Levelling Up the Logistics Strategy for SMEs in Malaysia
Join the FedEx-SME Association webinar on 23 February 2022
FedEx Express Malaysia
As we are rapidly approaching the second anniversary of the COVID-19 pandemic, let’s take stock of how much the business world has changed in the last two years.
When the Movement Control Order came into effect on 18 March 2020, most people were confined to their homes and had little choice but to go online to get what they needed, from their daily essentials to their entertainment needs. The millions of Malaysians who had suddenly become online consumers triggered exponential growth in digital commerce and retailers that were already operating on e-commerce platforms found their online businesses booming.
This rapid e-commerce expansion was unprecedented and unexpected. Analysts in the pre-COVID crisis-era estimated that this shift into a dominant e-commerce environment would normally have taken more than a decade to reach the point where we are now. Global management consultant firm McKinsey & Company supports this view, stating in their 2021 survey ‘US Consumer Sentiment and Behaviors during the Coronavirus Crisis’, that 10 years of e-commerce growth had been compressed into a mere 3 months in 2020.
Almost two years later, this growth shows no signs of abating as it has readily become part of the new norm. In FedEx’s white paper “E-commerce Megatrends to Watch”, released in December 2021 by FedEx Express, it was stated that the global e-commerce market is expected to grow at 47% globally in the next five years, with Asia’s e-commerce growth pegged at 51%. Malaysia followed a similar trajectory, reporting an increase in e-commerce revenue by 37% in 2020. For 2021, the Department of Statistics Malaysia reported a 23.1% year-on-year growth in e-commerce in the first nine months of 2021, showing that this trend is here to stay. The market is expected to reach $12.6 billion by 2024, increasing at a Compound Annual Growth Rate of 14.3 percent between 2020 and 2024. (Source: Malaysia Country Guide, International Trade Administration, 2021).
Malaysian businesses and consumers alike have had to adapt quickly to the new e-commerce norm. Now, any playbook for the coming post-COVID era would necessarily consist a reimagination of new frontiers for e-commerce and identification of new digital trends that have emerged from the pandemic era. Malaysian Small and Medium-sized Enterprises (SMEs), especially those in the retail space, should be aware of these for their long-term strategies so they can fully capitalize on the e-commerce market.
Revolutionizing digital space
The changes in consumer behaviour in the wake of the COVID-19 pandemic are quite profound, opening up new possibilities for even the smallest Malaysian SMEs to compete on the global stage.
The first such digital trend is that of customers being extremely digitally savvy. Malaysia already has the highest number of online buyers in the region, at 88% of the population, above the regional average of 78%. This was estimated to rise to 90% at the end of 2021, according to the SYNC Southeast Asia report conducted by Facebook and global management consulting firm Bain & Company. Malaysia also enjoys the highest internet penetration rates in Southeast Asia and the proliferation of smartphones among the population, enabling 80% of Malaysians to shop online at least twice a week.
Complementing the above trend is the move towards convenience. The contemporary Malaysian consumer expects online shopping to be a breeze, from browsing to purchase, payment and then delivery. Adding to this convenience factor is that major e-commerce platforms in Malaysia have reduced their delivery times down to within a week anywhere in the country. This also applies to customers in other countries who purchase from Malaysian sites – they too do not want to wait too long for their item to arrive.
Businesses ought to take advantage of these trends by connecting with customers via business-to-business (B2B) e-commerce platforms and selling products online both domestically and internationally. Many Malaysian SMEs weathered the pandemic by going online, but despite that, many more are still struggling with their online presence. Logistics service providers offering improved cross-border logistics, broader network coverage, and ease of connectivity can support the increasing penetration of e-commerce players into the Malaysian digital sphere.
One example of what FedEx is doing to enhance convenience is our strategic collaborations with 23 leading e-commerce players in the APAC region, whereby they are integrated into the FedEx Compatible system, enabling retailers to ship directly from their platform. Collaborations such as this have helped these e-commerce platforms to modernise their supply chains.
Cross-border e-commerce accounted for approximately 40% of Malaysian e-commerce transactions in 2021. However, many SMEs continue to face problems in the export process due to issues with export shipping documentation, tax structures, and the lack of a reliable shipping affiliate. Here, FedEx offers tools such as the Global Trade Manager which completes this logistics chain by assisting shippers with duty and tax estimations, document preparation, and regulatory information. Other tools offered by FedEx include cross-border e-commerce solutions like FedEx® International Connect Plus (FICP) and FedEx® Delivery Manager International, giving both buyer and seller convenience and oversight on their shipments.
This acceleration in e-commerce is without a doubt a watershed moment for the century. Businesses have had to adapt quickly to consumer demands and the new e-commerce driven ecosystem. As e-commerce is essentially remote selling, logistics is the backbone of this new ecosystem and is already playing a greater role as e-commerce expands.
Further information and discussion on the changing role of logistics in the e-commerce boom will be available during the FedEx-SME Association webinar titled ‘Levelling Up the Logistics Strategy for SMEs in Malaysia’, to be held on 23 February 2022: