Cambodia’s Online Marketplace: A SWOT Analysis of a Growing Digital Economy

In recent years, Cambodia has emerged as a noteworthy player in Southeast Asia’s digital economy, with its e-commerce sector experiencing significant growth. This transformation is reshaping the country’s retail landscape and creating new opportunities for businesses and consumers alike.

According to recent data from the e-Conomy SEA 2023 report by Google, Temasek, and Bain & Company, Cambodia’s e-commerce market reached a value of US$1.68 billion in 2023. Projections suggest this could grow to US$2.9 billion by 2025, representing a compound annual growth rate (CAGR) of 31%. These figures underscore the sector’s rapid expansion and potential for further development.

The Cambodian government has recognized the importance of this digital shift. The implementation of the Cambodia Digital Economy and Society Policy Framework 2021-2035, followed by the E-commerce Strategy 2023-2030, demonstrates a commitment to fostering a supportive environment for digital business growth. However, as with any emerging market, Cambodia’s e-commerce ecosystem faces both opportunities and challenges. The country’s young, tech-savvy population and increasing internet penetration rates provide a strong foundation for growth. Yet, issues such as underdeveloped logistics infrastructure and low trust in digital payments persist, potentially hindering progress.

This SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis aims to provide a comprehensive overview of Cambodia’s e-commerce landscape. By examining each of these elements in detail, we seek to offer valuable insights for businesses, investors, and policymakers engaged in or considering involvement in Cambodia’s digital economy. The following sections will delve into the specific factors shaping the e-commerce sector in Cambodia, from its robust mobile connectivity to the challenges of cybersecurity.

The below analysis will provide a balanced view of the current state of e-commerce in the country and its prospects for future growth, equipping stakeholders with the knowledge needed to navigate this dynamic market effectively.

Strengths

1. Growing Internet Penetration

Cambodia has seen a significant increase in internet users, with more people accessing affordable smartphones and mobile internet. According to the latest Digital 2024 report by DataReportal, internet users in Cambodia reached 16.93 million in January 2024, representing 98.2% of the total population. This marks a 4.6% increase from the previous year.

2. Young and Tech-savvy Population

Many Cambodians are young and adaptable to new technologies, making them prime candidates for online shopping. The median age in Cambodia is around 27 years, with a high percentage of the population being digital natives. (Source World Population Prospects 2022. United Nations Department of Economic and Social Affairs)

3. Government Support

The Cambodian government has been supportive of digital transformation, creating policies to encourage the growth of e-commerce. The launch of the Cambodia Digital Economy and Society Policy Framework 2021-2035 aims to promote digital economy growth. (Source Cambodia Digital Economy and Society Policy Framework 2021-2035. Ministry of Post and Telecommunications, Kingdom of Cambodia.) 

The key components of the Cambodia Digital Economy and Society Policy Framework are:

• Digital Infrastructure Development. Investment in high-speed internet, telecommunications networks, and data centers to ensure reliable and widespread access to digital services.
• Digital Literacy and Skills Training. Initiatives to improve digital literacy among the general population, including educational programs and training for digital skills.
• Promotion of Digital Innovation and Entrepreneurship. Support for startups and innovation through funding, incubation programs, and partnerships with tech companies.
• Enhancing Cybersecurity and Data Protection. Implementation of robust cybersecurity measures and data protection regulations to safeguard online transactions and personal information.
• Regulatory and Policy Support. Establishment of clear and supportive regulations for digital businesses, including e-commerce, fintech, and digital payments.
• Promotion of Digital Financial Services. Expansion of digital payment systems and financial inclusion initiatives to ensure more people can participate in the digital economy.
• Development of Smart Cities. Implementation of smart city projects to integrate digital technologies into urban planning and management.

4. Rising Social Media Usage

Cambodia has seen a significant increase in social media usage, creating a fertile ground for social commerce. As of 2023, there are approximately 13.95 million social media users in Cambodia, representing 82.1% of the total population (Source: DataReportal, 2023). This high adoption rate of social platforms like Facebook and Instagram presents unique opportunities for e-commerce growth through social selling.

5. Improving Digital Payment Infrastructure

While cash on delivery remains popular, there’s a growing adoption of digital payment methods. The National Bank of Cambodia’s Bakong system, launched in 2020, is accelerating financial inclusion and enabling easier digital transactions for e-commerce.

Weaknesses

1. Limited Logistics Infrastructure

Cambodia’s logistics infrastructure is still developing, which hinders the efficiency and reliability of e-commerce deliveries. Many rural areas still face challenges with poor road conditions and limited access to reliable delivery services.

2. Low Trust in Online Payments

There is still a significant trust barrier among Cambodians regarding online payments, with many preferring cash on delivery (COD). Cash on delivery remains the dominant payment method, accounting for over 70% of online transactions. (Source e-Conomy SEA 2023 Report. Google, Temasek, and Bain & Company)

3. Digital Literacy

While internet penetration is high, digital literacy levels vary significantly across different demographics. According to a 2021 study by The Asia Foundation, only 32% of Cambodians possess basic digital literacy skills, with significant disparities between urban and rural areas. This gap affects not only consumers’ ability to engage with e-commerce platforms but also the capacity of small businesses to digitize their operations.

4. Skills Gap in E-commerce Workforce

There’s a notable shortage of skilled professionals in crucial e-commerce-related fields such as digital marketing, data analysis, and logistics management. This skills gap can hinder the growth and competitiveness of local e-commerce businesses.

5. Limited English Language Proficiency

While improving, limited English proficiency among a significant portion of the population can be a barrier to engaging with international e-commerce platforms and accessing a wider range of products and services.

Opportunities

1. Expanding Mobile Commerce (m-commerce)

With high mobile penetration, there is a growing opportunity to capitalize on mobile commerce. Platforms like Shoppee and Lazada have mobile apps that are increasingly popular among Cambodian consumers. (Source Statista Digital Market Outlook: eCommerce in Cambodia. Statista)

2. Rising Middle Class

An expanding middle class with increased disposable income presents a growing e-commerce market. The World Bank projects that Cambodia’s middle class will continue to grow, driving demand for diverse products and services online.

3. Untapped Rural Markets

There are vast opportunities in rural areas where e-commerce is still underdeveloped. Companies can create tailored strategies to penetrate rural markets, such as localized marketing and partnerships with local delivery services.

4. Cross-border E-commerce

Cambodia’s strategic location in Southeast Asia presents significant opportunities for cross-border e-commerce. The ASEAN E-commerce Agreement, signed in 2019, aims to facilitate cross-border transactions, potentially opening up new markets for Cambodian businesses and providing local consumers with access to a wider range of products.

5. Fintech Integration

The rapid growth of Cambodia’s fintech sector presents opportunities for seamless integration with e-commerce platforms. Innovations in areas such as mobile wallets, peer-to-peer lending, and blockchain-based solutions can address payment trust issues and expand financial inclusion.

6. Green E-commerce Initiatives

As environmental awareness grows globally, there’s an opportunity for Cambodian e-commerce businesses to differentiate themselves through sustainable practices. This could include eco-friendly packaging, carbon-neutral delivery options, or promoting locally sourced, sustainable products.

Threats

1. Regulatory Challenges

E-commerce regulations are still evolving in Cambodia, which can create uncertainties for businesses. Changes in taxation or e-commerce policies could impact business operations and profitability.

2. Competition from International Players

International e-commerce giants entering the Cambodian market pose a significant threat to local businesses. Companies like Alibaba and Amazon may enter the market, leveraging their vast resources and established logistics networks.

3. Cybersecurity Risks

The growth of e-commerce in Cambodia has been accompanied by an increase in cybersecurity threats. According to the Cambodian Computer Emergency Response Team (CamCERT), there was a 30% increase in reported cybersecurity incidents in 2022 compared to the previous year. These incidents include phishing attacks, data breaches, and online fraud, which can erode consumer trust and deter people from shopping online.

To address these risks, e-commerce businesses in Cambodia need to invest in robust cybersecurity measures, including:

• Regular security audits and penetration testing
• Implementation of multi-factor authentication
• Employee training on cybersecurity best practices
• Compliance with international data protection standards

4. Environmental Concerns

The rapid growth of e-commerce could lead to increased environmental challenges, particularly in terms of packaging waste and carbon emissions from last-mile deliveries. Without proactive measures, these issues could lead to negative public perception and potential regulatory challenges in the future.

5. Economic Uncertainties

Global economic fluctuations and potential domestic economic challenges could impact consumer spending power and affect the growth of e-commerce in Cambodia.

Additional Considerations:

1. Legal Framework: While the Cambodian government has shown support for digital transformation, the legal framework for e-commerce is still evolving. The E-Commerce Law, enacted in 2019, provides a foundation for regulating online businesses, consumer protection, and electronic transactions. However, implementation and enforcement remain challenges. Future regulations around data protection, cross-border data flows, and digital taxation will significantly impact the e-commerce landscape.
   
   
2. Cultural Factors: Cambodian cultural norms and consumer behavior play a crucial role in shaping e-commerce adoption. The preference for face-to-face interactions and the ability to physically inspect products before purchase remains strong, particularly among older generations. However, younger consumers are increasingly comfortable with online shopping, driven by convenience and access to a wider range of products.
   
   
3. Role of Telecommunications Companies: Telecom companies play a vital role in Cambodia’s e-commerce ecosystem. Companies like Cellcard, Smart, and Metfone not only provide the necessary connectivity infrastructure but are also increasingly involved in e-commerce-related services. For example, some telcos offer their own mobile payment solutions and partner with e-commerce platforms to provide data packages optimized for online shopping.
   
   
4. Comparison with Regional Peers: While growing rapidly, Cambodia’s e-commerce market is still relatively small compared to its Southeast Asian neighbors. According to the e-Conomy SEA 2023 report by Google, Temasek, and Bain & Company, Cambodia’s e-commerce Gross Merchandise Value (GMV) was estimated at $1.5 billion in 2023, compared to $40 billion in Vietnam and $60 billion in Thailand. However, Cambodia’s growth rate is among the highest in the region, presenting significant catch-up potential.
   
   
5. Impact of COVID-19: The COVID-19 pandemic accelerated e-commerce adoption in Cambodia. Lockdowns and social distancing measures pushed more consumers and businesses online. This shift has had lasting effects, with many consumers continuing to shop online even after restrictions were lifted. The pandemic also highlighted the importance of digital resilience for businesses, encouraging more SMEs to establish an online presence.
   
   
6. Future Projections: Despite challenges, the future of e-commerce in Cambodia looks promising. The e-Conomy SEA 2023 report projects Cambodia’s e-commerce GMV to reach $2.5 billion by 2025, representing a compound annual growth rate (CAGR) of 21% from 2023 to 2025. This growth is expected to be driven by increasing internet penetration, rising disposable incomes, and continued improvements in digital infrastructure and logistics.

Cambodia’s e-commerce ecosystem presents a landscape of significant opportunities tempered by notable challenges. The country’s young, tech-savvy population, improving digital infrastructure, and supportive government policies provide a strong foundation for growth. However, issues such as limited logistics infrastructure, digital literacy gaps, and cybersecurity concerns need to be addressed to fully realize the sector’s potential.

As the e-commerce landscape continues to evolve, businesses that can adapt to local preferences, leverage emerging technologies, and address key challenges will be well-positioned to succeed. Meanwhile, policymakers have a crucial role in creating a supportive regulatory environment that fosters innovation while protecting consumers and addressing societal concerns.

The coming years will likely see continued rapid growth in Cambodia’s e-commerce sector, with increasing integration of fintech solutions, expansion into rural areas, and the emergence of new business models. As the ecosystem matures, it has the potential to become a significant driver of Cambodia’s digital economy, contributing to economic growth and digital inclusion across the country.