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News & Events

[ 02-06-2016 ]
E-commerce: a new horizon

The future is digital, and if small businesses don’t want to get left behind, they must get on the digital bandwagon and look to e-commerce as an avenue for innovation and growth.

The fact that the Multimedia Development Corporation (MDEC) has formally been renamed the Malaysia Digital Economy Corporation from April 11, suggests that e-commerce is seen as one of the key engines of growth for the country in the coming years.

E-commerce is on its way to becoming an important economic sector, with more and more enterprises adopting this new business model. It also helps that e-commerce seems somewhat impervious to recession — promotional activities via e-commerce seem to be able to drive consumers to continue buying even during economic downturns.

There is ample room for e-commerce in Malaysia to improve and grow. The sector contributes only about 5.4% to the GDP, compared to 35% in the US, 21% in China, and 14% in Taiwan. It’s estimated that currently about 10% of Malaysian SMEs are involved in e-commerce.

Contrast that to the World Bank Report which says that the penetration rate of mobile devices in Malaysia is 140%. Meaning: many individuals own more than one mobile device.

Many of us would use mobiles or tablets to pay bills, shop, book a taxi and many other things. The advancement of ICT has, without doubt, changed the lifestyle and consumer behaviour of Malaysians.

Nonetheless, for many SMEs, especially those in semi-urban and rural areas, the use of ICT is low, its adoption slow. In addition, the level of ICT skills possessed by SME owners and employees is also poor. This may prevent them from exploiting the new digital business opportunities.

The barriers in adopting e-commerce are real — it requires new investments, it’s technical, and managing ICT functions require new skills. It’s also vital that businesses know how to integrate e-commerce into their existing business operations in ways that add value.

Having limited resources, SMEs may be hesitant to adopt e-commerce.

Assistance and incentives from the Government are essential to resolve these issues. So far, several programmes have been put in place to assist SMEs to venture into the digital economy. At the federal level, Matrade has introduced e-Trade to encourage SMEs to participate in international e-marketplaces, with successful applicants given incentives and training.

At the state level, the Selangor government has established the Selangor Information Technology and E-commerce Council (Sitec), under the secretariat of Invest Selangor, to develop the state as a regional trading hub for e-commerce and to uplift the startup eco-system. Sitec has introduced several programmes to assist SMEs in the state to embrace e-commerce and to widen their market. These initiatives include the Selangor E-commerce Class 100, Selangor Online 100, and Selangor Apps 100.

The successful e-commerce scene in China can serve as a model for Malaysia. There, e-commerce is utilised as an important strategy for enhancing SME competency and promoting industrial upgrade. More and more enterprises and individuals are joining e-commerce platforms, including farmers, to generate income.

Although it’s new and require some investment, e-commerce really is an affordable platform for expanding your business. SMEs can benefit from the low transaction and operating costs. In addition, the borderless world provides a good platform for SMEs to export their products and services at minimal cost.

In the past decade, we have witnessed the increasing integration of global and regional economies. A number of major e-commerce marketplaces are eyeing the potential business opportunities offered by the Asean Economic Community (AEC). Local SMEs should tap the opportunities and make good use of their comparative advantages to gain a foothold in the AEC.

No doubt, there is room for improvement in the Malaysian e-commerce scene, including in logistics to enable efficient delivery. Also, the O2O (online-to-offline) model has yet to be fully developed by local e-commerce players.

The integration of online and offline, which allows consumers to pick the products or services online and purchase them offline, would be one of the key trends in the near future.

It’s time for SMEs to take a bold step towards e-commerce to avoid being left behind in today’s fast-changing and highly competitive business environment.

Michael Kang is the national president of the SME Association of Malaysia.