Being here, there and everywhere it is omnipotent. It is more than just geeky gadgetry.
To the urbane populace, it is a culture in itself, so incandescently encased in digital package with which one goes shopping from the comfort of one’s home.
Here it is – e-commerce, where not your legs, but your fingers take you shopping.
An employee in a small online company fulfills orders from a customer, a housewife shops for kitchen utensils online during her free time, and a businessman books a last minute airline ticket home; all these pertains to the e-commerce industry.
It is wonder that one could shop by merely pushing buttons on the keypad, while a purchase order clerk attends to the order at the online retail store which could be located across the other end of the globe.
With the rapid growth of technology since the past decades, e-commerce has grown to become a part and parcel of the modern shopper, who are largely from the Gen-Y cohort.
Global market research firm Nielson Global Survey (Nielson) in its latest statistical report of the e-commerce industry, noted that the millennial generation are gregarious e-commerce shoppers as it is this segment of the world population that has grown up in the digital era.
According to the report: “The overall e-commerce industry, is a trillion dollar industry and is growing bigger by each day.”
Growth estimates from Nielson’s eMarketer states that business-to-consumer (B2C) e-commerce sales worldwide will reach US$1.5 trillion in 2014, increasing nearly 20 per cent over 2013.
For the average consumer, the e-commerce offers a key feature that most of us look for these days – convenience.
Reuters in a study said scientists have discovered that modern living is driven by e-mail, text messages and the need to be available 24 hours a day. In fast-growing economies, people feel the need to do as much as possible, in a day.
Furthermore, with the increase of affordable smart devices and the ease of going online, consumers’ expectations and demands have gone beyond what experts have predicted a decade ago.
In fact, now, analysts and industry experts say consumers are currently more sophisticated in their buying behaviour.
The Kearney Global Consumer Institute (ATKearney) points out in the “2013 Global Retail E-Commerce Index’ Report” that consumers in both developed and developing markets do their homework before buying something online, studying product features, pricing, shipping options and retail return policies.
“They gather information from stores and websites and solicit friends’ opinions through social media and blogs,” says the report.
The president of Nielson’s Strategic Initiatives, John Burbank, says: “The lightning-fast pace of change in the digital landscape has ushered in a consumer mindset that is both adventurous and exploratory when it comes to online shopping.
“Consumers everywhere want a good product at a good price, and the seemingly limitless options available in a virtual environment provides new opportunities for both merchants and consumers.”
According to the market survey agency, spending intentions for each has risen at a double-digit or near double-digit percentage-point rates since 2011, underlining the growing confidence of consumers towards online shopping.
“Online buying rates in Asia-Pacific are the highest of any region – so high, that buying rates exceed browsing rates for more than half (14) of the categories. Asia is the furthest down the e-commerce maturity curve. In Asia-Pacific, tech-savvy consumers have already embraced the convenience of online shopping.”
Riding on the rapid rise of e-commerce and the increasing adaptability of the digital economy in Asia, China’s home-grown Alibaba.com made headlines worldwide and while debuting on the New York Stock Exchange, its market value surged to US$231 billion.
Reuters reports that Alibaba.com’s market value has exceeded the combined market capitalisations of the US’ leading e-commerce companies which are Amazon and eBay. Alibaba.com, which operates China’s Taobao and online retail site Tmall.com, has churned US3.7 billion earnings in the 12 months ended March 31, 2014, according to Reuters.
Smack on the trail of Alibaba’s listing, German based Rocket Internet, a leading e-commerce ventures incubator, is also on the threshold of listing its stocks. Late last month, it announced that it is on its way to listing on the Frankfurt Stock Exchange. The rise in e-commerce companies underlines its growing importance in the global market driven by the growing adaptability of consumers towards online commerce.
In the Southeast Asia region, Nielson in a separate report says: “The growth of connected device ownership across Southeast Asia is laying the foundation for a booming online retail sector, with the number of consumers in the region making online purchases spiking in numbers significantly in the past two years.”
It added, Malaysians’ online purchase intent is also high, with the country ranking second globally for tours and hotel reservations and third globally for intention to purchase airline tickets and event tickets online.
Highlighting the importance of e-commerce, MdeC chief executive officer (CEO) Datuk Yasmin Mahmood was quoted by a business news portal as saying that the e-commerce industry is expected to contribute RM31 billion to the country’s gross domestic product by 2020. He was also quoted as saying, since 2005, the e-commerce industry has risen and is now the second largest industry contributing to Malaysia’s GDP.
To boost the e-commerce and encourage online buying, Nielson says, while some shoppers treasure convenience and are less risk-averse, others need research and reassurance before making a purchase.
“Still others are bargain hunters, always on the hunt for a good deal. And then there are the sceptics. For these cynical shoppers, overcoming negative online perceptions can spell the difference between a doubter and a devotee.
“Regardless of shopper classification, when it comes to shopping online for consumable products, the experience must be convenient, cost-effective and safe. Companies that address these critical components will be best-positioned for online success,” it pointed out.
With that, BizHive Weekly takes a look at two major online retailers who are making waves in Malaysia’s e-commerce, and explores their respective marketing strategies and ways to retain and grow their market share.
Selling fashion online
Leading fashion online retail site Zalora Malaysia leverages on proper funding, excellent operations, strong relationships with international brands and an ambitious marketing strategy.
“These are the key factors to becoming a premier online fashion commerce website,” says company director Luca Barberies.
Part of Zalora Group which is under the Rocket Internet umbrella, the group, which has presence in 10 countries across Asia Pacific, has made itself a prime example of a business that implements aggressive marketing and branding strategies.
From advertisements on Facebook and Youtube to spreading its reputation as a quality fashion retail provider via word-of-mouth, Zalora Group has pushed its brand at the forefront of the online retail industry across Southeast Asia.
Established since 2012 and with a goal to become the leading online fashion destination in Southeast Asia, Zalora has successfully gained tremendous traction and growth within a short amount of time.
“Growth has been astonishing, we have a steady 100 per cent year-on-year revenue growth for Malaysia, with over 600 brands working with us and more than one million users who engage with Zalora through email, social media, website and so on,” Barberies said in an email interview with BizHive Weekly.
Interestingly, Sarawak represents its fourth largest market in Malaysia, after Klang Valley, Penang and Johor, he said.
“Market percentages fluctuate according to seasonality but it’s safe to say that 10 to 15 per cent of our business in Malaysia comes from Sarawak,” Barberies revealed.
He pointed out that spending power in Malaysia is quite high compared to the rest of Southeast Asia but it still has room to grow.
Barberies says, this has made Malaysia a very interesting market for e-commerce, because it is halfway between doing online commerce in Singapore and in Indonesia or Vietnam, which are the two extremes in the region.
“Confidence for online shopping is still extremely low compared to US, Europe and China, where about 10 per cent of retail trade happens online.
“In Southeast Asia, including Malaysia, this number is one per cent. I expect this number to grow steadily in the next years, reaching four to five per cent in three to five years, fuelling the Southeast Asian region’s e-commerce growth to new heights,” Barberies forecasted.
He also noted that there is growing opportunities for the e-commerce industry in the fast developing Southeast Asian region.
“If you combine the increase of this percentage with the increase in spending powers of most of the regions in Southeast Asia you can quickly realise how local e-commerce companies are well positioned to become the future giants of retail trade.”
Milestones achieved
Some of the “milestone moments” in Zalora’s young life include receiving US$100 million funding round – the largest funding for a tech start-up in Southeast Asia. This is to scale-up its operations in the region.
Also, early last year, Zalora had achieved its first one millionth order delivered for Southeast Asia. After leveraging on various reputable international and local brands, the company had successfully launched its own private lable, Ezra, late last year.
Barberies also highlighted, late last year, famed London street brand, River Island entered Southeast Asia exclusively via Zalora and in November 2013, the company received another US$112 million funding round.
Aside from that, he noted, so far this year, Zalora has managed to launch Mango, New Look, American Apparel, Material Girl, Sephora, Ray Ban and many more.
More recently, Zalora had launched its new e-commerce platform on its website called “Marketplace” which is specially designed to help emerging fashion businesses such as blogshops, boutiques and upcoming designers to showcase their designs and products to the whole of Malaysia.
For any kind of business or industry, reaching a fast level of growth requires effort particularly in retaining its reputation and confidence level of its consumers.
It is no different for Zalora as it upholds top-level customer care and maximum cyber security for online transactions to ensure their customers remain confident of their services.
At Zalora, Barberies pointed out that credit card transactions are done through the state-of-the art security protocols used by all main international e-commerce groups in the US and Europe.
“Our long time partner has always been Cybersource, global leader in online transaction frauds detection and we have a dedicated team dealing with this issue.
“If the customer still doesn’t feel safe about online payment, we always have the possibility of paying with cash on delivery. Once you receive your box you can pay by cash to the rider,” he assured.
Currently about 30 per cent of Zalora’s orders in Malaysia are done with “Cash on Delivery” nationwide, which shows that people are apprehensive when it comes to buying online with credit cards, Barberies noted.
When asked on Zalora’s target market, he said its focus currently remains on the young digital generation, the 18 to 35 age group.
“Southeast Asia’s population is very young compared to the rest of the world, and this is one key additional factor to our expectations of very high growth rates in the coming years,” he said.
Barberies adds: “We are 100 per cent focused on fashion, our goal is to be on top of the mind of every person in Southeast Asia, when it comes to buying fashion and we are working hard to make the online shopping experience as pleasant as the offline one, with the additional convenience typical of the Internet.”
Keeping reputation as its hallmark
As the world becomes more digitalised, the online market is now teeming with e-commerce shops and services.
Like physical brick and mortar business stores, to stand out and be successful, a business has to spur its potential customers’ confidence by building a “good reputation” for itself.
ShaShinki, a dedicated homebred online camera retailer seems to have taken a cue from Amazon.com founder Jeff Bezos who stated: A brand is like the reputation of a person and to earn reputation, one has to try to do hard things well.
ShaShinKi started out from scratch, established by Sibu-born and Miri-raised Dr Koh Kho King. The company began as an outcrop of his passion and hobby in photography.
However, today ShaShinKi stands as a reputable professional online camera retailer.
Within a span of just nine years the company is well known throughout Malaysia for its quality and personalised customer service and is trusted for providing genuine photography-related equipment and gadgets of high quality.
From just a stock of hundred products, ShaShinKi now offers more than 15,000 active products online.
Some of its many customers include corporate customers and professional photographers as well as average consumers seeking a wider option in compact digital cameras. ShaShinKi’s customers hail from Sarawak, Sabah, Selangor, and Kuala Lumpur.
According to Koh, ShaShinKi commenced as a pure “online only” business, with no physical retail store for customers to walk in. Till today, ShaShinKi is still an online retail shop.
“Over the years, ShaShinKi has closed over 90,000 orders, from over 50,000 registered customers. Over 90 per cent ShaShinKi customers are from Malaysia, but ShaShinKi also serves buyers from US, UK, Europe, Arab Saudi, our neighbouring countries,” says this PhD holder in marine engineering.
“Being a pure online shop, ShaShinKi has over 5,000 unique visitors hitting ShaShinKi’s website daily,” says Koh.
Koh is a photo enthusiast himself. His love for photography began in 2000 and he still actively enjoys his hobby while delving with cameras and camera equipment as a businessman.
In 2001, he started the first and currently largest online photography forum in Malaysia, PhotoMalaysia (www.photomalaysia.com), which now serves as a place for photographers around Malaysia to share their work and learn from each other. From there, he branched out into the online business.
In 2005, Koh was awarded a scholarship by the Japanese government to further his study in marine engineering in Hiroshima, Japan.
He explained, amused by the ease of online shopping in Japan, he started ShaShinKi.com in the same year, in Japan, while he was reading for his PhD. That’s how the name ShaShinKi came to be, as it is a direct translation from the Japanese language which combines ‘shashin’, which means photo and ‘ki’ which means machine or in other words; camera.
In a light quip, Koh says: “No, I didn’t follow in the footsteps of Bill Gates or Steve Job or Mark Zuckerberg to quit from school, but it was tough having to concentrate on the PhD research and running ShaShinKi’s business at the same time.”
Thanks to Lydia (his wife and general manager of ShaShinKi) and Foon Ngok (his sister-in-law), the ShaShinKi business took root and is running and growing steadily.
Says Koh, one of the most important part of running an online shop is to gain the trust from your customers.”
Throughout the years, ShaShinKi has managed to learn the intricate art of gaining trust and confidence from customers around Malaysia (including our neighbouring countries such as Singapore, Brunei, Thailand) where buyers are confident enough to remit cash in tens of thousands to ShaShinKi and wait for the products to be shipped to their doorsteps.
“The largest single order that ShaShinKi has transacted is worth over RM100,000, by a customer that we have never met before,” he enthused.
Being a tech-savvy person, Koh uses his knowledge in photography and camera equipment to advise his customers on the products which must be personally endorsed by strict scrutiny.
ShaShinKi also offers photography accessories that are difficult to obtain in physical stores. Koh assured, the company adheres to strict price transparency as prices will be stated clearly on the online shop with no hidden cost during and throughout the purchasing process.
“ShaShinKi keeps its overheads to the minimum, and offers products at the best possible price to its customers.
“Customers pay for what they see, and get what they purchased. This makes shopping at ShaShinKi worry-free and risk-free,” Koh assured.
Dealing with products such as camera equipment which are not only fragile but costly as well, BizHive Weekly asked, how does ShaShinKi assure customers that the products will reach them, intact?
“Extra care,” says Koh, adding, “ShaShinKi packs every parcel with bubble wrap and bubble wrap, then extra box.
“We want to ensure that our customers always receive the products in brand new condition that includes the original packaging box that comes with it as well.
“That is why we use bubble wrap for the actual product, then bubble wrap for the original packaging box of the product, then extra box to pack the original packaging box inside.
“We do not save on bubbles. There are over a thousand metres length of bubble wrap in ShaShinKi’s office ready to be used.”
“We have customers ‘complaining’ that it took them great effort and time to ‘dig’ into the bubble that we wrapped,” he quips.
ShaShinKi’s reputation and high customer confidence comes from the company’s customer service even during the delivery process, although logistics is not exclusively by the company itself.
“Every parcel shipped by ShaShinKi are fully insured. Buyers bare zero and absolutely no responsibility if a parcel is lost or damaged during shipping. If such incident happens, ShaShinKi will send a new replacement unit to buyers at our own cost.
“ShaShinKi products range from RM1 to over RM100,000, hence we always ensure that those products reach our customer’s hand safely.”
On the supplier’s side, Koh says, ShaShinKi always and only works with reputable suppliers who can ensure that the products it receives are in brand new condition.
“If we detect any damages on the products we receive, we will immediately return them and demand a full exchange. We take zero compromise on product’s condition,” he stressed.
The company’s reputation also comes from its personalised customer service. Koh said ShaShinKi’s staffs are well-trained be familiar with the technical part of the camera equipment.
“When a customer calls ShaShinKi office, they won’t be greeted by a cold answering machine. All of ShaShinKi’s staff are trained to serve customers at the best possible way.
“Customers can even call Koh’s direct mobile phone which is published online at ShaShinKi’s webpage for any technical enquiry, or advice on the suitable equipment to be purchased.”
As ShaShinKi’s customers have ballooned over the years and its products have increased to 15,000 products (and growing daily), Koh noted, the shop does face challenges especially in terms of keeping all info updated.
However, he said, ShaShinKi currently has seven full time staff running the daily operations that include product uploading and up keeping.
ShaShinKi’s goal is to become the professional source and reference of photographers in Malaysia, where, when people talk about camera, they will think of ShaShinKi.
“After serving nearly nine years as a pure online camera shop, ShaShinKi plan to open up its first physical store in 2016,” Koh said.
According to him, Internet penetration in Malaysia has reached over 60 per cent in 2013, and the number is still growing. People are spending more and more of their time in front of the computer and computers are often connected to the Internet.
“Smart phones that are connected to the Internet at all time, which lead to the growth of online shopping. If 1996 is an ‘infant age’ for online shopping in Malaysia, now it has reached its teenage stage.
“There are still lots of room for Internet business in Malaysia to grow,” he admits.
From his nine years in the e-commerce and online retail industry, Koh says: “Work very hard. Your time is your modal. Invest your time in things that can help build up your business and spend your time promoting your business, building your digital store front, and communicate with your customers.”
Safeguarding the consumers’ digital purchasing trails
According to Internet World Stats, as at December 31, 2013, there are more than two billion Internet users and MasterCard Worldwide viewed that this number could increase by 35 per cent.
It noted, the digital growth in Asean markets, the smartphone market has grown three-folds and Malaysia has been viewed as one of the fastest moving countries on the digital growth index, with its score under the ‘innovation’ pillar increasing by 42 per cent from 2008 to 2013.
With that, more and more companies are merging their businesses with the digital platform. Various government organisations including Malaysia External Trade Development Corporation (Matrade), encourages ventures into e-commerce particularly for small and medium enterprises as the digital marketplace offers a cheaper alternative to physical retail presence.
However, with the influx of online shops, to protect Malaysia’s consumers against fraud and to ensure online merchants, shops and suppliers conduct their businesses legally, the Government introduced a new set of regulations mid last year.
The regulations; ‘Consumer protection (Electronic Trade Transactions) Regulations 2012’ highlights various points businesses with an online presence or businesses running online, should adhere to.
These regulations also include online market place operators as well as businesses or sellers trading on online marketplace.
Some of the points highlighted in the newly enforced regulations include proper and clear disclosure of information in regards to the business’ name, purpose, registration number (if applicable), contact details of the online business’ operator, description of the goods and services, prices, method of payment, terms and conditions, as well as estimated time of delivery of goods or services to buyers.
A quick check on several major e-commerce sites that provides and/or delivers its products and services to Malaysia shows that most have adhered to this new regulations.
Other than that, on a global scale, Nielson highlighted in a recent research, credit card security remains a key concern for consumers across the region with five of the six Southeast Asia markets ranking above the global average with respect to their concern around providing credit card information online.
“Filipinos are the most cautious when it comes to paying online by credit card (67 per cent do not trust giving their credit card information online), followed by Thais (62 per cent), Indonesians (60 per cent), Vietnamese (55 per cent), Malaysians (52 per cent) and Singaporeans (41 per cent), compared to 49 per cent of consumers globally,” it explained.
In order to gain the trust of consumers, Nielson said, online retailers must look for opportunities to provide reassurances around online payment security.
Financial services company MasterCard WorldWide said, over the past five years, it has made many security innovations and initiatives.
“We’re continuing to pioneer security technologies around the world to make the future of your payment transactions even more secure,” it said.
Among some of the innovations it has developed over the past decade include the usage of MasterCard SecureCode in 2002, the introduction of biometric debit EMV cards which utilises fingerprint technology, and many more.
Currently, it says, it is developing a physical biometrics security payment system which involves facial recognition, voice recognition and many more.
More recently, it had launched a global tool called ‘SafetyNet’ to reduce the risk of cyber hacking of banks and processors. The new tool is designed to use MasterCard’s global network to identify potential attacks before they start and in some cases, before the bank or processor is even aware.
“Around the world, consumers put safety and security of their payments as a key priority when shopping, which is why MasterCard has been working to ensure payments and the data connected to payments are safe, wherever you are.
“We do this through a number of tools, in a multi-layer approach that works in partnership with issuers, acquirers, retailers and consumers,” MasterCard said in a press statement.
Besides innovations by MasterCard, digital financial services have also upped their security services while more innovative and more secure digital payments are being introduced to the market regularly to ensure the safety of consumers’ spending online.