Stores are closing and people are busy playing with internets. With a massive spread of pandemic, coronavirus, people all around the world are bound to stay at home and the only thing they have is internet to surf and move around the world staying at home. This lockdown has increased the internet users and internet surfing time drastically. People who were reluctant to accept E-Commerce as a role maker in development of economy are now in the frontline to advocate the use of it. Here by saying that, I mean more to the government like ours, who has denied to accept change and adopt new technologies in the field of commerce and other services. E-Commerce is now not limited to only trade of goods online, it covers a very wide sphere and is able to provide almost every services to the mankind for their existence to development and innovation. Here is an interview with Ex-CFO of Daraz, regarding E-Commerce, Current Practices and It’s Importance to Economy.
1. What is E-Commerce? Does it has different Models?
In a very simple meaning, E- Commerce is trading of goods and services electronically. In all the cases all process to complete to trade might not be 100% electronic but if the major process of the trading are controlled and managed electronically, is it called E-Commerce. Because Logistic is the backbone of E-Commerce Industry and major part of tangible logistic cannot be performed electronically. Online Shopping, E-Learning/Distance Learning, Tele Health, Working from Home, Electronic ride sharing services etc these all are the common examples of e-commerce.
Models and Types can be varied widely based on multiple parameters, but in simple if we concentrate more on e-commerce of goods ie online shopping, we can broadly classify into two. Marketplace and Retail. Market place model play as mediator between buyer and seller, they don’t perform any sell and purchase transaction. In the other hand, Retail Model companies hold their own stocks and perform complete sale and purchase transaction. Daraz, Sasto Deal are currently operating on Market place Model. That means they provide the platform services to buyer and services where the real sale and purchase transaction are conducted by the seller and buyer themselves.
2. Do you mean to say they are commission agent by word mediator?
Not precisely, but the process adopted by those companies clearly demonstrate as a mediator. They are service provider and they charge fee for their services. It basically a service fee you can call it with any name.
3. Are the Companies having Foreign Direct Investment allowed to perform as Sales Agent based on our current FITTA Act?
As far I Know, there is no direct restriction to FDI to act as mediator, but the special restrictions are given by Department of Industries to respective Industries at the time of Industry Registration and granting permission to conduct business in Nepal. So you need to check the certificate of Registration of respective companies.
4. Is E-Commerce the only means to serve the people during lockdown?
E-Commerce helps to conduct business electronically. This to the larger extent means physical contact is eliminated, which is the real spirit of lockdown. All the intangible goods and services can be executed almost 100% electronically but the transfer of tangible goods and services cannot be performed completely through use of electronic means. Here what I mean to say is, even the online shopping companies require physical transfer of goods to ultimate consumer which require involvement of people and their movement. In contrary you might also say, drone deliveries can be option to those. Of course, but as of today drone deliveries are restricted to very limited area and services, I would say it is still in its early infant situation, we still need to walk a long way to have that as an option for mass area.
Umm, But what is the true is, even if the stores are closed you can request orders staying at home and with the involvement of very few people (in comparison to traditional process ) and use of preservative measures Online shopping companies could deliver the product to your door step, which is the beauty of E-Commerce. We must be thankful to them specially in this situation.
5. As you have observed the Nepalese E-Commerce Development from the front being one of the strategist person from the inception of Kaymu to handover of Daraz to Alibaba. How would you like to explain the importance of E-Commerce to the countries like ours?
Though it is not a happy thing to mention here but the reality cannot be lied, Nepal is very behind the double digit economic growth, foreign subsidy holding significant portion in the fiscal budget, youth are forced to work abroad for making livings for their family, agriculture based economy with almost zero planned agriculture facilities present, scattered tourism industry, uneven demographics, varied geographical structure.
E-Commerce is no more an option, it’s advancement and development has made it as a mainstream of the economic development. E-Commerce basically is the combination of Technology, Assortment and Logistics. So the development of E-Commerce means the innovation & advancement of Technology, availability of various facilities and products, development of distribution channel. We can see the example of Alibaba, how it played a significant role to assist the government to convert the china’s import based economy into world leading export economy. A proper development and use of ecommerce can benefit country in number of ways. Some of them are:
· As mentioned earlier, ecommerce help to develop and innovate new technologies
· Every people can be a businessman
· Movement of goods and services are made easy and fast
· Small/Domestic producer will have international/ global reach at very low cost.
· Transfer of expertise from across the global to help small and new comers to learn and boost their business
· Efficient distribution channel are developed.
· Easy access to global market.
· Financing become easy and effective
· Boost Digital Economy
Above all, well managed E-Commerce helps to eliminate black economy and promote more transparency, credibility and accountability
6. You have mentioned immense importance of E-Commerce but based on discussion with many online users, they blame online shopping companies for; delivering low quality product, higher prices and difficult return processes. Do you agree with them?
As there is an established saying, “If you want to satisfy everybody at a time you end up satisfying nobody”. I think this saying has a lot to tell about business and marketing. We cannot say that every business organization are good or bad, off course when you are dealing with mass you cannot avoid these kinds of things. Also, this kind of things are found more on initial days. If you are taking about Nepalese buyers, than I say Yes, they are right to most extent. Because I am, the person who faced the real case. If we typically talk about Nepalese E-Commerce Players, though there are many but noticeable are Daraz and Sasto deal in Online Shopping, they perform on marketplace Model and do not control inventories. What they do is they list seller’s products and generate orders and fulfill order through their logistic mechanism. In this process, there is the chance that seller do not pack the right product, list the product at higher price, delivers different product than shown in website ( because he/she don’t want to lose order but the ordered item is already oos ), mentions different content etc. Because of these activities performed by seller buyers get penalized and dissatisfaction is sure to happen.
7. As per your description, looks like seller can easily cheat buyer? Isn’t there any role of platform provider except generating orders, to preserve the buyer’s right to purchase right product at right price?
You have asked very important question. Actually the customer face the problem you mentioned above from those online shopping companies who are only running behind NMV and ignoring customer satisfaction. Of course it’s the responsibility of platform provider to ensure quality of product, price of product and maintain easy return process. We have also an Consumer protection act to govern these kind of matters related to Consumer Protection. The role of government comes here to make marketplace operator more accountable and responsible for what they sale from their platform. I once had a chat with Department of Revenue as well in this matter. I hope they are working on these as well.
8. Are you satisfied with the current role of E-Commerce players of Nepalese market during this lockdown?
This lockdown is new to the world. I am listening from various media, this kind of complete lockdown was never reported before in the history of mankind. And the next thing is it came all of the sudden. So no organization, even government were not prepared. What I want to say here is, Of course what ever been done are not sufficient, not only insufficient they are also out of range of more than 90% of population. No matter to what extent been done, the attempt to address the need of people is really good. This shows the need of e-commerce as well as learning to companies for preparation and expansion of their capabilities.
9. How would you analyze the deal between Walmart and Flipkart, called one of the biggest deal in the history of E-Commerce, despite the huge accumulated loss reported in the financial statement?
This is interesting. Yeah you are right, I too have read a huge accumulated loss is being reported in financial of Flipkart. This might look interesting to many people why Walmart agreed to pay 16 billion US Dollar for 70% (Approx)stake despite huge accumulated loss being reported. In the age of brick and mortar valuation of business was done seeing the probability but based on net assets for ongoing business. For an E-Commerce net assets is almost insignificant to consider for valuation. For any e-commerce company customer base is the Key. Next to customer base, GMV and NMV are considered for valuation. Also EBITDA plays a vital role for determining the valuation of the company.
In short, there can be many reason but above all, Indian customer base and potential other related services that can be introduced to the existing huge customer base might have attracted Walmart to come to India. Also, E-commerce is somehow related with Teen-patti (Indian name), if you don’t have money no matter how good cards you have you need to lose out.
10. No doubt that the E-Commerce helps in development of countries economic system through trade, but what about revenue contribution to Nation? We can still read on newspapers and publications that E-Commerce are making huge losses and not paying taxes to nation?
As E-Commerce are market maker, they create platform for many thousands of businessowners to perform their business. Definitely government will collect tax from all of those business houses in one or other way. Yeah you are right platform provider are mostly in losses, they don’t pay profit tax, but there are many other taxes they pay to government. People get confused here, if business is in loss and he/she is avoiding tax to government. You cannot say all business will have profit, if that is the case than we could ask all citizen to start business and earn profit and be happy. This won’t happen. Even some of the our tax officer have similar thoughts. whenever they see loss financial statement they stare owner as if he/she is thief. Thing we need to worry or specially government need make sure on the geniuses of those losses. It is government and department of govt. role to find those and act accordingly.
11. As Daraz is now owned by Alibaba, Can we purchase goods directly from China or from Alibaba sites through Daraz ?
I have been asked the same question many times by many people. This implies people are looking a way to purchase things directly from abroad. As already mentioned Daraz is just a market place, a platform operator, so there is no possibility of getting any item directly from abroad. You can only buy those items from daraz that are listed in its websites.
12. If that is the case, few month back daraz was promoting Global Collection, mentioning product are shipped from abroad, how is that being done? Does it mean they are doing illegal?
What I know is daraz has no right to bring any product from abroad directly. Till I was with Daraz there were no such any transaction related to abroad, if it has done in recent few months back then, they might have got permission to do so. In the other hand it also can be some domestic seller might be selling abroad goods. Better to get depth idea from company itself. I don’t believe daraz does any illegal thing. Because a single act done against law in Nepal can directly or indirectly affect the overall Alibaba and its stock market. Also, government agencies keeps checking frequently so I don’t think so.
13. What are the current challenges of the E-Commerce companies, especially in the countries like ours?
There are many challenges but some significant are; Lack of clarity in laws, geographical distribution create challenge for logistics, No technology friendly infrastructure, digital economy is in very early stage etc.
14. Last but not the least, Is Nepal ready for E-Commerce?
This is very difficult question to answer, because there are no any special parameters which proves whether the country is ready for anything or not. Of course as mentioned in challenges of E-Commerce, we are far behind the advancement of technology & development of technology friendly infrastructure. What I think is, this is not the time to discuss whether we are ready for it or not, it’s time to create laws and let the companies build the business and in the meantime government should develop technology friendly infrastructure, offer special tax holidays for large scale industries providing mass employment, increase the reach of quality internet all over the country, promote digital economy. If we do so, by the end we will have system and platform both ready, so that we are not required to wait one for other.