Alibaba secures foothold in Myanmar market, growth in e-commerce expected

Alibaba group has established a foothold in Myanmar following the acquisition of Daraz Group, the Pakistani online shopping platform which operates Myanmar e-commerce site shop.com.mm.

The move could be the start of a slew of investments in the country by the Chinese Internet giant as well as other rival businesses. It also came just a week before the Ministry of Commerce (MOC) on May 14 opened retail and wholesale trading to foreign owned companies and joint ventures, allowing them to trade any commodity manufactured in Myanmar or imported from overseas.

Alibaba on May 8 acquired Daraz, which is owned by German start-up incubator Rocket Internet, for an undisclosed sum. Before the acquisition, Daraz was owned by CDC Group, the UK government’s Development Finance Institution (DFI) and Asia Pacific Internet Group (APACIG), which is a joint venture between Rocket Internet and the Qatari telecoms group Ooredoo.

The deal is the second time Alibaba has acquired a Rocket company, the first being Singapore-headquartered e-commerce company Lazada two years ago.

Competition heating up

The acquisition could mark a turning point for e-commerce in Myanmar, especially with foreign retailers now permitted to set up shop in the country. “This move will change the entire e-commerce ecosystem and the way people look at e-commerce in Myanmar,” said Sumit Jasoria, who is the former regional managing director for Myanmar, Sri Lanka and Nepal at Rocket Internet.

“The new law is like icing on the cake. Now, Alibaba can open or invest in a network of local logistics and distribution companies. They may look at building their own warehouses or open other e-commerce and digital start-ups of their own,” Mr Jasoria added.

And Alibaba would not be without competition. Earlier this year, Daizen Myanmar, a logistics pioneer based in Thilawa Special Economic Zone (SEZ), started providing bonded warehouse services to both domestic and international companies.

Last month, Japan’s largest delivery business, Yamato Group, also began providing warehousing and freight forwarding services in the country. For Yamato, the ASEAN trade and logistics integration is a key factor behind its entry into Myanmar.

Another pull factor is the approval to start a Myanmar credit bureau. “With a proper credit bureau, the use of credit cards will only increase. Over the past 3.5 years since shop.com.mm began operating in Myanmar, the use of cards has already increased tremendously,” said Mr Jasoria.

“The new retail law and approval of the Myanmar Credit Bureau will open doors for even more foreign companies to enter the Myanmar market,” he added.

Now, other e-commerce and logistics players are likely to enter the scene, too. “In fact, Alibaba and other big Internet companies from Japan, South Korea and China have actually been eyeing the Myanmar e-commerce market for a long time,” said Mr Jasoria.

“These are big companies that are looking to capture the Myanmar market for the long term.”

Erwin Sikma, co-chair of the European Chamber of Commerce in Myanmar’s digital and innovation advocacy group, agreed.”We are at the forefront of a technological revolution with almost all people now being connected to smartphones. Specific digital services and interaction models will need to be developed to serve this new digital population,” he said.

“Alibaba’s interest in Myanmar shows that they do not want to miss out and want to see how such a new market can [out] develop,” Mr Sikma said.

South Asia, not ASEAN

Still, some reckon Alibaba’s main aim is to expand in Daraz’s other markets. Daraz covers Pakistan, Bangladesh, Sri Lanka, Nepal and Myanmar – a total of over 460 million in terms of population. Myanmar only takes up about 10pc of the population share and is much less developed than the Pakistan and Bangladesh markets.

“Alibaba’s focus, we believe, is on completing their South Asia expansion, and where the market size matters for them, such as Pakistan and Bangladesh,” according to BarLoLo.com, a domestic online marketplace platform which focuses on C2C and small B2C services.

Pietro Borsano, lecturer at Mandalay International University and Shinawatra International University, reckons Alibaba will likely invest behind Lazada to penetrate the ASEAN markets. Daraz, instead, will represent its push into South Asia.

“The Chinese tech giant has already signed numerous deals with governments in ASEAN, and has big ambitions in Malaysia and Thailand,” he said.

Meanwhile, Bangkok is working closely with the Chinese firm to develop its Eastern Economic Corridor, which straddles three eastern provinces of Thailand – Chonburi, Rayong and Chachoengsao – to become the hub for smart manufacturing, tech and innovation as well as e-commerce.

“Consequently, I believe that the strategy of Alibaba group for the entire Southeast Asia region will be necessarily based within ASEAN and spearheaded by operations in Malaysia and Thailand. The company believes that all ASEAN markets are at an early stage of adopting e-commerce platforms so you can imagine how nascent the Myanmar market is for them.

“My guess is that Alibaba will prioritise Lazada for major ASEAN markets,” Mr Borsano observed.

Source : Myanmar Times

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