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What Challenges Does Malaysia Face in the Next Stage of E-Commerce?

An Exclusive interview with PIKOM Chairman

E-commerce platforms are not a new thing. They’ve been around since the 1990s and have been helping vendors enhance their business. E-commerce platforms are basically sites that allow anyone to design and set up on online store, with ‘add to cart’ options and payment features.

Popular international platforms include sites like Shopify and Wix Stores. In Malaysia, the e-commerce scene is extremely lively. There are sites that allow businesses to reach other businesses (B2B), businesses to reach consumers (B2C) and consumers to reach other consumers (C2C). Examples include Lazada, Taobao, 11 Street, Mudah.my and many, many more.

Recent years have brought a ton of challenges to the e-commerce scene both locally and internationally.

There are issues of data and payments security, dishonest vendors, dropping sales and an increase in competition. What does the future hold for Malaysian e-commerce platforms? We sit down with Mr. Ganesh Kumar Bangah, the Chairman The National ICT Association of Malaysia[PIKOM] to wrap our heads around the issue.

“We are thrilled to embark on this journey towards sustaining the eCommerce growth momentum of the country. We look forward to empowering Malaysian SMEs to embrace digitisation which will help spur the growth of their online businesses.”Ganesh Kumar Bangah, PIKOM Chairman 

Malaysian E-commerce in the Region

Mr. Ganesh began by clarifying Malaysia’s position in the e-commerce scene of the ASEAN region. According to him, we’re the second biggest online market after Thailand, even with Thailand being four times the size of Malaysia in terms of land mass. Being second in the region is therefore, something of an achievement since we’re actually a much smaller nation.

Malaysia is also set to be an e-commerce hub in the region, with the potential of being a leading e-commerce location due to the fact that E-Commerce conglomerate, Alibaba has chosen Malaysia as its base in ASEAN.

Malaysia has a surprisingly larger e-commerce market compared to Indonesia, despite Indonesia having a much bigger population size than either Malaysia or Thailand. This is because the internet and e-commerce penetration in Malaysia is much wider and deeper.

The role of PIKOM in promoting e-commerce locally is therefore very significant. PIKOM started their e-commerce chapter about two years ago and has worked with MDEC to organize the My Cyber Sales event, which is an online shopping event offering various promotions, discounts and offers.

Last year alone, about 1,000 merchants participated and the number has increased to 1,200 this year. These merchants have brought in over RM300 million in revenue, generating substantial income for everyone. PIKOM wants to focus on generating demand for local merchants and vendors by promoting the existence of these merchants to consumers.

Cross-Border E-Commerce

Mr. Ganesh very candidly stated that Malaysian merchants have a high potential in bringing their products out of Malaysia, and the digital free trade zone (DFTZ) actually plays an important role. Last year alone, MDEC was able to gather 2,000 merchants to sell their wares to China via the Alibaba platform. In addition to this, PIKOM has been working with MDEC to recruit even more merchants to conduct their business on Alibaba, with the support of the currently sitting government.

What is the DFTZ?

The digital free trade zone (DFTZ), according to Mr. Ganesh, has three major components. The first core component is the hub in KLIA that functions as the tool that allows China vendors on Alibaba to export to Malaysia, and Malaysia then re-distributes those products to the rest of the region. This is an avenue for added income as the products shipped into this KLIA hub will be subjected to things like export fees, taxes and the like before being exported out to other ASEAN countries.

The second component is the DFTZ is the online digital services that allow for quick customs clearance and other cross-border documentation and logistics. The third component is SME enablement.

Right now, Malaysia has over 700,000 SMEs but only about 30% of them sell their products online. The new government has been pushing for this number to go up to 50% at least.

The requirements for SMEs to join as an Alibaba merchant aren’t difficult. However, Mr. Ganesh stresses that the main issue now is the lack of SMEs that know how to grow their businesses online. Growth is a key factor, rather than just marketing to an international audience. Malaysia has a wide range of products that are unique and can appeal to other nationalities, beyond just things like durians.

According to Mr. Ganesh, e-commerce merchants need to know their market fit. They cannot just resell the products of others. They must know their target market and craft strategies to be able to reach that market.

Is Malaysia on Track to Bringing in the Targeted E-Commerce Incomes?

Malaysia aims to have a GDP contribution of at least RM211 billion from the e-commerce sector by 2020. The good news, according to Mr. Ganesh, is that we are definitely able to achieve that number in the coming years. In fact, according to him, the e-commerce sector managed to generate RM74.6 billion in 2017. However, there is still a lot of work that needs to be done in terms of recruiting the right talents to join the online marketing efforts. These talents include those familiar with user experience, strategists and the like.

The Road to E-Commerce Success

Selling products online isn’t as easy as just opening a shop and putting products on display. Merchants need to focus on finding their market fit, and there are specific steps to do this. Firstly, they need to perform market research and know who their customers are. Once they know their customers; they need to find out which channels are the best to reach these customers. Finally, there needs to be a feedback gathering mechanism.

The business has to be product driven, and finding your market fit as a merchant will determine how well the business does.

Places like Alibaba have the customer base, and therefore there is no need to generate other government-linked online marketing platforms to bring in business opportunities, says Mr Ganesh. Additionally, both brand and products are equally important in determining an online business.

PIKOM’s Role in All This

Mr Ganesh mentions that the e-commerce market is very dependent on enablers, and PIKOM’s role is to support these enablers.

Technologies are largely dependent on enablers and PIKOM’s members are the enablers. PIKOM supports these enablers by directing them to the marketplace, such the My Cyber Sale and our PIKOM E-commerce fair where PIKOM matches them up with suitable merchants.

E-commerce is one business platform that’s rapidly growing. According to Mr. Ganesh, the potential revenue from e-commerce is projected to double every year for the next 7 to 8 years and we must all be able to take advantage of this.

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