Monday, August 10

The changing e-commerce landscape


With a smartphone in almost every pocket of the developed world, it’s safe to say that the way we shop and do business has changed drastically.

Gone are the days where we rush to malls for year-end discounts – nowadays, most of us are eagerly awaiting by our phones or laptops waiting for the right time to be the first to snap up huge discount from the plethora of e-commerce platforms out there.

Malaysia is no exception to this but as we dive into the e-commerce era how are things around us going to change?

Well one thing for certain is that brands and companies out there will now have to seriously consider an online presence if they want to continue keeping afloat in our ever competitive consumer industry.

More brands moving to e-commerce platforms

If you think online shopping is mostly just about electronic and fashion, then you might not have taken a recent gander at our local e-commerce platforms who have expanded their offerings greatly.

Nowadays, a multitude of brands have jumped onto the online shopping craze – giving us all the convenience of being able to purchase almost anything and everything we need with a few taps on our smart phones.

From grocery stores like Aeon and Tesco to hardware supply stores like Mr DIY, as long as you live in an area within delivery routes of postal delivery services, you might never have to step out from your homes again.

One particularly successful brand that has flourished in the e-commerce space is Nestle (Malaysia) Bhd (Nestle) who join forces with online marketplace Shopee Malaysia back in March 2017.

With Nestle products so easily accessible in any corner store around Malaysia, you’d think that the brand’s online sales wouldn’t have been so significant, but this is far from the case as the group has announced that their sales have double on Shopee Malaysia within a year of their partnership.

And the solid and steady sales of Nestle products on the online marketplace’s grocery segment has also earned the group the title of Seller of the Year at the Shopee Seller Awards 2018.

In a statement, head of e-commerce and Nescafé Dolce Gusto, Nestle Malaysia, Joshua Zhu explained that the feat was achieved through continuous participation in all of Shopee campaigns that allowed Nestle to be able to reach new segments of consumers and build a base of loyal online shopper.

“We are very proud to be one of the first adopters of e-commerce amongst the food and beverage players in Malaysia.

“Our progressive business approach is a demonstration of our foresight and versatility in embracing technology to enable healthier and happier lives for Malaysian individuals and families,” said Zhu.

To-date, Nestlé has more than 700 unique products available on the e-commerce platform including Milo, Maggi, Nescafe and Lactogrow that cater to consumers of every age group.

Nestle’s success in the e-commerce space shows potential for other fast moving consumer good (FMCG) manufacturers to thrive in the industry but food products are not the only category that has made a splash online in recent times.

Other best-selling brands seen on Shopee in 2018 during their numerous digital sale bonanzas were Samsung in phones and home appliances, Olay in skincare, Maybelline in cosmetics and Fitflop in fashion.

And in baby products, Enfa and Mamypoko reign supreme for their large sales of baby milk formula and baby diapers.

Lazada who is well known for their curation of electronic product sellers also saw baby products surging in 2018 as Pampers and MamyPoko were also on their Top Brand leader board in 2018.

“Also generating a lot of buzz among female shoppers are the Fashion, Health and Beauty categories, which grew by more than three times year-on-year (y-o-y),” added the Lazada Group in a statement.

Riding on this growth in the cosmetics markets, Lazada and several large scale beauty and skincare brands had cooperated in several successful campaigns on the online marketplace.

M.A.C cosmetics had launched limited-edition products with complimentary lipsticks and themed gifts on their debut on their platform and following their sterling success, brands like Shiseido, L’Oreal and feminine product Unilever also launched successful campaigns in 2018.

Once revered as a less trustworthy source to purchase quality products, it is surprising now to see that the top sellers on our most popular online marketplaces and platforms are being dominated by brands and products that require strict quality control to be fit for consumption or application.

Our society’s attitude towards online shopping was warmed drastically in recent years, posing as a huge opportunity for many other brands and products out there to join in on the boom.

2018: A great year for online shopping

Overall, 2018 had been a pretty successful year all around for most platforms and online market places in the ASEAN region.

According to a study conducted by the iPrice Group, online market place Lazada has managed to maintain its lead as the top platform in our e-commerce space as it commanded the largest market share of total visits of Malaysian online shoppers at 46 per cent.

“However, the Alibaba backed e-commerce received a strong challaneged from Shopee who grew its total visits on desktop and mobile web by 98 per cent between the fourth quarter of 2017 (4Q17) and 1Q18.

“By end 2018, Shopee had reduced Lazada’s lead by 62 per cent to become its closest competitor,” said head of content marketing Jeremey Chew.

Shopee and 11street came in second and third in the market share of total visits at 23 and 13 per cent respectively.

Meanwhile the most visited Malaysian based e-commerce platforms were Lelong, Hermo and Goshop. Lelong came in fourth in the ranking board and boasts and average of 5 million visitors in 2018.

Through iPrice Group’s analysis of Malaysian search patterns on Google, the group announced that Malaysians had gone through a bit of a shopping spree on particular periods such as the 11.11 Singles’ day and 12.12 sale shopping holidays, the Hari Raya sales period, and the tax holiday period where the GST become zero-rated.

“The 11.11 Singles’ Day sale garnered a bigger interest in 2018 as compared to the previous years due to increased investment by various players to promote the event.

“This was evident as players such as Lazada organised a star-studded 11.11 Super Show to promote the event. Other players also initiated various offline and online activities to get consumers shopping,” guided Chew.

The top five e-commerce platforms in Malaysia saw a decline in search interest on 9 May during the 14th general elections period and on Hari Raya when most consumers were offline to celebrate the occasion.The need for last-mile delivery services to grow

With the local e-commerce industry projected to register a 20.8 per cent growth by 2020, analysts MIDF Amanah Investment Bank Bhd (MIDF Research) and AmIvestment Bank Bhd (AmInvestment Bank) are expecting the booming e-commerce industry to drive growth for last-mile delivery companies such as Pos Malaysia Bhd (Pos Malaysia), GD Express Carrier Bhd (GDEX) and Tiong Nam Logistics Holdings Bhd (Tiong Nam).

“Consumers are attracted to online shopping due to price advantages, product range and its sheer convenience. The rapidly expanding e-commerce sector has created huge opportunities for parcel delivery service providers,” said AmInvestment Bank.

And the growth of our e-commerce scene is on the cusp of a quantum leap, driven by the Alibaba-backed Digital Free Trade Zone (DFTZ) project in KLIA Aeropolis.

“The DFTZ will serve as a regional e-fulfilment centre (virtual zone) as well as an e-commerce logistics hub (physical zone). Apart from MAHB (the landowner and developer of the KL Aeropolis), we believe local logistics players (including warehouse operators) are poised to garner a slice of the action in the DTFZ physical zone,” said the bank.

Closer to home, our state government has also hinted for the pursuit of a DFTZ of our very own at Kuching International Airport in a bid to spur the growth of the e-commerce scene in Sarawak.

While this is good news for parcel delivery players, the drastic growth of our e-commerce industry has also created a conundrum for local players as they struggle to meet the needs of the surge of orders and experience heightened competition.

Routes outside of urban areas especially are underserved as many players lack the resources and capabilities to cover the whole of Malaysia.

Due to this, many foreign logistic players have begun expanding into Malaysia in a bid to garner a slice of the growing last-mile delivery sector.

Hong Kong based logistic players Lalamove, GoGoVan and Pickup, and Singapore based Ezyhaul and Ninja Van are just few of the players that have already begun their expansion into Malaysia.

The crowding in the local space has begun leading to some intense price competition.

MIDF Research pointed out that existing last-mile delivery companies may need to revise downwards the delivery fee in order to remain competitive.

“As a result, we observed that both GDEX and Tiong Nam’s profit margin has reduced to single digit in the latest quarterly earnings (3Q18),” it said in a sector report.

While profitability might have lowered in our last-mile delivery sector, its growth will continue to be driven by the robust growth of our e-commerce industry.

Changing consumer laws

It’s a great thing to be able to buy anything you want online, but as online shopping becomes more and more common place in our society, it has also become a potential area of transaction fraud – especially in smaller or less formal online market places like social media sites.

Datuk Seri Saifuddin Nasution Ismail

To combat this, the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP) have guided that they will be reviewing the existing consumer protection laws.

Datuk Seri Saifuddin Nasution Ismail, minister of KPDNHEP said that fraud, especially those related to online business, now ranked second on the list of complaints received by the ministry and the issue could not be underestimated, especially in terms of enforcement.

“These online traders are not just those under the auspices of dominant entities like Shopee or Lazada.

“So, the definition of online sales is not just confined to a company.. it can also be an individual.. and there we have difficulty in enforcing the laws,” he told reporters after a luncheon held in conjunction with the Shopee Kongsi Fa Cai 2019 campaign on Thursday.

Although the ministry has a consumer tribunal to address consumer issues, Saifuddin attributed the downside of the enforcement to the ineffectiveness of the current laws.

“One of the shortcomings is a notice must be served physically in order for the person being complained can be charged in a tribunal case after the consumer has lodged a complaint and the ministry has investigated the matter,” he said.

Hence, he said the ministry along with legal advisers would review the existing legal clauses, while industry players could also give their views on ways to counter online business frauds.

While such frauds are more susceptible in online marketplaces, Shopee Malaysia business head Zed Li explains that the platform has a guarantee system called ‘Shopee Guarantee’ in placed to protect its consumers.

“In essence, we will hold the money from the seller until the buyer has received the products. Now that gives protection to the buyer as well.

“Actually, on top of that, if there is a dispute between the buyer and the seller, Shopee will come in and solve the problem for them,” he said, adding that Shopee would continue to work with the ministry in safeguarding consumer rights, as well as expanding the e-commerce industry.

Tackling the competitive fashion retail scene

Whether you’re reading your favourite news site, playing a mobile app or just checking up on your friends on Instagram, as an internet user, you’re bound to run into a clothing advert.

If it not the incessant notifications on your phone about a fashion sale, it’ll be the ever following ads of your favourite pieces of fashion on your web browser.

Barry Ooi

Being the pioneer consumer segment that took the e-commerce scene by storm, it’s safe to say that no one with an internet connection is in any real need for more clothing options when they’re shopping online.

With data that indicates online fashion retail growth to be four to five times higher compared to offline fashion retail, Barry Ooi, head of fashion analytics at market intelligence company Omnilytics, points out that the rapid growth in the e-commerce scene is due to the low barriers of entry in the space.

“It’s become incredibly easy to start an online fashion business. Consider the boom in the Facebook Live selling scene, it’s a low barrier to entry and touches on the biggest paradigm shift in retail now; the growing focus on convenience and meaning,” he explained.

But despite the maturity and saturation of the fashion retail industry on the whole, Ooi believes that there is still room for growth in the e-commerce space for fashion retail if players learn to capitalise on the paradigm shifts that we see in retail.

“Take the beauty industry for instance – one of the fastest growing markets – the most successful recent launches are all centred on an influencer or celebrity, which provides that “meaningful” connection between the brand and the consumer.

“The battle in online retail has moved past price wars. The consumer’s focus is now on ease, speed and meaning.

“So, while the industry may be a saturated one, growth opportunities still exist for brands that know how to leverage that connection.”

Delivering the right message

However, building that meaningful connection with your consumers is not as simple as hiring a celebrity or influencer to endorse your products.

Instead, Ooi who is also the former chief executive officer (CEO) of online boutique Twenty3, explains that meaningful connections with customers are built by delivering the right message or the right product, at the right place at the right time with the help of big data and analytics.

“Analytics in retail revolves around two key areas: consumer analysis and market analysis. In the first, you want to know everything about your customer, such that the shopping experience delivered to them becomes highly personalised.

“This includes information that we’ve been tracking for years, such as browsing history, search history, social media engagements, and location history. If you aren’t already tracking these, you absolutely should.

“Ultimately, the goal in this area is to know your customers better than they know themselves, without them having to even say a word to you,” he asserts.

But that being said, just keeping track of customers will not be enough to keep players ahead of the intense competition of that they now face.

“With increasingly sophisticated shoppers with shorter attention spans, you need to also keep track of the competition: what’s their sell-out rates, what are the best performing trends, how many pieces per SKU to order, the optimum selling prices in the market, when to discount and by how much and so on.

“Understanding your competitors allows you to adopt the strategies that have proven to work and avoid costly ones that don’t. The end goal is to deliver the right product, at the right place, at the right time.

“The market is constantly testing and experimenting with millions of products, but you do have to pay attention to the results of their testing so you can react appropriately,” Ooi explains.

Changing times, changing lives

Simply put, the fashion retail and retail industry in general has become extremely data driven. While this doesn’t really affect larger corporations who employ large teams of experienced analysts at their disposal, smaller players are feeling the pressure as many may not have the capabilities of accurately analysing their data.

“This is where a big data tool like the Omnilytics dashboard is useful, by aggregating millions of SKUs and simplifying the market analytics process, you can make accurate decisions faster than anyone else, without having to bear the cost of running those experiments yourself.

“For instance, if your audience isn’t responding to your products, Omnilytics data can show you new opportunities in new markets and the data can also help you find trends before your competitors so you can extract more margins before a price war ensues,” Ooi guides.

Looking at the future of fashion retail and retail in general, analysts believe that soon, retail will no longer be segmented into online or offline retails, instead retailers will soon be employing omni-channel retailing where they unify all channels of retail to create a single commerce experience.

“Omni-channel isn’t a new buzzword, but it’s still a concept that most retailers are only now starting to adopt, so we’ll still be seeing a lot of that in 2019-2020.

“The focus there is to create a seamless experience for the consumer when they move from online to offline, as well as to gather more data points to paint a more customised, holistic picture of your audience.”

And for the next shift in retail, Ooi guides that a frictionless shopping experience will likely be the next shift as consumers are now more likely to abandon a potential checkout if there is anything that impedes, distracts or inconveniences them during a purchase.

“The future is predictive, personalised, automated.”