Big future for e-commerce despite retail tycoon’s doubts

A local retail chain owner’s claim that e-commerce will not be a major part of business has stirred an online debate, with many questioning his view that the sales method has benefited only multinational companies and not local players.

Without mentioning names, Ameer Ali Mydin, who owns the Mydin hypermarket chain, had said e-commerce in Malaysia only benefits two foreign suppliers.

“They charge 30% for food and beverage delivery. Minting money! What are we doing? Support and support. We are supporting the wrong people,” he told business radio BFM yesterday.

Ameer also said e-commerce does not benefit the whole supply chain, unlike what happens with physical shopping.

The e-commerce sector had been booming long before the pandemic stopped brick-and-mortar shops from operating at full capacity.

“When you go shopping, you walk around, you go for a drink, you take a cab. The whole supply chain moves.”

But how likely is it that not spending hours in physical stores or walking around and getting a drink will throw the supply chain out of whack?

The e-commerce sector had been booming long before the pandemic stopped brick-and-mortar shops from operating at full capacity.

Malaysia’s e-commerce tryst started in 1998 with Lelong.

In 2001, budget airline AirAsia launched an online ticketing site, and in the years to come, companies like eBay, Groupon and Mudah would become household names among Malaysians.

The current phase of the Malaysian e-commerce market took shape in 2012 when Lazada and Zalora launched in Malaysia, followed by Shopee in 2015.

Digital market research company eMarketer predicts that global e-commerce sales will hit US$4.9 trillion this year, up from US$1.3 trillion in 2014.

E-commerce sales worldwide have steadily eaten into the retail market and, by 2023, will account for 22% of total global sales.

When Covid-19 forced businesses to cease operations, many small and medium businesses did not have a platform to allow the support of customers – until public-private initiatives brought them online.

They now rely on e-commerce, realising the advantage of leveraging this to diversify revenue streams and meet the ever-rising demand of online shoppers.

Many businesses survived the stringent and sometimes unpredictable Covid-19 lockdowns by pivoting online.

The growth of e-commerce in Malaysia is driven by the government’s National eCommerce Strategic Roadmap initiatives, intended to increase internet accessibility in rural areas and improve e-wallet technologies.

According to the Malaysia Digital Economy Corporation, an agency under the communications and multimedia ministry, before the advent of e-commerce, people in less developed parts of the country had limited choices in terms of purchases.

The pandemic simply boosted the number of consumers migrating towards online purchases, who cite convenience, lower prices, and the ability to research products in real-time.

In fact, many businesses survived the stringent and sometimes unpredictable Covid-19 lockdowns by pivoting online.

So did e-commerce benefit more individuals and businesses than just the two multinational foreign suppliers?

A survey conducted by Shopee revealed that despite being fully employed, 35.4% of sellers turned to e-commerce as alternative sources of income.

Of the 11,850 sellers surveyed, 5,406 were new entrepreneurs who operate 100% online. These sellers make an average of RM2,750 per month on Shopee alone.

The pandemic has seen a rapid shift in consumer behaviour, with people forced to work, learn, spend and even communicate differently.

These changes will ultimately shape the future of e-commerce, even post-pandemic.

Part of the new norm is online shopping, and the platforms provided by big companies ensure that small or traditional businesses can also go digital.

As consumers move online for their purchases, companies, particularly e-commerce platforms, have taken steps to help SMEs start their digital journeys. Assistance given includes the provision of loans, training, stores on e-commerce platforms, and digital marketing.

Encouraging the move to digitalisation is MDEC’s matching grant of RM300 million in a joint effort with the private sector, involving training, vendor subsidies, and sales assistance.

Lazada Malaysia brought on board more than 50,000 new SMEs through its Pakej Kedai Pintar stimulus programme, and they recorded an overall growth of more than 110% in sales.

Astro Malaysia is another company that leveraged its wide market of consumers and existing capabilities to assist SMEs with digitalisation with Go Shop, its e-commerce platform, hosting some 600 vendors with the help of Astro TV, Astro On The Go, as well as other online and mobile platforms.

Social media too has played a huge role, serving as a discovery and post-purchase platform for e-commerce businesses.

With some 25 million active social media users in Malaysia, accounting for 78% of the population, there is massive potential for e-commerce growth in Malaysia.

According to GlobalData’s ECommerce Analytics, Malaysia’s e-commerce market is expected to reach RM51.6 billion by 2024.

Still, Malaysia is still far behind its neighbours, although this is understandable due to market size. For example, Indonesia’s e-commerce market valued at US$21 billion in 2019 is expected to hit US$40 billion by 2022, according to McKinsey.

The strong government support for internet-based retail has lowered the entry barriers for Malaysians to trade online and across borders.

Malaysia’s e-commerce market will continue to be attractive with room to grow as it is driven by increasing consumer spending, growing internet users, and greater acceptance of mobile payments.

It is something that big businesses, even giant retailers such as Mydin which for years have been comfortable with crowds swarming its stores nationwide, cannot afford to ignore.