E-commerce watchers expect only modest growth in online shopping this festive season as import restrictions on certain goods and runaway inflation keep Nepali consumers tight-fisted.

The Russia-Ukraine war has caused problems with supply chains and that has resulted in higher prices.

Sales growth may slow down, but e-commerce firms say that rising cases of dengue in Kathmandu Valley may drive shoppers to online stores in a replay of pandemic days.

The mobile and electronics category is expected to remain strong during the festive period driven by better deals and new launches, despite the embargo on these type of goods.

E-commerce firms like Sastodeal and Thulo.com said that rising prices may hurt e-business sales to some extent.

“We are expecting a growth in festive sales even though goods have become more expensive,” said Laxman Gautam, senior category manager of Sastodeal. He said that sales trends at brick-and-mortar stores were not good either.

According to Nepal Rastra Bank, the year-on-year consumer price inflation stood at 8.26 percent in the first month of the current fiscal year, as compared to 4.35 percent a year ago.

Food and beverage inflation stood at 7.11 percent while non-food and service inflation stood at 9.18 percent in the review month.

E-commerce firms say that despite inadequate inventory in the market, they aim to launch bumper schemes to attract customers to online shopping.

“There is a shortage of goods in the market. However, we are aiming to provide the best deals and prices with the available products,” said Pranayna KC, chief marketing officer of Daraz.

"Factors such as inflation and import restrictions that impact the supply of goods hurt the offline and online markets alike," she said.

Observing the high number of orders during festival time, online marketplaces are managing their logistics accordingly, with many hiring extra temporary staff.

Surakchya Adhikari, co-founder and chief operating officer of Thulo.com, said that the online marketplace is expecting a 30 percent sales growth this festive season.

“This is the same growth rate we had achieved during last year’s festive sales. As the number of dengue patients is rising in Kathmandu, more customers may want to buy goods online,” Adhikari said.

Although Covid-19 restrictions disrupted Nepal’s economy—tourist arrivals, for example, plunged by 81 percent in 2020—the pandemic has created new online opportunities, said the United Nations Conference on Trade and Development report.

Nepal’s key online supermarket Thulo.com, for example, has seen sales surge by more than 200 percent from 2019 to 2020.

“Covid-19 has levelled the shopping experience due to the convenience of buying goods from the comfort of one's home. It has also increased the trust level of customers,” Adhikari said. “More and more people are joining the online market.”

“Despite the rise in online shopping, customers are tightening their budgets due to inflation,” she said.

Online marketplace in the valley say that the number of customers ordering food items and fast-moving consumer goods has jumped following the discount offers.

With special discounts of up to 25-30 percent, customers are snapping up essential and fast-moving consumer goods. After fast-moving consumer goods, winter sales have also picked up. But sales of high-end mobile phones are slow because of the import ban, they said.

“To attract people to online shopping platforms, we are adding values like free delivery, coupon vouchers, discounts on e-wallet payments and combo offers,” Gautam said.

Besides essential food items, Thulo.com is expecting good sales of consumer electronics and kitchen products.

Sastodeal has launched its Big Deal at Sastodeal scheme which offers discounts of up to 80 percent on different goods and other offers and schemes. The offers are receiving good response from customers, the firm said.

Adhikari said that they were managing their logistics part through Thulo Express, a sister logistics company of Thulo.com.

“We are hiring temporary staff too and are trying to cater to customers who want their shopping delivered the same day,” she said.

There has been a shift in the payment system as well. E-commerce entrepreneurs say that customer preference towards cash-on-delivery has been declining.

According to Nepal Rastra Bank, online transactions between mid-July and mid-August 2022 reached Rs5.68 trillion compared to Rs3.61 trillion last year.

The number of transactions also swelled, reaching 70.39 million during the review period, up from 49.45 million transactions previously.

KC, chief marketing officer of Daraz, said, “From a mere 16 percent digital prepayment, we expect it to increase to 50 percent of overall transactions which includes payment via debit/credit card and e-wallet.”

Digital prepayment has seen a lot of traction recently.

E-commerce entrepreneurs say that there is no supply side strain in the products offered by online shopping platforms despite import restrictions and hurdles at the border points.

E-commerce marketplaces are observing a rise in demand from outside the valley too during this festive season.

“Online orders from outside Kathmandu Valley have more than doubled this festive season,” said Gautam. “We are expecting to maintain the growth momentum.”