Iranian ecommerce thrives despite obstacles By Najmeh Bozorgmehr in Tehran When brothers Hamid and Saeed Mohammadi founded online retailer Digikala in 2007 they had capital of $20,000, an office in a small apartment in Tehran and a couple of engineers on the payroll. Now the company controls about 85 per cent of Iran’s online retail market and leads the country’s ecommerce sector – which is thriving despite formidable domestic restrictions and international sanctions over the country’s nuclear programme. The brothers own 49 per cent, with 51 per cent owned by Sarava Venture Capital, and the company is estimated to be worth about $100m. “Iran’s market is so thirsty for ecommerce and is condemned to massively grow no matter which government will be in power and whether sanctions will continue or not,” says Hamid Mohammadi, speaking from his 10-storey head office in central Tehran. “Digikala has grown on average 200 per cent every year despite all the political and economic upheavals.” Iran is one of the world’s biggest untapped ecommerce markets. The sector constitutes at best about 0.7 per cent of GDP, according to unofficial figures, much less than in neighbouring countries such as Turkey and the UAE. But it has massive potential, say analysts. With a tech-savvy young population – 70 per cent of Iranians are under 35 – the country’s internet and mobile phone penetration rates are among the highest in the Middle East at 55 and 126 per cent respectively. An efficient local debit card system has boosted public trust in online payments in recent years. “Iran’s young population is like a tsunami, which is fascinated by internet and smart phones,” said one leading local entrepreneur, who asked not to be named. But the obstacles faced by the ecommerce sector are significant. International sanctions mean online entrepreneurs have no access to legal licences for ecommerce software. PayPal and other international online money transfer systems are non-existent, foreign investment is next to zero and advertising on social media such as Facebook and Google is impossible. With the ruling clergy fearing that opening up the internet to youth could lead to infiltration by “decadent” western culture, Iranians also face an array of domestic limitations. Internet speeds are kept deliberately slow and many sites, including YouTube, Facebook and Twitter, are filtered – although illegal software is used to unblock them. To add to the difficulties, bureaucratic hurdles are holding up allocation of operating licences for online retailers, and the sector lacks venture capital and the innovation accelerators and incubators to support start-ups. There are also cultural challenges, including educating investors not to expect quick profits and altering the preferences of consumers long accustomed to examining goods and haggling over the price before they buy. Attempts by the centrist government of Hassan Rouhani to relax internet censorship have so far failed due to opposition by hardliners in the judiciary, the elite Revolutionary Guards and parliament. But there have been some positive developments. The telecoms ministry recently granted 3G and 4G licences to two leading mobile phone operators, Hamrahe Aval and Irancell MTN, to provide high-speed connections to subscribers, and service providers are now allowed to increase bandwidth to 10 megabits a second for domestic customers. Ecommerce investors hope the moves will accelerate development of the sector, allowing users to view videos and images of products more easily. Despite the difficulties, there are an estimated 15,000 Iranian online shopping sites, although bureaucratic delays mean only about a third have received operating licences. Among the most prominent are Digikala, which is modelled on US online retailer Amazon; Takhfifan, a daily deals site like Groupon; eSam, an eBay-like marketplace; and Sheypoor, which offers free classified advertisements. Support for the nascent industry is also beginning to emerge. Start-up accelerator Avatech, set up earlier this year by a partnership that included private-sector entrepreneur Mohsen Malayeri, offers training, seed funding, mentoring and workplaces to Iranian ecommerce start-ups. It plans to hold a “Demo Day” next spring, where 10 start-ups will be showcased to potential investors. “What Iran now needs is mentorship, because we have good talents and resources, but we do not know how to have sustainable business,” said Mr Malayeri. Would-be online entrepreneurs are also starting to seize the initiative themselves, with networking events under the auspices of the Google-organised Startup Weekend taking place across Iran over the past two years. Nonetheless, backing remains scant. “The few investment and venture funds that exist in Iran invest mainly in well-established companies and not start-ups with great potential,” said Amir Cyrus Razzaghi, co-founder of Persian Luxury, an online lifestyle marketplace offering services such as personal shopping for the wealthy. “There is literally no seed money available to young entrepreneurs with innovative ideas.” The only foreign investor in Tehran’s ecommerce sector is Middle East Holding Internet (MEIH), a joint venture between Germany’s Rocket Internet and South Africa’s MTN Telecom. MEIH, which operates under the name.... To see the full report please go to: ft/cms/s/0/e44136e6-3cdb-11e4-9733-00144feabdc0.html#axzz3N6eWYq4T
Posted on: Sat, 27 Dec 2014 14:50:42 +0000
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