Malaysia seeks to boost courier services as e-commerce booms

Malaysia is seeking ways to improve courier services in the country as new operators continue to cram into an already-crowded market marred by thinning margins and swelling complaints on poor delivery.

A study will be conducted to assess industry competitiveness and capacity to serve the anticipated e-commerce volume growth, said Malaysian Communications and Multimedia Commission. However, any government intervention would require careful consideration, the commission said.

“I plan to start looking at ways to improve those sectors’ performances and address some of their age-old issues in order to make them better,” the commission’s Chairman Al-Ishsal Ishak told Nikkei Markets. “MCMC is both a regulator and industry developer.”

The move comes as current last-mile delivery players grapple with brutal price wars, prompting calls for gradual consolidation in the highly-fragmented industry. Malaysia, a nation of 30 million people, had 113 courier services firms as of August, official data show.

That hasn’t translated into better service for Malaysians who order everything online from televisions-to-burgers only to wait through the longest delivery period in Southeast Asia, a survey by Parcel Perform and iPrice Group showed.

Orders took 5.8 days to deliver, compared to the region’s average transit time of 3.8 days, according to survey of 80,000 e-commerce consumers in Singapore, Malaysia, Vietnam, Thailand, and Indonesia. More than one-third of Malaysians were unhappy with the service.

Budget carrier AirAsia Group’s cargo and logistics unit Teleport expects increased competition in the local courier services industry due to low entry barriers will pave way for consolidation.

“There will be massive competition, followed by massive amount of capital and eventually it will lead to consolidation,” Teleport Chief Executive Pete Chareonwongsak said. “The industry is less-regulated as compared to e-wallets players, which are regulated by the central bank,” he said.

MCMC last reviewed the licensing condition in 2012 and introduced a three-tiered approach to raise the entry barrier and to attract serious operators to the market.

Any proposal for the government to intervene in a complete competition market requires a deep and careful study, the commission said. “With the growth of e-commerce and digital economy, introducing control regulations may have a direct impact on the market economy.”

Domestically, MCMC projected e-commerce revenue to increase to $5.75 billion in 2023, while number of users will increase 10.7% by 2023 to 21.6 million people. For traffic volume, the commission forecasts one billion parcels in 2025.

To cater to the growth in parcels volume, Pos Malaysia, a unit of conglomerate DRB-HICOM and the country’s biggest postal company, has increased its processing capacity to over 500,000 parcels each day from up to 100,000 parcels.

Pos Malaysia has delivered more than 100 million items through its courier service that generated 824 million ringgit in revenue in the year ended Mar. 31, 2019. While the company owns the largest courier fleet in Malaysia, competition for last-mile delivery is intense, it said.

For smaller operators such as Nationwide Express, which has been bleeding through the past seven fiscal years, the hope is for the government to push for gradual consolidation in the industry after sharp drop in market shares and profit margin, its Chief Executive Mohd Khairi Abdul Aziz said.

The company was in talks with several rivals about consolidation though discussions remained in initial stages, he said. “There is no definite resolution on what we should do going forward, but we are exchanging ideas,” Khairi said.

As competition at home market heats up, others are exploring abroad. GD Express Carrier is scouting for acquisition and partnership opportunities across Southeast Asia, Managing Director Teong Teck Lean said.

“We are looking at Vietnam, Thailand and the Philippines which has huge growth opportunity,” he said, adding the company is looking to buy controlling stake in the targeted companies and turn them profitable in three-to-five years.

Shares of AirAsia Group ended 1.7% lower at 1.74 ringgit apiece, and that of DRB-HICOM closed 0.4% down at 2.39 ringgit, while the benchmark FBM KLCI shed 0.9%.