoming new normals after the government announced lockdown to curb the coronavirus contagion in late March 2020, the demand for phones soared, offering much-needed relief to the importers and distributors.
“The necessity for personal devices surged exponentially as the online classes and remote commuting became the order of the day for students and office employees after the enforcement of the lockdown,” said Agrawal.
And, the impact was quite visible. Nepalis purchased smartphones worth Rs 36.9 million in the fiscal year 2020/2021. The amount Nepalis spent on smartphones is double the money spent in the fiscal year 2019/2020 when the amount stood at Rs 18.17 billion.
“The closure of the borders also gave us much-needed relief as sales of legally imported mobile phones increased tremendously,” mentioned Malhotra.
According to data published by the Department of Customs, 4.3 million mobile phone sets were imported in FY 2019/20, which increased to 7.03 million units in FY 2020/21.
“The last two years also showed us what is the actual demand for mobile devices in the country. What happened was we experienced double-digit growth as the share of authorized imports increased in the market and the share of unauthorized imports decreased,” said Prabhakar Shumsher Thapa, Vice President, Golchha Group. The group’s company Him Electronics is another authorized distributor of Samsung mobile phones in the country.
“In terms of sales, last fiscal year 2020/21 was the peak. The sales reached an all-time high as Nepal imported about 7 million sets,” said Thapa.
Not a Luxury, But a Necessity
Until a couple of years ago, owning a smartphone with advanced features and functions was considered a luxury for most Nepalis. In recent years, this notion has mostly gone away as many ordinary citizens have handsets with them. The current smartphone penetration rate suggests how the mobile phone market got disrupted in no time after the start of the pandemic. The estimates of the Nepal Telecommunications Authority (NTA) puts the smartphone penetration rate at 70 percent which was around 45 percent in 2018.
“For me, a smartphone has now become a necessity,” said Srijana Thapa, 38, who is a banker. Thapa, purchased two new phones for her two kids to attend online classes. “During the lockdown, I spent Rs 60,000 to buy two new phones for my kids,” she told the HRM. “Had there been no online classes, I would not have bought phones for my kids.”
Like Thapa, many parents bought at least one smartphone for their kids to attend online classes.
“Smartphone is no longer a luxury product. After the concept of remote working and online classes started, it became a part of daily life. The sales surged by a huge number in the lockdown as smartphones became the need of the hour,” said Sunil Agrawal, chief executive officer (CEO) of Telecell Pvt Ltd, the authorized distributor of OPPO smartphones in Nepal.
“During the first lockdown, educational institutions, corporate organizations, industries and development sector organizations were closed. People started remote working, and colleges and schools also started online classes. This increased the sales of mobile phone devices all of a sudden. If there were four members in a family, all of them needed a mobile phone either for online classes or for remote working,” said Agrawal.
The pandemic not only expanded the domestic mobile market, but its wider usage also made people’s daily lives more dependent on it. “People are using mobile phones for multiple purposes–from online study to shopping and mobile banking. This reliance on mobile will only grow as our economy is becoming further digitized,” said Sanjay Agrawal, vice-president of the MPIA, adding that smartphones ranging Rs 50,000-60,000 are no more a luxury item, but a necessity.
Contributions in Government Revenue and Employment
As imports surged, the contribution of the mobile industry to the state coffer has also increased. The taxes paid by the mobile importers and sellers in 2021 increased by a whopping 60 percent compared to what it paid in 2020. As per the data, the government collected Rs 6.27 billion as revenue from mobile devices imports in 2021. The mobile industry contributed Rs 3.92 billion as revenue to the government in 2020.
Of the total taxes, the contribution from the smartphones segment is much higher. According to MPIA, the government collected Rs 5.71 billion as revenue from smartphone imports and sales.
Importers argue that the smartphone business has been contributing a huge amount to the government and providing job opportunities to thousands. “Importers who import through legal channels, are contributing huge revenue to the government. There is no under-invoicing issue in the imports of mobile phones. From the national distributors to retailers, all doing business legally strictly comply with VAT rules,” said Sanjay Agrawal.
The mobile phone industry has also helped to create thousands of jobs, according to MPIA. As per the data provided to the HRM, 3,000 people are working in the national level organizations in the mobile phone business, while 4,000 are in regional distributors. Similarly, more than 10,000 people are employed in mobile phone retail shops.
Grey Import Back Again
While the start of the pandemic helped authorized distributors to fight against sales of grey handsets, importers say the menace of grey imports has come back again, particularly after the easing of the second lockdown. According to them, sales have not reached that level which they had experienced after the first lockdown. “It is due to three factors. First, most people already own smartphones. Second, the grey market is flourishing again. And third, shortage of microchips in the global market,” said Malhotra.
Sunil Agrawal also has the same opinion. “People already have mobile phones, and that too in excess. For example, if there are six members in a family, they together own up to eight phones. Why would people buy new phones if there is no need? Another reason is that the economy is grappling with a liquidity crisis. I feel the mobile phone market will remain the same for the next one year,” he opined.
“The sales of mobiles have declined significantly in the last six months. This period, we mobile importers, see is the worst phase when it comes to sales. From September/October, the sales have declined even more,” said Agrawal.
With the reopening of Nepal’s international borders, the grey channel is active again. “While the Nepali market sold 7 million units of smartphones last year, we expect the sales from the authorized imports would only reach 4.5 million this year. The rest will again come from unauthorized imports,” said Thapa.
At least 30-40 percent of the smartphone market in Nepal is captured by illegal imports, according to the importers. They say about Rs 12-15 billion worth of mobile devices are imported to Nepal illegally.
During the lockdown, the grey market lost its supply lines after the Nepal-India borders were closed, and customers turned to legitimate sellers, pushing the demand for handset up. “As Nepal has an open border with India, the major markets in southern belts are dominated by illegal imports. As soon as a particular brand becomes cheaper in India, it comes to Nepal through the open border. Same is the situation in Kathmandu where handsets are brought by the migrant workers and end up in the retail store,” said Malhotra.
Dillydallying in MDMS Implementation
In recent years, importers and market experts have raised their voices for the implementation of the Mobile Device Management System (MDMS), a security system that enables the telecom regulator to implement policies that secure, monitor and manages end-user mobiles. While NTA officials have repeatedly made commitments regarding MDMS, the implementation of the system is yet to see the light of the day. Importers argue that the only option to control illegal imports is by implementing MDMS. Once the MDMS is implemented, the Nepal Telecommunications Authority (NTA) can block the smartphone which is brought to Nepal without clearing customs.
It has already been four years since the NTA had announced a plan to implement MDMS. The telecommunications sector regulator even announced plans to introduce the system from the beginning of the current fiscal year. But this time too, NTA has failed to start the much-needed mechanism.
MDMS is expected to completely end the import of grey mobile sets as the authority can block smartphones imported through illegal channels. As the implementation is delayed, grey smartphones have dominated the market, and the government is losing billions in revenue.
“The telecommunications authority has repeatedly issued notices to implement the MDMS, yet it has not been materialized. The NTA, now, has said the MDMS will be implemented by the Nepali new year 2079 BS. The reason behind the delay is the misunderstanding between the NTA and the vendors implementing MDMS. The delay is a loss to both the state and mobile importers,” said Malhotra.
The implementation of the tracking system is expected to control the rampant grey market. As the MDMS will bring smartphones under the registration net, it will make it easier for authorities to monitor them. Once it comes into effect, the grey market vanishes, claim importers. According to them, the implementation of the system will also reduce criminal activities that are conducted through the use of mobile phones.
“We have been talking with the authorities concerned for the implementation of the system. The main responsibility for implementing the MDMS lies with NTA, the Ministry of Communications, and the Ministry of Finance. The hardware and software are all ready for its implementation. It should not be delayed now,” said Sanjay Agrawal.
Although importers have been complaining about the grey market, the regulator has just been blaming the government for the delayed implementation. Under the condition of anonymity, a high-ranking NTA official said, “It was a political decision to implement the system. The government without any discussions with the NTA announced plans to implement the system.”
According to Thapa, if the indirect beneficiaries of the growth in authorized imports are regular businesses, the direct beneficiary is the government. Hence, it is the government that will also benefit from the implementation of the MDMS. “The more the imports become legal, the more revenue the government will receive,” he said.
How MDMS Works?
The implementation of the Mobile Device Management System (MDMS) is perhaps one of the most discussed topics in the Nepali telecom business in recent years. While mobile phone importers have been urging the implementation of the MDMS as soon as possible, the government has been postponing its implementation.
The MDMS is security software that enables the regulator i.e., Nepal Telecommunication Authority (NTA) to implement policies that secure, monitor, and manage end-user mobile devices. Once the MDMS comes into force, the entry of grey devices into the market will be stopped as the mobile SIM card on phone sets whose International Mobile Equipment Identity (IMEI) number has not been registered at the NTA will not work.
The NTA has built a centralized system that keeps a record of mobile devices after their International Mobile Equipment Identity (IMEI) number is registered with it. Every mobile phone has a unique 15-digit IMEI number. For dual SIM phone sets, there are two IMEI numbers.
According to mobile importers, the system helps in detecting lost or stolen phones and importing genuine quality phones.
The IMEI number of officially imported mobile phones or phones imported by paying taxes is initially registered by the importing company.
As per the law, the telecom regulator has to give a type approval of the phone sets before it is imported into Nepal. NTA looks at the lab report of the mobile phone sets. After a mobile phone is manufactured, the company needs to obtain the IMEI number from the Global System for Mobile Communication (GSM). The importer will send the list of IMEI numbers to the authority, and the authority will verify it. The authority then checks the IMEI number with the data of the GSM. If it gets matched, the authority provides a no objection letter to the customs, and the customs office will check whether the mobile that has been imported is IMEI listed or not. This way, the system helps to ensure that genuine devices are imported.
Once the phone is connected to the mobile network, the IMEI number is detected with the help of the system. If the mobile has not arrived through formal channels, then it will be blocked. So to use a mobile phone, it needs to be registered.
Customers who have purchased their sets from importers do not have to register their phones. Mobile devices enter the country through different channels besides legal importers.
Similarly, mobile devices that were purchased from the domestic market but were imported through the grey market by traders too have to be registered.
The IMEI number is shown on the cover of the mobile set or users can dial *#06# to find out their IMEI number. Users can verify whether their IMEI number has been registered or not by visiting the authority’s website www.nta.gov.np and going to the registration portal. If the IMEI number is verified, the customer need not register it again; but if the IMEI number is not verified, it has to be registered. The verifying portal is currently out of service due to heavy traffic.