This article first appeared in Forum, The Edge Malaysia Weekly on May 25, 2020 - May 31, 2020

It is highly unlikely that a Malaysian small and medium enterprise (SME) today would be unaware of the benefits of taking its business online. Gone are the days when “going online” meant merely launching a website.

According to the “e-Conomy Southeast Asia 2019” report by Google, Temasek and Bain & Co, the Southeast Asian e-commerce market is projected to be worth at least US$102 billion (RM443.3 billion) by 2025. While similar industry reports have shown that Malaysia’s e-commerce market has tripled in size since 2015, exceeding US$3 billion in 2019, many Malaysian SMEs are still not tapping into the full power of digitisation.

The recent e-Dagang Expo (eDX) hosted by the Malaysian Digital Economy Corporation (MDEC), with the support of the Ministry of Communications and Multimedia, underscored the importance of long-term digitisation. The five-day virtual expo also provided a structured approach for entrepreneurs and SMEs to accelerate e-commerce adoption through its Go-eCommerce programmes.

Adoption may have been the first step, but the time has come for SMEs to realise the full potential that e-commerce has to offer.

Long-term shifts

Two months of unprecedented global lockdowns have drastically changed consumer behaviour. While many consumers have shopped online before, the frequency of usage increased substantially during the lockdown period.

This habitualisation of making purchases online is the game changer for e-commerce, even if the change continues to create existentialist dilemmas for brick-and-mortar businesses. To illustrate, after two months of being shut down, a restaurant may question the need to even have inefficient dining spaces. With robust delivery and some clever marketing, a restaurant may only need to operate and manage just a kitchen.

Becoming ‘online-first’

As SMEs all over the nation start pondering these questions, they will realise a fundamental need to change their business to a truly online one. To make that leap into becoming an “online-first” business requires a reimagining of the business model and how the company can earn money. It also requires a transformation in products and services, marketing, distribution, packaging, customer service and operations.

The immediate benefit of embracing the online channel is an increase in reach. It is a well-known fact that restaurants offering delivery services can reach a larger catchment population than if they operate from a single outlet. Retailers can access customers anywhere in the world instead of just relying on a network of physical stores.

Going online can transform a local retailer with five stores in Kuala Lumpur that has a potential reach of seven million customers into a global exporter with zero stores and seven billion latent reach instead. Just implementing an end-to-end e-commerce strategy can turn thousands of SMEs into advanced exporters.

As for Malaysian SMEs that are in the B2B (business-to-business) space, they tend to be a little further ahead of the curve in terms of their e-commerce mastery. These players have a greater imperative to go global because the domestic market would not be enough to achieve economies of scale.

Meanwhile, for SMEs in the B2C (business-to-consumer) space, exporting is a daunting prospect.

B2C exporters currently maintain a network of in-country importers — distributors and wholesalers. Leaving aside the legal, logistics and compliance headaches, margins are often compressed to accommodate extra players. Necessary minimum order quantities (MOQs) make it harder to strike deals and, ultimately, the cost and uncertainty of exporting can increase a company’s risk profile.

Stepping stone to e-commerce export

The advent of giant e-commerce marketplaces, such as Amazon, eBay, Rakuten, Alibaba, Flipkart, Tmall, JD.com and Lazada, has made it easier than ever to export B2C products around the world. Leveraging these platforms creates many benefits. Primarily, marketing and customer acquisition costs will be considerably lower. In fact, the cost of establishing trust between buyer and seller is reduced and positive user reviews can incentivise additional sales.

Marketplaces operate round the clock and remove the headache of managing infrastructure downtimes. For more niche products, focused merchant platforms such as Etsy, Newegg, Wayfair, Wish and Asos are excellent options to consider. For many SMEs, however, just being on Amazon, eBay, Alibaba and Rakuten will deliver a large and lucrative audience of B2C customers globally.

To facilitate cross-border e-commerce, the MDEC Go-eCommerce initiative also provides various programmes for SMEs and micro-SMEs to extend their reach into lucrative markets, enhance online marketing capabilities and strengthen their supply chains.

Data-driven insights are key to brand loyalty

Despite the ease and benefits that come from using these online marketplaces, SMEs will need to employ their own performance maximisation strategies. While the platforms are there to provide ease of doing business, deliver a larger reach and manage fulfilment, they are also openly supportive of the competition that operates on them.

Executives will need to track and refine web analytics, optimise user reviews, trace customer net promoter score (NPS) and conduct constant A/B testing for all digital marketing spend. SMEs will also need to convince customers that their products are high quality, reliable, safe and sustainably made. Branding, packaging and good customer service are important factors that cannot be overlooked. After all, in the age of Facebook and Instagram, a solid social media strategy that seamlessly ties in with the entire e-commerce stack is crucial.

Long-term growth drivers

In 2020, Malaysian SMEs have a unique opportunity to capitalise on the sea change in consumer behaviour around the world. However, just building an online store on the website is not enough; companies will need to re-evaluate their business model and transform into “online-first” companies.

The easiest and most expedient step to getting started would be to set up an online store on Shopee, Lazada, OURSHOP.com by AirAsia, Blibli, Amazon, eBay and Alibaba. Additionally, SMEs should invest in training their executives on e-commerce performance management and take advantage of the various programmes and incentives offered by the government via agencies such as MDEC, SME Corporation and the Malaysia External Trade Development Corporation (Matrade).

Multi-stakeholder collaborations between the government, public and private sectors, industry leaders and e-commerce partners are necessary as well since they can unlock inclusive growth opportunities and drive forward the digital economy for the nation. As is, MDEC’s Go-eCommerce programmes will help facilitate the digitisation journey for Malaysian SMEs.

Datuk Ng Wan Peng is chief operating officer of the Malaysian Digital Economy Corporation

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