prospects

Myanmar: Prospects improving in e-commerce

Southeast Asia’s internet economy is expected to be worth $50 billion by the end of this year and will likely be worth four times more by 2025, according to a report released last week by Google and Singapore sovereign wealth fund Temasek Holdings.

At 330 million, the number of monthly active internet users has risen by 13 percent per year between 2015 and 2017, making the region’s internet economy the fastest growing in the world. In fact, the internet economy is projected to account for at least 2pc of Southeast Asia’s GDP this year, up from 1.3pc in 2015.

More importantly, with internet users in the region spending an average of 3.6 hours per day on the internet, one more than in any other region in the world, by 2025, the internet economy will expand to account for at least 6pc of Southeast Asian GDP, according to Google and Temasek.

E-commerce potential

Local technology businesses believe Myanmar’s nascent e-commerce sector could be key to driving the country’s internet economy forward.

In fact, one of the biggest contributors to Southeast Asia’s internet economy is retail e-commerce. Driven by the emergence of digital marketplaces like Lazada, Shopee and Tokopedia, online business-to-consumer (B2C) transactions on such platforms is expected to reach $10.9 billion in value this year, almost doubling since 2015.

“Over the next 3 years, internet usage in Myanmar will rise with cheap data and a new telecommunications operator entering the market. That will help to increase internet penetration and retail e-commerce in this country,” said Sumit Jasoria, regional managing director, Myanmar, Sri Lanka & Nepal, at Rocket Internet, which controls the country’s largest online retail platform, Shop.com.mm.

Indeed, a rising number of consumers are already shopping online, if the latest trends are anything to go by. “In the last year, we have seen a lot of people buying online especially at night, after office hours. Traffic on our website goes up after 8pm, which was not the case before,” Mr Jasoria added.

Rianne Roggema, founder and managing director of local e-marketing start-up Irie Digital, reckons the e-commerce industry will grow as more companies shift their marketing strategies online. “Myanmar is an incredibly large country with low population density, which makes offline marketing very time-consuming and costly,” she said.

“Online marketing is a more efficient way to reach people all around the country, especially with the introduction of data connectivity in the countryside,” she added. The way she sees it, e-commerce penetration in Myanmar has big potential to grow as more companies establish a marketing and operational presence online.

Drawing investments

All that will pique the interest of investors on the prowl for the next tech unicorn and help aspiring firms raise the necessary capital they need to grow. Indeed, between 2016 and Q32017, Southeast Asian internet companies were able to raise more than $12 billion in capital, up from just $1 billion in 2015.

Notably, three quarters of the capital was invested in so-called unicorn companies, that is, start-ups valued at over $1 billion. Currently, Southeast Asia is home to seven internet unicorns: Go-Jek, Grab, Lazada, Razer, Sea Limited (formerly known as Garena), Traveloka and Tokopedia.

Nevertheless, to help local firms attract funds and investor interest, the Myanmar government must provide incentives to set up a functional ecosystem in which internet start-ups and businesses can operate efficiently.

The most important part is ensuring banks and other financial services providers invest in the necessary online payment and transfer systems that is paramount to conducting e-commerce.

In Myanmar, for example, only 8 out of 80 online payment transactions are successful,” according to Mr Jasoria.

This is because proper banking infrastructure to facilitate e-commerce is simply non-existent. “Banks need to invest in technology so that their systems are ready for online payments and online transfers. The main thing would be enabling interbank money transfers, which is not happening as of now,” he said.

Mr Jasoria added the government should also issue more licenses enabling global logistics companies to operate in Myanmar. “I think these global companies will bring a lot of technological support in improving last mile delivery not only in Yangon and Mandalay but also in the Tier-2 cities of Myanmar,” he said.

Meanwhile, companies involved in the internet economy can also work to provide education to encourage consumers to do more online, including shopping and paying digitally. Currently, even though more items are being ordered online, payments are mostly made via cash upon delivery.

“While access to data has grown rapidly, digital literacy has yet to follow. [In Myanmar], it is hard to get people to use digital products outside of Facebook. It is now up to the digital start-ups to give people a reason to use the internet outside of Facebook, for example, to do online shopping, taxi hailing, music and movie downloads,” said Ms Roggema.

Mr Jasoria thinks so too. “As the market matures and if banking shapes up well, we will see a lot of global e-commerce companies entering this market. With mobile wallets also coming up and an increasing middle-class, Myanmar is poised to take off in the internet space,” he said.

Source: https://www.mmtimes.com/news/prospects-improving-e-commerce.html