Modern retail channels are gaining ground in Myanmar

Eight years after the economy was liberalised, consumerism appears to have taken hold among Myanmar’s population – spelling riches for the country’s budding modern retail sector. This is according to a new YCP Solidiance report.

Myanmar began its economic liberalisation back in 2012, and a newly elected democratic government in 2015 threw the country’s doors open to foreign direct investment (FDI). A record $9 billion plus flowed into the economy that year, and healthy activity since has driven a 6% average GDP growth rate for Myanmar between 2014 and 2019, according to World Bank figures.

International businesses are taking notice, and waiting in Myanmar is a vast, young population that is not only tech savvy, but is also benefitting from a growing rate of GDP per capita. Nearly half of Myanmar’s 50 million plus population is below the age of 25, while a third actually fall within the earning bracket of 16 to 35. Between 2014 and 2019, the country’s GDP per capita has jumped by nearly $200.

For retailers, this is a dream landscape. “As such, Myanmar not only represents the untapped rising middle-income consumer market, but also holds long-term growth opportunities for retailers and consumer brands,” noted Naithy Cyriac, a YCP Solidiance partner based in Myanmar who co-authored the report.

The potential has been there since the liberalisation drive, and Cyriac highlights how consumption patterns are starting to reflect the myriad favourable market conditions. “A higher disposable income, access to internet and social media dominance have resulted in fundamental lifestyle changes through increased adoption of new practices such as dining out, visiting shopping malls and movie theatres.”

Much like in other Asian markets, an appetite for discretionary spending is taking hold among Myanmar's young population, and a range of modern retail brands from within Myanmar and across the world are there to feed this demand. Foreign brands have become household favourites in the country, for products ranging from consumer electronics to beauty & cosmetics, and even K-pop. Essentially, factors such as lifestyle and appearance are playing more of a role in consumption patterns.

That being said, YCP Solidiance notes that change is afoot even in the basic retail segments such as food and groceries, at least in the big cities. In the capital of Yangon, traditional grocery retailers are increasingly being replaced by modern supermarkets – fueled by the rising demand for such options. Major shopping malls and centres are even starting to emerge in the outskirts of big cities, looking to serve a sub-urban population.

Up until 2014, mixed retailers in Myanmar dominated the market share when compared to modern grocery retailers – with sales of more than $65 million versus $62 million. While both segments have traced an upward trajectory since, the tables turned in 2015 and modern grocery retailers have pulled ahead by some distance.

Last year, modern grocery retailers recorded sales worth nearly $270 million, marking a compound annual growth rate (CAGR) of 33% since 2013. For mixed retailers, sales were short of $180 million – a healthy CAGR of 20% over the same period.

So the signs of growth are visible. At the same time, modern retail is far from becoming a central fixture in Myanmar – currently accounting for only 10% of the overall retail landscape on aggregate. Another sign of the long road ahead is the state of ecommerce in the country.

Internet-based purchases make up less than a quarter of all non-store based sales, which in turn comprise less than 1% of all sales in Myanmar. Despite a digitally connected, tech savvy population, the country is yet to see any ecommerce penetration. For the researchers, this partly calls for reform in the banking sector, as reliable and secure digital payment infrastructure is a crucial enabler.

Another barrier is the lack of a regulatory framework around ecommerce, which retains the air of uncertainty around online sales. The good news is that the intent for online shopping is in place, and the market – small as it may be – is still growing at a rate of knots. YCP Solidiance reports that internet retailing in Myanmar has expanded at 30% every year between 2013 and 2019, and has reached a “nascent” value of $6 million.

Provided that the banking and regulatory barriers can be overcome, the conditions are in place for a thriving ecommerce sector, amid a retail sector that is on the path to modernisation.