Expanding E-Commerce Sector Promising, But Remains Unregulated

Cambodia’s steadily expanding e-commerce sector holds potential for the nation’s future economic growth, but industry observers say the country’s continuing reliance on cash and a lack of legal protections or trusted delivery system are holding it back.

Even so, many retailers and social media entrepreneurs are bullish on the potential for e-commerce, and are building websites and Facebook pages to attract customers to their electronic shopfronts, according to a report released on Tuesday by market research company Mango Tango Asia.

“Cambodia has a vibrant ecosystem of micro-entrepreneurs who are finding ways to sell goods online—particularly in the area of ‘social commerce,’ in which individual buyers operate small, curated storefronts through Facebook, Instagram, Line and other platforms,” says the report, produced with the financial support of the Mekong Business Initiative and BritCham Cambodia.

The report, an overview of Cambodia’s e-commerce market for the year, relied on interviews with senior executives, supplemented by research on academic databases. Little hard data is available about e-commerce in Cambodia.

Facebook entrepreneurs, especially, are helped by growing smartphone use across the Cambodian market, the report says.

“Almost all Cambodians have a mobile phone (95 percent),” it says, while the penetration of smartphones, specifically, “is increasing rapidly at 50 percent in 2015.”

Meanwhile, Wing—the ubiquitous money transfer service that allows customers to transfer payments and remittances across Cambodia and from abroad using their phone numbers—is gearing up to handle more e-commerce.

Currently, it handles a monthly volume of transactions equal to 50 percent of Cambodia’s GDP, the study says.

As promising as e-commerce appears, there are still a number of challenges facing the sector in Cambodia.

One is trust, as “Cambodia is still a predominantly cash-based culture,” and many potential buyers are still suspicious of paying online for goods and services, the report says.

Additionally, a lack of transport options means “almost all deliveries are organized personally in Cambodia,” the report says.

Another problem, said Nancy Jeffe, head of strategy for Mango Tango Asia, is a lack of legal protections for companies seeking to enter the market.

“We have interviewed some law firms, which receive quite a few inquiries every week from new players coming in to ask about the legal structures,” she said. “Many tons of products from Alibaba are coming here, so there are lots of players looking at opportunities.”

The problem, she said, was as-yet-unclear laws on e-commerce and consumer protection.

In fact, government regulation has yet to touch some corners of the existing e-commerce market.

While the bulk of Facebook entrepreneurs peddle legal goods like herbal weight-loss remedies, motorbikes and Korean cosmetics, shopfronts like GunSafe Cambodia display Glock pistols, and there’s the perennial—and illegal—trade in dildos.

Commerce Ministry spokeswoman Soeng Sophary said the long-anticipated law regulating the e-commerce industry was still being drafted, but should be completed this year.

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