The Growth of Malaysia’s E-commerce Industry

Introduction

The invention of the Internet has led to the rapid development and progress of the world today, whether it is searching for information, contacting with family members and friends, or even shopping, all of this can be done online in a second. ICT is one of the keys to Malaysia’s successful economic growth. E-commerce is seen as a factor affecting economic growth, allowing even small businesses to enter the market, thus creating a level playing field for the country’s economic players. E-commerce benefits from the spread of information and communication technology.

Malaysia is among Southeast Asia’s fastest-growing e-commerce markets. Since 1998, it has launched Lelong, AirAsia, eBay and iPay88. E-commerce accelerated from 2010 to 2012, when major platforms were FashionValet, mudah.my, Rakuten Malaysia (now closed), Carousell, Groupon, hermo.my, Lazada and Zalora. E-commerce penetration in Malaysia accounts for about 5% of the total retail market. The e-commerce sector saw significant growth in 2016, contributing RM74.6 billion (6.1%) of GDP, higher than RM68.3 billion (5.9%) of GDP in 2015. As a result, the industry is growing exponentially as the idea of online entrepreneurship is adopted and applied by more and more small and medium enterprises (SME).

The current trends in e-commerce in Asian nation constitute many classes. First, the trend of SMEs. From The Associated Chinese Chambers of Commerce and business of Asian nation (ACCCIM) report on the SME survey, the adoption of the latest technologies by native SMEs is high. In line with the survey, Asian nation hierarchic fourth in digital platform implementation (among the 9 Asia-pacific countries surveyed) and third within the application of a business 4.0 technologies. About 61 native SMEs are optimistic that e-commerce platforms can facilitate boost revenue growth within the next 12 months. 69 percent of Malaysian small and medium-sized businesses have integrated 4.0 technology into their sector, in particular mobile payments, automation packages and comprehensive information research. The survey additionally showed that employment of mobile payments by The SMEs in Asian nation was as high as 90%.

Second, the trend of consumers. Malaysia’s e-commerce utilization rate is very high. Malaysia, 15.3 million people will choose to online shopping (accounted for 50% of the total population), 62% of mobile users are using their mobile devices in online shopping. The motivation for online shopping is usually based on price advantage, wider product range and the availability of reviews. Shoppers will also look for deals such as free deliveries and promotions. The most popular shopping categories are fashion and beauty, electronics, sports and hobbies. Other categories expected to increase sales include home decor, furniture, home furnishings, groceries and health care products. The most popular e-commerce company in Malaysia is Lazada.com.my and Shopee .com. While both companies have zero commissions, Shopee has gone one step further, offering free shipping modules and zero transaction fees, making both, unsurprisingly, the most popular platforms. Lazada had about 60,000 sellers by mid-2018, up from 25,000 in December 2017. Lazada’s monthly traffic is estimated at 45 million (as of February 2018). As for Shopee, it already says it has more than 1.6 million users. Its monthly traffic is estimated at 12.5 million (as of February 2018).

There are several major trends in the Malaysian e-commerce market. First, globalization will conduce to the development of SMEs. Malaysia’s SMEs have played an important role in the digital transformation. In fact, more than 1,900 SMEs have joined DFTZ (digital free trade zone) to help them promote their products globally and expand their customer base from 30 million to 600 million, bringing the number of SMEs joining DFTZ to 4,000 in 2018. Second, the development prospect of community e-commerce is good. Social commerce is mainly driven by the younger generation, so the younger generation will have a huge impact on consumers’ shopping decisions, especially in the fields of beauty and health products, fashion products and electronic products. In addition, with 55% of consumers following video shopping and a 20% increase in branded video content such as makeup tutorials, product reviews and cooking demonstrations, these videos will boost online shopping.

Next, new product categories and loyalty programs will increase repeat customers. Social e-commerce requires constant interaction with consumers. From leading companies to the entire industry, loyalty programs are offered to attract experienced online shoppers. Besides, Artificial intelligence (AI) will redefine the customer experience. AI is very professional at providing personalized and interactive shopping experiences. Innovations in distribution centers and logistics warehousing systems have greatly reduced the domestic and international delivery time in Malaysia. Lastly, the integration of O2O shopping experience. Although more and more people are buying books, shoes and electronic products online, most consumers still choose to shop in physical stores. Offline brands in the online business provide consumers with convenient ways to purchase and return goods, as well as a variety of payment methods to improve the multi-channel shopping experience.

Issue

There are several issues found on the Malaysia e-commerce trend. With the emergence of e-commerce marketing, it is undeniable the e-commerce brings an issue to logistic trend.There is a competitive advantage of foreign countries compared to the congested traffic situation on Malaysia road.The crowded road in Malaysia has led the logistic company deplete off the external labour force.According to DHL, 6.9% shares of e-commerce is expected to total in retail by 2022, double of what is recorded for 2018.M. Andy, a dispatch boy-turned-logistics company boss claimed that many logistics players are faced with higher operating costs due to manpower cost, fuel cost and warehouse space expansion. The industry growth potential in Malaysia is nearly understated during festival.

Pos Malaysia Corporate Development (Commercial) vice president for Commercial Strategy Rofidah Arof stated the problems faced by logistic, especially with the growth of e-Commerce.Pos Malaysia sees up to 240,000 items processed per day, as opposed to 100,000 items per day 2 years ago, reflecting the rapidly increasing demand for logistical services.The logistic industries has faced a shortage of driver as it needs time in delivery while it affects customer confidence as delivery plays a big role in entire e-commerce experience.They forced to use of non-compliant trucks to catch up the high demand of consumer.Some of the small regions even have no formal address and location which complicated the deliveries.The small logistic companies have all faced the challenges of lose out in the long run because the lack of automation and the resources to fulfill the requirement from their customers.

Meanwhile, it brings the risk of payment via debit and credit card from e-commerce.As mobile technology becomes common, the internet researcher includes a wide range of age user.When comes to Malaysia e-commerce trend, the online business is important to Malaysia internet user as e-commerce provide lots of benefits either in efficiency or effectiveness.Credit cards are the most widely used e-payment instruments in Malaysia in the volume of transaction from buyers. It has been the oldest e-payment instrument in Malaysia.However,the poor distinguish of knowledge of the younger internet user are easier being attracted and scammed by some unofficial or personal store which registered illegally with unclear information of their product. Without terms and condition, they sell of product that similar with the real store product with abnormal price.After the payment, the product received may not same with the picture they shown. Donthu and Garcia (1999) found that Internet shoppers are less risk averse than Internet non-shoppers are. This distinction indicates that non-users are likely to perceive higher levels of subjective risk associated with Internet usage as compared with users

On the other perspective, as the e-commerce become common, the buyer can buy anything from Lazada, Shopee or Taobao.However, it is easily to get addicted in shopping in the online merchandise when it just a moment to finish the payment.As a result, they might spend lots of money with their wants more than their needs.

As the growth of Malaysia e-commerce, the traditional local offline store are slowly eliminate from the sight of consumers.Consumers tend to choose the online retail store so that they can bargain and look for cheaper merchandise via online store.It brings the offline store to a critical when compete with the dominant factors such as the store interface,facilities,content creation and customer service centre of e-commerce store.E-commerce through internet dramatically shrinks the distance between seller and buyer, without involving of retailers, wholesalers and distributors. It brings benefit to the consumer-original store channel but not for the others channel.The relevant offline store affected mostly under the categories of fashion and beauty, sports and electronic.

By comparing the offline and online store, the buyers have less selection of products on the physical place limit of product in local offline store. For example ,Popular Bookstore in shopping mall can only provide limited amount of books in their offline stores.In the virtual marketplace on Internet, buyers are much efficient and effective in searching the products they desire as the quantity of products are huge.This is achieved by employing browser and intelligent search agents such as comparison shopping agents which are designed to simultaneously locate and compare products prices across multiple online retailers (Rowley, 2000).Meanwhile,the price are under affordable range providing free shipping voucher which lower than some offline store.It is also difficult for some buyers to bargain the price when face to face so they tend to purchase online.The offline store seems hard to cater up with the consumers with high expectation and requirement.Therefore the offline stores are under high operating cost with lower revenue when comes to e-commerce.

Solution

There are some logistic challenges faced by Malaysia e-commerce industry. These challenges will bring serious consequences if they are left unattended. To avoid wasting resources such as employing more and more workers to reinforce the customer services and delivery department, Malaysia e-commerce platform has to have greater innovations and technology advances in the shipping option which is saving user’s information for courier and delivery service. Users are able to purchase products after filling the information such as name, phone number and the detailed address. The solution of the logistic problems is that e-commerce platforms have to add on important information about user which is the GPS of the user’s location. To prevent the scenario of user want to ship to other places that user no chance go to the location and save the GPS, so the platform also can accept the GPS is sent from other user via email, chatbox and massage. Besides that, the e-commerce platform also can collaborate with Waze and Google map to achieve better results. By adding on this feature, delivery company can find the delivery address on the map easily and also can get the best route to shorten the delivery time. Therefore, GPS navigation is very efficient and effective to solve the logistic problems.

Malaysians are concern about the security and safety of their privacy and personal informations while using e-payment system. They fear that their details and datas will be shared and revealed to the third party, as it will cause serious consequence such as stolen money and stolen identity cases. Although the hackers have the skills to extract the user’s private information such as identification card, bank account information in the pass three or four years, but in an age of technological innovation, security privacy issues have been highlighted and cybersecurity threat had been solved partially. So, it is not easy for hackers to snatch user’s information via e-payment system. According to chief risk officer, Teh Huey Tzi mentioned that, guest’s debit and credit card information will be masked or replaced by symbol when display in the device. (eWallet security: What users need to know, 2019)

And now the system become more secure, after users make payment via debit or credit card, the device will not display the full account numbers, there is only last 4 digits can be seen to identify the bank account, and the bank will automatically send the PAC number to the users’ phone number which is binding with user’s bank account when registered to do double verification. Apart of that, there are several security rules that we need to pay attention to increase the protection. First, as hackers have become adept to hack into user’s account via public internet connection, so, users have to avoid to type their debit and credit account details when connecting public free Wi-Fi. Second, users have to make sure they are in a secure shopping website or browser, take note of the icon and platform before enter their bank account number, and user have to pay attention and double confirm they are in the correct website when pop up security warning. Third, users have to pay attention and never ever send debit and credit card details though insecure messaging technology and email to anyone.

According to retail research, e-commerce industry emerging into market, it has been slowly growing up around 20% in between 2014 and 2015, and now it becomes multi-billion industry in 2019. Due to this trend, offline store has to be eliminated. To avoid this problem, it is the trend to let the physical store become omni-channel from multi-channel. Multi-channel is distributing the products to the market through one channel such as retailer promote and sell through website, mobile, local store or social. In contrast, omni-channel is operating website, social and local store at the same time. This technology can be strongly engaged with consumer, and let them interact with the company meaningfully and caused them become the loyal customer. Although omni-channel requires strong resources such as employee, follower capital, rental and so on, and maybe it will keep you from making first barrel of gold, but this marketing strategy can bring more benefits in the future.

There are several major steps that has to be taken before start to operate the omni-channel strategy. First, company must be branded to the population when emerging in the new market. So, it can make many advertisements to deliver their objective, goals, characteristic and product to the target customer via platforms such as Google ads, Facebook ads and Alibaba (online platform). At the same time, company can open booth in event. And if the company has budget, it can try to invite famous people to attract their followers who is also your target customers to introduce your company and promote the product. (offline platform). For example, Etude House has launched a new series of lipstick, consumer can go to the brick and mortar store when they want to try the testing, and consumer also can purchase in online while they want to buy again. (inform online and buy offline or test offline and buy online). Therefore, omni-channel is perfectly combine the advantage of offline and online store for consumers and it is also the most businesses has start to invest in today.