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Cambodia's e-commerce struggles amid potential

Cambodia's e-commerce struggles amid potential

It was only in July this year when German-owned internet start-up incubator Rocket Internet launched shop.com.kh in Cambodia, an online retail store selling electronics such as mobile phones, laptops and tablets.

Rocket Internet Cambodia co-founder Karl Seilern told the Post in July that the country’s growth in internet usage and the lack of competition in the e-commerce market were driving factors to enter Cambodia.

Seilern said the company planned to offer delivery in Siem Reap and Sihanoukville within the next few months.

But less than two months after its launch, shop.com.kh ceased business. Now their former office on Norodom is empty.

Rocket Internet Cambodia is not the only player to have struggled in the local e-commerce market, a type of business that, although having much potential for growth, still needs to establish itself in Cambodia.

“The majority [of e-commerce shops are] actually not really successful,” said Leng Chanprathna, CEO of thecareerocean.com.

Cambodia had more than 2.5 million people with internet access as of last month and the figure is expected to grow, officials at the Ministry of Post and Telecommunications told the Post earlier this month.

The number of Facebook users in Cambodia is about 650,000, or about 4 per cent of the population, Leng Chanprathna said.

But according to the 2012 Media Index Survey from Indochina Research, only 7 per cent of internet users have used online shopping. The survey was conducted in five provinces among a sample of 1,103 people aged 15 to 50 in urban and semi-urban locations.

Seventy-four per cent used the internet for browsing, surfing and information, 69 per cent for MP3, video and picture downloads, 66 per cent for Facebook, 56 per cent for messaging and chatting and 45 per cent for games.

“Cambodian internet users are not in the habit of using the internet for online shopping yet,” Laurent Notin, general manager at Indochina Research said, adding that such habits will develop with time as users become more sophisticated.

But while e-commerce in the Kingdom still faces a number of challenges, it could succeed locally with an internet payment system and higher use of credit cards. “There’s only one reason why there’s no major e-commerce sites at the moment in Cambodia and that is because there is no good payment gateway,” said Ken White, managing director of Krawma Company, which owns the domains bongthom.com and lengpleng.com. “Once a payment gateway is implemented, then e-commerce will just absolutely take off here, because this has been needed for a number of years and nobody has taken it on.”

“I did set up a system similar to shop.com.kh. I did this back in about 2002 … You could order your products online and then you just pay on delivery. And yeah, I think it could have worked, but we just got too busy doing other things,” he said. “And I still think that something like that would work.”

According to Leng Chanprathna the market here is profitable. “But the business model here is different from advanced countries. Because here we live without online payment like PayPal,” he said.

Laurent Notin said online shopping is linked to the development of online payment methods. “Currently, the incidence usage of credit card is very low in the country and this hampers the growth of online shopping too,” he said.

Paul Blanche-Horgan, CEO of internet provider Ezecom, also said there is tremendous potential.

“We would expect Cambodia to follow the examples set by neighbours such as Thailand where all kinds of businesses use social networking platforms for marketing and sales,” he said.

“E-commerce can be used for everything from ticketing to clothes purchases.”

Existing e-commerce businesses have found other solutions to handle transactions.

“There is potential to use mobile phone top-ups and credit as methods of payment which will hopefully drive the e-commerce industry,” Blanche-Horgan said.

Small shops also arrange meetings in person to do their trade and get the money. “So they can trade the product usually at a shopping mall,” Leng Chanprathna said.

But these methods can make it hard to expand business and make profit, as only a limited number of transactions are possible.

“A true e-commerce site, you’re looking at potentially thousands of transactions a day,” Ken White said.

Purchases in the online retail store shop.com.kh were based on cash on delivery. But Open Development Cambodia published an Economics Today article as reporting that tax issues in Cambodia were the reason for the company’s pullout.

According to White, the tax department here does not yet have the capacity to deal with digital payments and transactions.

According to Ek Vandy, secretary of state of the Ministry of Posts and Telecommunications, the ministry does not get involved in tax charges for online business. But he said there has been an improvement in online business and a lot of shops are selling their products online.

Another reason for why e-commerce sites in Cambodia struggle is because of poor marketing, Leng Chanprathna said.

Companies doing e-commerce in Cambodia believe it will soon kick off but still make their profit in other areas, waiting for e-commerce to boom.

“They might be in constructions, or import-export or, you know, they’re big Cambodian companies that are making money in an entirely different field,” Ken White said.

“But they see that... at some time that e-commerce will take off here. So they’ve thrown their hat into the ring.”

To contact the reporter on this story: Anne Renzenbrink at [email protected]
With assistance from May Kunmakara


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