High e-commerce potential, but growth stunted, for now

On November 11, 2018, online shoppers in Myanmar purchased goods worth US$90,000 on the Internet within the first hour of Alibaba Group’s global 11.11 sale. It was the first time the Chinese e-commerce giant had opened up the annual event to Myanmar, where just 1 percent of the population is exposed to e-commerce.

Alibaba knows this and in May last year secured a foothold in Myanmar via the acquisition of Daraz Group, which operates the country’s largest e-commerce platform shop.com.mm.

“Not many people are aware about e-commerce here but this is changing fast based on sales generated during Alibaba’s sale. There is also a growing number of other online shopping websites running in Myanmar that do not report their figures. There is a lot of potential for growth in e-commerce here,” said U Myo Min Aung, vice chair of the Myanmar Retailers Association.

But Myanmar also has a lot of groundwork to do to build up the right environment for e-commerce to flourish. The issues that need tackling range from legislation to logistics and e-commerce may well remain stunted in Myanmar until solutions are found for some of the problems.

Based on our interviews with insiders, here are some of the challenges the sector should overcome to grow:

Lack of delivery service providers – As consumers start opting more for the convenience of shopping online, the pressure is on logistics companies to make sure the goods are delivered on time to the right locations as well as process and handle returns.

“For e-commerce to work, companies must be able to deliver the goods. Online vendors must be able to guarantee that the goods sold are delivered to customers on time and in their original condition. Meanwhile, businesses need insurance to cover for damaged or undelivered goods,” said U Kyaw Soe Win, deputy director of the Department of Trade.

Currently though, there is only one registered deliverer in the country- state-owned Myanmar Posts and Telecommunications – that guarantees delivery.

“Many of the private and smaller delivery companies used by online businesses to deliver goods purchased on the internet are not able to provide a guarantee on delivery. Because they are unregistered, we also cannot track them,” said U Kyaw Soe Win.

Undeveloped payment systems – With the exception of Alibaba, most online shopping is done via Facebook in Myanmar. Vendors create a Facebook page promoting their ware and once a customer agrees to purchase a product, usually via Facebook’s chat service, payment is transferred via bank or a mobile money service provider. After the payment has been made, buyers show a screenshot of the receipt to the seller, who releases the goods.

”Problems arise when some customers show fake receipts or a screenshot of an uncompleted payment process. Sometimes, sellers send the goods to their customers without checking the receipts carefully and realise only afterwards that payment has not been made. By then, it is very difficult to track the buyer down,” said U Myo Min Aung.

Sellers can also cheat buyers with false advertising and then disappearing when issues arise. “For e-commerce to be a success, the method of payment has to be sound. Lately, many local banks have started offering payment services and things are becoming more trustworthy and convenient. But there are still difficulties drawing awareness to these services,” said U Kyaw Soe Win.

No system of registration – The authorities have yet to announce an official system of registration for e-commerce businesses in Myanmar. Typically, brick and mortar businesses must register with the local council and apply for a license to operate but online vendors using social media do not register their operations. As a result, there is no data on how many online businesses there are.

”In Myanmar, online sellers and buyers trade easily using social media. But if something goes wrong, there is no way to trace the culprits. But if the business is registered with the government, they will lose their registration fees when they close down. Similarly, on a registered operation like Alibaba, there is a record of payments and grounds to file complaints should the need arise,” said U Myo Min Aung.

“We need to establish a clear system for registering online businesses and building trust in e-commerce in Myanmar,” said U Kyaw Soe Win.

Legislation needed – The authorities have yet to draft the necessary legislation to govern e-commerce, implying a lack of certainty for businesses in the sector. For example, MPs have been pressuring the government to tax online businesses. “The government is now losing out on tax revenues from e-commerce,” said U Myo Min Aung.

”It is important that the government sets the rules and regulations for e-commerce,” Fox Chu, partner at McKinsey, Hong Kong Office and Company, told Myanmar Times at the Asian Logistics and Maritime Conference in Hong Kong last year.

“Like Myanmar, many other countries are losing tax revenues from online businesses. On the other hand, other countries are trying to relax taxes if customers buy online because they want to encourage people to buy more. So, governments must decide and modernise their tax and cross border rules to enable e-commerce to grow. It is a matter of how each government wants to enforce the rules while facilitating the free trade of goods at the same time,” Mr Chu said.

In fact, the Ministry of Commerce has held at least three meetings to kick start the process of drafting an e-commerce law, U Kyaw Soe Win said. “There are many moving parts that must be considered,” he said.

In the meantime, the number of online shoppers is increasing daily. “I bought shoes online three times already and there has been no problem. I also ordered a bag for my mother, which arrived in the expected condition and quality. I just don’t like having to wait 2-3 weeks for the goods to arrive,” said Ma Yu Thandar from North Dagon Township.

Ma Nu Lat of Yankin Township said she once received the shoes she bought online in the wrong colour. “’I ordered pink shoes but they give me a black pair. I complained several times on Facebook but nothing happened. So I will never order from this page in the future,” she said.

But that hasn’t stopped her continuing to shop online. “Sometimes we can get things at a cheaper price online and there are more choices available compared to traditional shops,” she said.


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