The changing face of e-commerce in Malaysia
The Covid-19 outbreak has impacted just about every aspect of life in Malaysia. With the various Movement Control Order (MCO) phases encouraging everyone to spend more time at home, they have also been adapting to the new normal that the outbreak has resulted in.
But in such a different environment from pre-Covid-19 times, how has the pandemic impacted Malaysia and the world’s e-commerce industry?
Supply chain disruptions
In February, China extended its lunar new year holiday by two weeks in a bid to reduce the spread of Covid-19 in the country. This caused factories to delay production for that period, which sent waves around the world that were also felt in Malaysia.
With Chinese factories offline for a longer period of time, their demand for raw materials and components to produce goods reduced. Fewer inputs needed by factories elsewhere in the world, including Malaysia, were produced.
Overall the automotive, metal products, chemicals, communication equipment, rubber and plastics, and office machinery sectors were disrupted. Many online businesses saw shortages of products and were unable to satisfy the demand from customers.
In Malaysia, this was reflected by a drop in the Purchasing Manager’s Index, a measure of the direction of economic trends based on a monthly survey of supply chain managers.
Malaysia was hit by a combination of less demand for its goods in China due to the lockdown and a shortage of materials.
After the MCO was imposed in March, only essential businesses and organisations could remain open.
Manufacturers of non-essential goods were not allowed to operate while manufacturers of essential goods required approval from the Ministry of International Trade and Industry Malaysia. Operations were allowed under certain conditions and regulations.
To encourage micro-enterprises, and small and medium enterprises to move into digital or online services, the government, together with the private sector, set up a plan to finance ventures via a matching grant of RM140 million.
“This allocation will be used for training sessions, vendor subsidies and sales assistance and it will be spearheaded by the Malaysia Digital Economy Corporation along with selected e-commerce platforms.
The government, in collaboration with private companies, will be running a “Shop Malaysia Online” campaign with a RM70 million fund, where promotional codes and various discount vouchers will be provided through the e-commerce platform,” said Prime Minister Muhyiddin Yassin.
Consumer behaviour influences e-commerce demand
Studies suggest that the behaviour of consumers in Malaysia influences e-commerce demand.
Customers’ purchasing behaviour can be attributed to the lack of availability of products and services in stores, making customers depend on e-commerce platforms for their shopping.
A survey by the Department of Statistics Malaysia found that average household spending fell from RM6,137 to RM2,813 (a drop of 54%).
This can be attributed to the pandemic creating uncertainty about job security and income as well as a lack of options to spend disposable income.
One survey also showed that Malaysians are shifting to online shopping. In response to the question, “Have you been purchasing more frequently online?” 60% of respondents said they have been making more purchases online compared with pre-Covid-19 levels. The most popular online grocery stores include Tesco Online and Mydin Online.
Malaysians are more focused on stocking up on essentials, according to a survey on consumer purchasing behaviour.
The survey found consumers are primarily buying groceries (97%), personal hygiene items (91%) and preventive care items such as face masks, hand sanitisers and disinfectant.
According to a Nielsen study, sales of hand sanitisers in Malaysia hit almost RM1 million in the week ended Jan 26, more than 800% above the weekly average.
Overseas, especially in China, more goods are being sold via online influencers, or key opinion leaders (KOLs), via social selling, where goods are touted via social media.
Top influencers in China sell out millions of dollars of products, ranging from lipstick to rice cookers to cars, in a matter of minutes.
Anything can be sold online, apparently, with a rocket launch service sold online via auction in China for US$5.6 million. Entertainment meets e-commerce live, starting a new trend for the future of online selling.
Covid-19 can have a significant impact on e-commerce, especially the buying behaviour of Malaysians. People are more inclined to stock up on essential items and health-related products.
But, with the reopening of businesses under the Recovery MCO, people are starting to buy from physical stores again, even though most are still cautious and try to avoid close contact with others.
In the mid to long term, there will be an inevitable shift to e-commerce with social selling helping to reduce the distance and online disconnect. The pandemic and need for online interaction has accelerated the online shopping trend.