Myanmar’s emerging e-commerce

Every month, Su Larb Yadanar makes a purchase78 for a handful of Korean and foreign branded cosmetics online. But instead of paying online, she hands over a bundle of cash when she picks up the goods at a friend’s house at the end of the month.

“This is how we work here without credit cards,” says the 20 year-old, business school student.

While online shopping in Myanmar is still in its infant stages and more reserved for the younger, techno- savvy generation, the fledgling e-commerce industry is prepared to take flight as the country gears up for transitioning from a cash-based economy to one in which cards and online purchases take on more importance.

As of today, the country still functions without any domestically issued credit cards, and only three international payment cards, namely VISA, MasterCard and China Union Pay (CUP) have been accepted in the country with a limited number of holders at this stage. Recently, Japan Credit Bureau (JCB) has been added to the list and is expected to be accepted nationwide in a few months time.

Even with Internet penetration reaching only up to 2 percent of the population, this hasn’t stopped local online service providers trying to get ahead of the game.  One of the online web stores, omyanmar.com was set up by iBiz Service Provider Co. Ltd in 2010. At that point, official statistics from state-owned Internet service provider, Myanmar Post and
Telecommunication (MPT) put the numbers at 400,000 Internet users all over the country.

How online shopping works in Myanmar

Omyanmar.comis dubbed “the online shopping mall” and sells a variety of products and goods, including electronics, books and even household items such as washing machines from 60 business merchants. Others, such as Cherry Shan Fashion Couture – aimed at young women – are getting into the act. Without any official online payment services in Myanmar, most online shopping sites only offer two payment options. Customers can pay by cash on delivery, or transfer money to the merchant’s bank account.

Win Tun, founder of iBiz Service Provider Co. Ltd came back to Myanmar after seven years of studying and working in the e-commerce business in the United Kingdom.  Although he knew that Internet usage and public awareness was fairly low, he still saw potential for developing e-commerce and set the wheels in motion.

According to him, shopping online this year has spiked in popularity, but it was not easy to convince merchants to use his web service.  

“At first, our clients were afraid of these things (creating an e-shop), they thought we were robbing them and believed they could do their own business well without the Internet,” Win Tun says.

Although he was aware that e-commerce was still a strange concept in Myanmar, he decided to give his idea a test run. In 2011, he created an online expo for his clients, allowing them to showcase their products for a month where customers could also make online purchases.

Necessity for centralized online payment

However, he believes that without a centralized online payment service, e-commerce cannot truly take flight in Myanmar.

“We are expecting a payment provider next year, but right now without any official online payment services, people cannot use online shopping services properly to its full potential,” he says.

He also adds that problems arising from the online store are derived from the lack of a proper online payment solution.

“Businessmen hesitate to join us because they cannot get their payment instantly. If they are able to, they will be more interested,” he says.

He makes reference to cases where merchants have been reluctant to send goods because it is not profitable for them to deliver small quantities. Instead, they would inform the customer that the particular product is out of stock.

Social media and e-commerce

Su Larb Yadanar, who is wary of fraudulent online websites, chooses to go for Facebook online stores, believing they are more trustworthy based on the number of likes the shop page has accumulated.

Most are Myanmar individuals who have connections with friends owning small stores in neighboring countries like Thailand or Singapore - countries with easy access, and cheaper price tags for international products. The page showcases the products, and customers submit an order form. A few weeks later, they pay in cash when they pick up the goods at the “shop owner’s” house in Myanmar. Local Facebook shop pages range from a few thousand likes, up to 30,000 over the course of one year - a small, but substantial amount given the low Internet penetration level.  

Using social media sites, especially Facebook, is not uncommon as a marketing strategy for individuals who are starting small. The low-cost start up combined with an extensive sharing network online allows individuals, and small shops to expand their customer base.

“I see new shops each day I open Facebook on the sidebar advertisement,” says Su Larb Yadanar. In the past year, she has spent a total of US$150 per month on Korean cosmetics, some of which can be found in Myanmar.

Like most South East Asian countries, the dominant Korean craze and obsession with pale skin as a trademark for beauty is prevalent amongst younger women.  As the country is opening up for foreign investment, Korean cosmetics giants like Etude House, Tony Moly and Nature Republic have been flooding into the country in the past year.

While Su Larb Yadanar could not contain her excitement upon hearing that her favorite brands were finally setting foot in Myanmar, she was disappointed to see that prices of the products at the counter were three times as much as the original prices elsewhere and online.

E-commerce regulation needed

However, the lack of a comprehensive, legal regulatory framework could potentially become a dangerous breeding ground for e-commerce developers. Currently, with no Internet or e-commerce law in place that protects both customers and merchants against varieties of fraud, online web stores find it difficult for e-commerce to reach its full growth potential.

Myanmar Computer Fed-eration (MCF), a governmentlinked organization told The Irrawaddy that the controversial Electronic Transactions Law that oversees disseminating online information is set to be revised soon.

“We will have to adjust the law so it is appropriate for nowadays,” says director of the MCF, Myint Myint Than.

The organization has been seeking comments and suggestions from the IT industry to help amend the law so that it may include regulations on recently developed fields such as e-commerce.

As Internet access and mobile penetration continues to grow, the demand for related laws will escalate alongside the developing infrastructure in the different sectors that needs to be able to support the new incoming technology.

Developed technology awaiting infrastructure

In Myanmar, companies have already developed the technology for online payment solutions, but are waiting in the wings for infrastructure from institutional bodies to come into place. MyanPay, a local take on PayPal, is one of the online payment systems available.

Founded by Soft-Gate Technology Co. Ltd. in 2010, MyanPay acts as an online payment gateway based on bank transactions in Myanmar. Instead of having the MyanPay account linked to a credit or debit card, customers can buy a MyanPay balance for online transactions from the MyanPay bank account at their preferred local bank.

While MyanPay is not an official partner with any banks, the company has opened MyanPay accounts in nine local banks.

According to Yan Naung Soe, managing director of SoftGate Technology Co. Ltd, the majority of MyanPay accounts are personal, with over 65,000 personal accounts and 800 business accounts. He claims that there have been over 80,000 sales transactions online.

Like many other online payment systems, MyanPay is looking to work with the Myanmar Payment Union (MPU), the only central payment network in the country that is facilitating the transition and upgrade of the cash-based economy to help push e-commerce nationwide.

The MPU currently has 17 member banks, but only nine are in full operation in issuing MPU ATM cards. With an MPU ATM card, the cardholder is able to withdraw cash at any of their member banks.  Zaw Lin Htut, chief executive officer of MPU says that after this step, they are looking towards developing infrastructure to enable e-commerce platforms.

“In the near future, the e-commerce platform will join MPU. It is the more efficient, centralized solution,” he says.

Changing local habits and mindsets He adds that before spreading to different channels, gaining public confidence and increasing stakeholder participation is key.

“The infrastructure needs to be good enough before the public has confidence in banks, but at the moment, we don’t have stable connectivity, and problems with ATMs can happen. If people have confidence in using banks, then the merchants will come to us,” he says.

One way of facilitating the payment transition is to get people used to the idea of cashless transactions. Up to now, the MPU has issued 350,000 ATM cards in Myanmar. A few months ago, he says most companies with large staff changed to adopt the payroll system and have money transferred directly to their bank accounts instead of handing out their salaries in cash.

“Imagine if you have 1,000-2,000 employees, you would need to prepare the cash three to four days ahead of time. Now they will have to start using their ATM cards to withdraw money,” he says.

Staying flexible during change

While there are many forces at play to assist the payment switch, Michael Sieburg, manager of the Vietnamese branch of Solidiance, a marketing consultancy firm with an expertise in the technology sectors in Asia cautions against a too aggressive approach during the transition.

“It’s a matter of taking the step of an in-between online and offline payment - by making use of convenience stores and kiosks as agents for online payments where customers can come into the stores to pay in cash for their electricity or phone bill,” Sieburg says.

He advises e-commerce sites to be flexible with consumers over time and emphasizes the importance of still offering cash on delivery options alongside online payments as it comes around.

Online shopping on Ebay or Amazon around the world has revolutionized consumer behavior and catapulted some businesses into “retail heaven.” While Myanmar has several challenges including modernizing the telecom and banking sectors, many are starting to realize the growth potential, but understand that it is a matter of time before it really can get on track with the rest of the world.