Technology Journal: Shop Online — In Mongolia? — ISP Entrepreneur Wants to Bring E-Commerce to the Steppe — How to Collect Payments? Issue Your Own Debit Cards
By Yasmin Osman and Thomas Hillenbrand
24 January 2001
The Wall Street Journal Europe
(Copyright (c) 2001, Dow Jones & Company, Inc.)
ULAN BATOR — Mongolia’s biggest Internet service provider has just 3,000 registered subscribers — and it’s profitable. But Datacom’s chief executive, Enkhbat, isn’t content to leave it at that. His next project: introducing e-commerce.
Mr. Enkhbat (Mongolians use only one name), 41 years old, looks more like the friendly but shy university professor he used to be than a brash Web entrepreneur. His career as a CEO began when he and twenty fellow scientists bought Datacom, then a state-owned computer research institute, from the government. (Today he owns 60% of the company; his employees own the rest.)
The government wanted to close it down to cut costs,“ he says. So the scientists put up the equivalent of $6,000 for Datacom’s assets: a couple of chairs, some desks and two computers. Their first project was a domestic e-mail system, called Mongolian Access to Global Information & Communications Network – Magicnet for short.
Today, Magicnet.mn addresses are on the business cards of many Mongolian executives — few companies can afford their own domain name, let alone their own server. Mr. Enkbhat estimates that around 10,000 people use Magicnet’s service via its 3,000 registered addresses.
That’s a tiny number of prospective customers. Most of the country’s 2.4 million people are nomadic herders. They live on steppes — and they’re not wired to the Web. Before Mr. Enkhbat can proclaim himself the Mongolian Jeff Bezos, he has to solve a couple of problems — reaching customers, collecting payments, and delivering the goods.
There’s little technological infrastructure available for e-commerce. So Mr. Enkbhat plans to offer the whole retail chain: from online ordering through payment and distribution. To reach more consumers, he plans to set up Internet cafes at local supermarkets and retail shops in all of the country’s 21 aimag, or provinces, starting next summer. „People can use Internet terminals at local supermarkets to order goods and collect them a week later“ on their next trip, he says. At first, Datacom will focus on Ulan Bator and the adjacent provinces. But serving more remote regions is likely to be far more difficult.
A growing number of Mongolians have begun to realize the Web’s potential, agrees Ariunaa, a United Nations official in charge of the organization’s development program for the country. In Ulan Bator, young Mongolians flock to Internet cafes — there are around 40 in the capital and the cities of Darkhan and Erdenet — surfing the Web on tiny 11-inch screens that rest on old camping tables. But many people can’t afford to use them. Half an hour of surfing costs 500 tugrik, about 50 U.S. cents. „That’s a lot in a country where the per capita GDP is around $400,“ says Mr. Ariunaa. In a recent poll by the U.N., three-quarters of students questioned said lack of money was the main obstacle to Internet access.
About 7,000 people had Web addresses in Mongolia in 1999, Mr. Ariunaa says, according to local ISPs, compared with just 500 in 1996. Many people „share their account with colleagues and friends,“ he adds, „so the total number (of users) may be higher.“ However, he warns, „the existing infrastructure isn’t sufficient to allow for e-commerce outside the major cities. Something has to be done to improve the telecommunications network.“
Mr. Ariunaa also doubts that Mr. Enkhbat’s business concept will work with rural consumers. „E-commerce could vastly improve the living conditions of herders and inhabitants of really remote places. But how will they know how to handle computers?“
Mr. Enkhbat seems undaunted. He says the supermarket terminals will improve Internet availability. And he says he’s taking steps to adapt distribution, logistics and payment to local needs, signing up with local partners. „We already have agreements with around 20 wholesalers and logistic companies,“ he says.
As for payment, credit cards won’t work: Most people still keep their money in a paper carton under the bed. „Mongolians don’t trust the banking system,“ says Mr. Enkhbat; they’re wary after several scandals, including some banks that collapsed under the weight of bad loans. „Our clients rarely have credit cards, and even if they do, the banks work very slowly,“ he says.
So he’s come up with his own payment system. Licensed in August by the Mongolian Central Bank, Datacom’s Netcard unit, a nonbank financial company, has begun issuing debit cards to customers. „I wrote to our customers and asked them, if they were interested in Netcard. Several hundred answered yes. We think there will be more,“ says Mr. Enkhbat. He sees the cards as the first tangible proof that his e-business plans are for real.