Five years ago online shopping in Iran was a thing for geeks. There were not many online stores nor was there any demand for it.
I got back to Iran six month ago, and was simply amazed by how much eCommerce had grown over this short period. In particular the last two years of growth was exponential. There is a reason, however, that Iranian eCommerce could compete with the big companies such as Amazon. Thanks to internet censorship, access to Amazon and eBay were blocked in the country, and lack of Visa and MasterCard left Iranians little choice. As a result domestic eCommerce businesses had the market all to themselves, and they’re not done yet.
Online shopping does not have a long story in Iran. Sure, there were a few shops here and there, but there was no big player on the scene. Poor infrastructure could be to blame.
Accepting online payment was not easy back then. As an online store you had to go through a lengthy bureaucratic process with a long list of ‘requirements’. Also, each bank had its own API, which led to fewer websites getting payments online at the time. More importantly though, Iranians didn’t have the trust in their banking system security for online shopping. To top it all off the internet came to Iran a bit late, and a slow rate of adoption in the beginning made selling online an unattractive proposition.
In recent years, Iran has seen exceptional growth in eCommerce and it’s not showing any sign of a slowdown and here is why. It’s way easier to get a merchant account from Iranian banks and even easier to use their API. Even better, there is no commission fee! Your bank is covering the costs of all transactions. It was a decision made by Iran’s Central Bank to minimise the risk for businesses to sell online. It’s a big incentive if you consider how much more businesses pay in EU for online payment.
Some of us may still prefer to buy stuff offline and use online stores for making decisions. Online shopping saves us time, gives us infinite choice, and It’s easy to access consumer reviews for pretty much any product you can think of. This makes for more informed purchases.
All these benefits are hugely important for Iranians. For example, In Tehran people are dealing with the traffic problem. Shopping centres are not that significant, and by contrast Tehran is a huge city. All that commuting makes shopping very inconvenient and exhausting.
Additionally, big brand chain shops are not common in Iran. You rarely can find Fred Perry shops for instance. Most Iranian stores have a variety of goods. If you are picky like me it means you need to search for hours to find what you want. Consequently online shopping benefits, time saving and unlimited choice, made Iranians hungry for internet shopping.
Who Are Those Successful eCommerce Startups Anyway?
It all started with DigiKala. Six years ago they started an online store for electronic products such as cameras, mobile phones, etc. Success of DigiKala after two years of starting up made others optimistic about the market. DigiKala grew from a money sinkhole to the biggest eCommerce startup in Iran. How big? We’re talking about an average daily income of $400,000. That is huge for a country that didn’t have a sizable eCommerce market just five years ago. There are even online stores accepting Bitcoin!
It’s not just online stores though. ZarinPal, the Iranian Paypal alternative, is trying to bring security and convenience to Iranian shoppers. Just like PayPal, they sit between the customer and the bank in order to give customers and shop owners peace of mind. ZarinPal processed 2M transactions last year alone. They just launched their own debit card. Mobile payment and possible collaboration with PayPal is coming soon as well. Thanks to ZarinPal, Iranian stores soon can accept payments in Dollars, Euros and Pounds Sterling. This means that all those startups can trade internationally. ZarinPal is the product of a company called SamanSystems, a lean company with just 8 employees.
Nothing shows the growth in online shopping better than startups like Kamva. Riding on the hype of DigiKala, Kamva has launched it’s eCommerce platform. A little disclaimer, I am the founder of Kamva. I realised eCommerce is going to be huge in Iran and jumped on the opportunity and launched a very easy to use service that allows anyone to start selling online. A lot of Iranians use Instagram to sell and advertise their products. Kamva is planning to integrate with most popular social networks Iranians use. We recently added the ability to sell digital products such as music, digital arts, pdfs, etc.
eCommerce startups are probably the most promising among the tech sector in Iran. They were among the first companies to attract the very first VC investments in Iran. Perhaps the encouraging growth of the market size, together with infrastructure improvements, made eCommerce startups very attractive to investors. There is still a huge opportunity in this market for both entrepreneurs and investors.
If you’re interested to learn more about startups in Iran, you can contact me @hadifarnoud.