Looking at Myanmar’s economic statistics you may be tempted to conclude that purchasing power is very low – a bad sign for retailers. Indeed, IMF statistics state that GDP per capita is only about $900 per year.
One thing these numbers fail to highlight though, is that there is a class of extremely rich people in Yangon and a growing middle class – in some cases fueled by remittances from abroad that are not tracked by official statistics. As you drive around Yangon you will see a mix of outdated cars and newer models. At the time these cars were purchased, every one of them, even the old clunkers, cost at least $US20,000 cash. Apartment complexes and houses in high demand areas of Yangon often cost over $US1 million – also 100% cash. If Myanmar is so poor and purchasing power is so low, how can people pay cash for million-dollar houses and expensive cars?
While there are many subsistence farmers in Myanmar who earn less than $100 a month, there is also a growing class of very wealthy people who have high purchasing power. This market is currently underserved and represents a strong opportunity for investment. We would suggest that retail businesses looking to invest in Myanmar look past IMF data and go to Tawwin Plaza or Junction Mawtin in Yangon. Inside these shopping malls it is clear that there is demand for high-priced retail items.
For many years during the Socialist period, the only factories in Myanmar were government run enterprises. The products they produced were often low-quality and the factories themselves were highly inefficient. Because the Socialist government had chosen a policy of isolation, it lacked the technical expertise and information exchange that more open countries were receiving. The inferior quality products produced by government factories have influenced the market’s perception about all Myanmar products. The perception is: Myanmar made = shoddy.
This gives a boost to foreign products which are perceived as higher quality and higher status. A market for foreign luxury products (like perfume, fashion, and handbags) exists in Myanmar, but it is still underdeveloped. Luxury goods companies who can tailor their brands for upper-class Myanmar have a good chance of success.
There are many other opportunities in the retail sector as well. Currently small mom-and-pop type businesses are the dominant forces in Myanmar retail, with larger supermarkets only just beginning to take market share. Many of these small stores lack efficiency, customer service, efficient supply chains, and professionalism. While Myanmar customers are not as picky as their Western counterparts, businesses that can offer a higher quality of service while keeping prices down through efficient supply chains will find themselves in good positions. While there are many import/export agents in Myanmar, national distribution networks are fragmented and unreliable. Many companies choose to distribute their own products instead of using a dedicated logistics company. We see a large need for logistics companies to support the growth of retail in Myanmar.
If you walk into most shops in Myanmar you will see that most financial transactions are done in cash, and most point-of-sale systems are primitive. As Myanmar develops, we see a large market for point-of-sale systems, credit card readers, cash registers, and other items which facilitate transactions. In this same vein, there will also be a market for metal detectors, barcode scanning systems, and other electronic devices as Myanmar transitions to a more digitalized economy.