e-Commerce industry growth will need banks and telcos to reduce service fees, provide better APIs, and simplify procedures to eliminate the hassle of payments
Since 2012, foreign investors have been on a gold rush in Myanmar. GDP has climbed up steadily from US$58.68 billion in 2013, to US$64.33 billion in 2014, then US$64.87 billion in 2015.
In July 2016, the new democratic government issued a 12-point economic policy, and in September, the US pledged to lift all economic sanctions on Myanmar. Nevertheless, e-commerce transactions in the country still remain relatively low.
Three giant telecom companies (KDDI, Telenor, Ooredoo) have nationwide coverage, with a fourth competitor coming soon, which is expected to shake up the local telecom ecosystem. Consumers are likely to get the most benefit when the discount race breaks out. However, to date, Internet rates in the country are still huge, compared to other countries in Southeast Asia.
Data Centre fees have also become more reasonable, from US$330 per 1U rack server to US$400 per 2U rack server. However, Internet blackouts still remain a headache. Most Myanmarese startups host virtual servers in Singapore or the US.
Additionally, country domain names (.com.mm) are quite costly, at US$70 per year. Mobile data access is also expensive, at 5 kyats (0.3 US cents) per MB for 3G.
For faster connectivity, consumers are charged an installation fee of US$420 for fibre optic connections, and a monthly fee of US$60/Mbps and annual fee of US$50. Some Internet service providers (ISPs) here give flexibility in terms of rates and packages, however.
The e-commerce industry — or any startup for that matter — will greatly benefit from faster and more affordable Internet services.
Telcos provide two options (USSD or SMS) for consumers when buying digital content online, including music, ebooks, wallpapers, video and other items. Nevertheless, content providers are left to fend for themselves, with the telcos requiring 80 to 85 per cent share. For instance, for every song valued at 500 kyats (US$0.39), the content provider only gets 70 to 100 kyats (US$0.06 to 0.08).
Another trend involves telco payments. For instance, Yoma bank has partnered with Telenor to deliver Wave Money, which enables e-commerce companies to receive payments as ‘Wave Shops’.
Several private banks support VISA, Master card, American Express and JCB. But some are still in the blacklist of the US Treasury, and thus could not link with VISA, Master Card and PayPal.
MPU (Myanmar Payment Union) Cards are accepted in most local banks. MPU has approximately one million users. Under five per cent of population owns a domestic card. Service fees are two to three per cent of the transaction. Until now, under 30 e-commerce startups have agreed to link their APIs because the process for credit card support is quite complicated.
Red Dot network offers an option. It currently co-works with over 13,000 shops nation-wide. The service fee is 20 to 30 per cent, which is suitable with digital content producers (such as those who publish games and e-books). Red Dot Zay, which pushes a C2C model, was launched in June 2016. As per rumours, the founders invested around US$40 million into the endeavour, and have not reached break-even point yet.
Other companies are also working hard to acquire users, like Myanpay, MPPS, 2C2P and OK dollar.
As with other emerging markets, cash-on-delivery (COD) is popular, too. There is no formal market research on this yet, but COD possibly enjoys 95 per cent of the gross merchandise volume in the country.
If banks and telcos reduce their service fees, provide better infrastructure and simplify the procedure for connecting with payment gateways, the hassle of payments can be eliminated. This can help boost the e-commerce industry, which is by far mostly cash-driven.
Yangon is the largest city, with a population of nearly 7 million and is the most important commercial centre. One nuance is that motorcycles are banned in urban areas here, whereas in Saigon (Vietnam), Jarkata (Indonesia), and Bangkok (Thailand), motorcycles are used for last-mile delivery.
This quirk is being addressed by Yangon Door2Door, which is a startup that delivers food on bicycles. The service fee is 5,000 kyats (US$3.92) or 15 per cent of the value of the order.
DHL also came into Myanmar years ago. It operates both e-commerce domestic and cross-boarder shipping.
Some little-known startups (Smooth Delivery Services and Phya Kalei) deliver using vans and bicycles. Taxi delivery is another choice.
Government postal service and express buses are also used for nationwide shipping. However, the postal service simply could not compete with express buses with regard to time and cost, though.
E-commerce and the digital economy are huge industries globally–expected to reach US$1.915 trillion this year. In Myanmar, people use Facebook for commerce, because companies sell directly through fan pages and accounts. The country has approximately 12 to 13 million FaceBook users. On the social network’s search tool, consumers can simply type in Zawgyi and Unicode to find merchandise quickly.
Print media, TV and radio have familiarised keywords such as e-commerce, online shopping, e-market and e-learning. However, media will need to be more aggressive, in order to popularise these even more.
In addition, business schools and universities should learn from global institutions and look further into research and case-studies done by these schools, in order to glean and apply best practices:
Stanford Law School (Stanford University, the US) has its Center for e-Commerce;
University of New Brunswick (Canada) operates Electronic Commerce Research & Training Centre;
Vietnam University of Commerce has a specialised faculty for e-Commerce.
If these four factors (broadband, payment, delivery and awareness) are addressed, the e-commerce industry in Myanmar will likely accelerate in maturity.
The author, Peter Nguye, is a serial entrepreneur in emerging markets (Vietnam, Laos, Cambodia, and Myanmar).
The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, submit your article here.
Source: E 27
