Here’s the scenario. You need/want to get a new phone. You consider your budget and search for some good phones around it. Then, you scour the Internet for their prices. Finally, you are discouraged by the fact that for your budget, you can get better phones in India and China than the ones in Nepal. Sounds familiar? It should be, because that’s the way it is. Every now and then, Nepalese consumers are complaining about the unreasonable pricing of the smartphones. Compare the prices of the phones here to international market. Actually, why go very far? Take our neighbor India for example. Put the same phone side by side, with the same specs and materials, and the prices of smartphones in Nepal appear inflated. At first instinct, every aware consumer will think the same way. However, different factors come into play in this. Here are some Reasons why Smartphones in Nepal are expensive compared to other countries:
Recent Tax Increment
We are all very aware of the recent budget allocation for this fiscal year by the Nepal government, particularly, because it has made everyone unhappy. Prices of almost everything has gone up, including smartphones and gadgets. Before the increment of taxes, smartphone retailers paid 13% tax, and on top of it, 40% of the VAT was refunded to them at the end of fiscal year, making it a net of 7.8% on taxes. But according to the new policy, the 40% rebate isn’t available anymore, and on top of the 13% tax, another 5% excise duty has been added, making it a total of 18.65% on taxes. And that’s only smartphones. For other gadgets, there’s a whole different thing going on. So, with it, prices are increasing, even though both suppliers and consumers are unhappy.
Buying and Selling Practice
The smartphone market in Nepal differs from other countries in terms of sales practices. If you are aware, you’ll notice that many companies sell their phones online via various websites like Amazon, BestBuy, etc. with good discounts, even! For example, Xiaomi sells their phones to India and China online mostly, as they have a strong presence online and have good payment gateways. This means companies don’t have to establish luxury retail stores that add to their expenditures, which in turn, affect the prices of the phones.
The same isn’t the case in our country. With a very limited presence of e-commerce and lack of good payment gateways, companies have to establish stores for customers. Even with some online retail stores on the rise, we prefer to see and feel the product before we buy them. As a result, companies have to invest in retail stores, increasing the price we pay for their phones.
This is, most likely, the primary reason for gadgets being expensive in Nepal. Yes, there are no in-house manufacturers, but there also aren’t any official company retailer stores to these gadgets here. On top of it, as aforementioned, there are very few online stores to sell these phones. While there is a practice to sign exclusive deals between smartphone companies and online stores in the international arena, which can help keep prices low; the same isn’t possible here. Daraz.com.np is trying, and they helped us somewhat during 2017’s Black Friday. I, even bought a phone for 13k less than normal price in that time! Let’s hope they continue such offers.
But for now, we have to stick with offline stores. And phones exchange hands between various channels before they end up in the country – through agents, wholesalers, distributors to finally to retailers. This long chain in the middle increases the price fairly quick. For example, One Plus 6 sold for Rs. 75,000 in Nepal, whereas, the same device sold in India and US exclusively via amazon.com for just $530 (Rs.55,000). Since One Plus Nepal has no option but to sell its product offline via its national distributor with RD’s nicking off almost 15% commission and retail shops getting around 7-8% commission, this really adds up to hick the price.
Quantity of product sold
We’re all familiar with the theory of economies of scale, i.e. larger the quantity, lower the price. Quantities of products sold in India, China, US or other countries are higher compared to Nepal. While smartphones ship in millions to those nations, we play in the thousands here, affecting the cost per unit of those products. And so, this adds some burden on the prices of such products.
Lack of In-House Manufacturing Plants
This is no surprise. Our country has no in-house manufacturing plants of any kind of mobile phones or gadgets. Almost all gadgets are imported, starting the chain of middle-men, excise and custom duties. Add shipping costs to it, and you end up with putting quite a dent in your pocket to buy gadgets here. Countries like India and China has its own manufacturing plant (factory) which cuts off the custom TAX and transportation costs. For eg., Mi India set up a manufacturing plant and launched its first in-house made in India phone, the Redmi Note 5A. The phone was priced aggressively at NRs. 11,200 while the same phone was launched for Rs. 17,500 in Nepal.
So yes, there you have it. The reason why smartphones and electronics are expensive here. What are your views on this? What do you think can be done? If you guys think we left out some other reasons, do let us know in the comments.