Local malls are now bracing for a paradigm shift in how malls are used and defined in the country
by MARK RAO/ pic by MUHD AMIN NAHARUL
THE electronic commerce or e-commerce has continued to transform the way business and commerce are facilitated today, as the virtual space inexorably shapes both the global and domestic economies.
Estimated to generate over US$700 billion (RM2.92 trillion) in revenue globally, e-commerce is one of the fastest growing industries in the world, affecting a wide range of sectors from food and beverage (F&B) to transport.
In Malaysia, income from e-commerce transactions, namely the selling and/or buying of products online, came in at RM447.8 billion in 2017 against RM398.2 billion in 2015, growing 6% annually over the two years, according to the Department of Statistics Malaysia.
Statista, a global market and consumer data provider, has it at US$3.68 billion in terms of revenue generated by the e-commerce market in Malaysia for 2019, with average revenue per user amounting to US$184.94.
It further predicts the market to grow at a compound annual growth rate of 11.8% from 2019 to 2023, resulting in a market volume of US$5.75 billion by 2023.
This puts the virtual commerce platform on a considerable growth trajectory in the foreseeable future, creating opportunities as well as challenges for businesses and industries going forward.
Here, The Malaysian Reserve (TMR) looks at several industries to be impacted by e-commerce, for better and for worse, as the electronic marketplace gradually, but surely establishes itself as a new economic frontier for Malaysia.

There is still a place for physical restaurants as the concept of going out to enjoy a meal with family and friends has not died out
Changing Landscape for Developers
Local malls, which are already struggling with the oversupply of retail space and stagnating to declining occupancy rates, are now bracing for a paradigm shift in how malls are used and defined in the country.
E-commerce has allowed consumers to go on shopping sprees from the comfort of their homes or in-between working hours, typically at a fraction of the cost and with a wider array of choices.
Toys “R” Us, Forever 21 and GameStop Corp are among the examples of how traditional brick-and-mortar retailers have come under pressure from the growing influence of the Internet.
Institute for Democracy and Economic Affairs senior fellow Dr Carmelo Ferlito said businesses are constantly evolving, with changes arising from this evolution often beneficial for consumers.
“In the case of e-commerce, the impact very much depends on the nature of the business. In fact, you can buy toys, books and, to a certain extent, clothes online, while entertainment and F&B still requires ‘live’ interaction,” he told TMR.
He said consequently, as opposed to observing fewer retail centres being built in Malaysia, a “gradual transformation” in terms of the services provided by malls is expected, where a growing space can be imagined for entertainment.
In terms of whether rising e-commerce transactions will result in an uptick in logistics demand for which the warehouses need to support it, Ferlito said this depends on the nature of the business itself.
“In certain industries, the increasing need for speed might even bring a higher degree of investments in physical warehouses. Think about Amazon.com Inc — they have fewer bookshops, but a growing number of Amazon regional warehouses.
“Other industries are so conservative that customers keep ordering in the traditional way and they are not keen in using e-commerce platforms,” he said.
Meanwhile, Malaysia’s National Transport Policy 2019 to 2030 has also highlighted the need for the transport sector to accommodate the growing e-commerce market.
This is in view of the anticipated rise in commercial traffic fulfilling e-commerce orders and providing last-mile deliveries, as well as the higher demand for infrastructure to facilitate the movement of goods from production centres to consumers.
Infrastructure will also be needed to accommodate for last-mile deliveries from distribution centres to consumers, the longterm national blueprint highlighted.

Last month, Citibank and Lazada initiated a new e-commerce credit card intended to capitalise on the growing digital economy (Pic by Razak Ghazali)
F&B and the Virtual Space
Another sector being transformed by e-commerce is F&B, namely in how players are entering and leveraging on the market today.
Ferlito said while e-hailing platforms have partially replaced fast food, the social aspect implies that eating and drinking together still requires “hard” or physical interaction.
“Surely e-commerce has affected all businesses, in terms of opportunity. However, in segments like F&B, I believe they have some limitations as far as we attribute eating and drinking to a social feature,” he added.
Thus, there is still a place for physical restaurants as the concept of going out to enjoy a meal with family and friends, or as a rendezvous point to close a business deal, has not died out.
However, investing in a physical location and the amount associated with its construction and subsequent maintenance is a costly affair.
The strategy is often employed by mainstay F&B brands in Malaysia such as Ayamas, KFC, Domino’s Pizza, etc. However, that kind of investment is not feasible for the smaller F&B players that do not have access to that kind of capital.
Food-delivery services — their transactions of which are predominantly facilitated online — are now providing an avenue for cash-strapped or nascent F&B companies looking to secure a slice of the growing, but highly saturated pie.
Via virtual platforms such as Foodpanda and GrabFood, these companies can open one or two shops and rely on third-party delivery services to reach a secondary (if not primary) market, provided that they are equipped to handle such high-volume traffic.
Alternatively, a business can operate from a home kitchen and leverage on the delivery services to reach out to customers.
Take “dahmakan”, a food delivery start-up delivering home-cooked meals within the Klang Valley, as an example. In the case of F&B, the e-commerce space is creating more opportunities than challenges for the industry.

Boxes ready for shipping at Zalora regional distribution centre in Shah Alam, Selangor. The growth of the e-commerce industry will benefit both the plastic and paper packaging companies (TMR pic)
Transition into a Cashless Society
Malaysia is estimated to generate approximately 1% in cost savings to GDP annually by switching fully to e-payment processes — the bulk of which will be facilitated by e-wallets.
The country is especially ripe to transition into this cashless future, with mobile penetration well above 100% and overall e-wallet adoption still low at 8%.
Mobile payments charted strong growth in 2018, jumping from just below two million transactions in 2017 to over 34 million transactions the following year.
From January to August this year, a total of 1.4 million e-money transactions were facilitated, amounting to RM10.6 billion in value, according to data from Bank Negara Malaysia.
Among the leading e-wallets in Malaysia are Touch ‘n Go eWallet, Boost, GrabPay, VCash and Razer Pay.
The majority of e-wallets functions are similar to credit or debit cards in that they are linked to an individual’s bank account to facilitate payments and are protected with passwords or some form of identification.
As mobile transactions gain traction, banking groups are exploring new ways to leverage on this relatively nascent, but rapidly expanding market, especially amid a business environment of moderating growth and thinning interest margins.
Last month, Citibank Bhd and Lazada Group, a leading e-commerce platform in South-East Asia, initiated a new e-commerce credit card intended to capitalise on the growing digital economy and to secure 500,000 sign-ups across the region.
Lazada is the second leading e-commerce platform in Malaysia based on web visits, recording 18.25 million in monthly web visits as of the third quarter of this year, according to data by meta-search online platform iPrice Group.
This put the group behind only Shopee which registered 25.79 million monthly visits during the same period.
Meanwhile, the government will be offering a one-time RM30 digital stimulus to eligible Malaysians aged 18 and above earning less than RM100,000 in income a year. This is in view of increasing e-wallet adoption among the public, merchants and businesses.
Financial disruption has long been a theme for the banking industry. As such, banks need to be ahead of the curve in the transition towards a cashless society or risk losing out on the immense value inherent in the e-commerce space.

Food-delivery services are now providing an avenue for cash-strapped or nascent F&B companies
Packaging Segment
Often overlooked is the role of packaging companies in the e-commerce space as the transfer of goods purchased online would mean that the products need to be packaged before being delivered to the customers’ doorsteps.
A local industry analyst said the growth of the e-commerce industry will benefit both the plastic and paper packaging companies.
However, it is difficult to assess the growth of such activities as e-commerce cuts across a wide variety of sectors.
“Nonetheless, the increasing e-commerce demand will lead to more spending and activities which will ultimately require more packaging services,” the analyst told TMR.
Among the companies expected to benefit from the e-commerce market, both locally and globally, are plastic packaging manufacturers Scientex Bhd and Thong Guan Industries Bhd, and paper packager Master-Pack Group Bhd.
Shares in these companies have already made significant gains this year, supported by strong corporate earnings and lower raw material costs.
Continued e-commerce growth is also providing a bullish outlook for the packaging industry despite lingering global trade risks.
The type of packaging product to be used, be it BOPP (biaxially oriented polypropylene) film or corrugated paper cartons, will depend on the use-case, costs and branding purposes, not to mention environmental considerations.
Packaging companies are only one segment of the economy to benefit from the expanding e-commerce market which is quickly establishing itself as an integral part of the Malaysian and global economies.
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