Online competitiveness among SMEs delayed by digital gap, cost

Although the govt and private sector are committed to aiding SMEs’ digitalisation, a more integrated policy framework would make their support more impactful 


THE pandemic has forced the small and medium enterprises (SMEs) to embrace technology and digitalisation in reaching a wider range of customers and selling more on online platforms. 

However, the lockdowns have also revealed the digital divide and gap among these enterprises where those facing constraints were hampered from increasing their competitiveness and productivity. 

Govt should also consult with NGOs such as SME Association to find the best way to assist the SMEs, opines Chin (Pic courtesy of Chin)

According to SME Association of Malaysia national secretary general Chin Chee Seong, many SMEs have started their journey toward digitalisation even before the pandemic but some may not have taken it seriously or made it a priority. 

“In other words, most of them only ‘existed’ on the Internet or got into only the basics of e-commerce platforms with minimal digital marketing efforts,” he told The Malaysian Reserve (TMR). 

Some of the constraints that they may have faced would include the lack of skilled technical workers, limited knowledge on technology and scepticism over whether they would benefit from digitisation at all. 

“Ideally, employees with a higher skill set would expect a high remuneration, and considering the hiring cost that comes with it, most SMEs end up delaying their implementation or some may not even consider implementing it at all,” Chin said. 

However, he disagreed that SMEs have abandoned these aspects after the pandemic, and that many are keen but their priority is now more toward rebuilding their businesses back to pre-pandemic levels. 

Chin noted that for them, that is more important than focusing their energy on going digital because in Malaysia, SMEs are either in a tight cashflow or experience drops in sales, even after the pandemic. 

Although the government and private sectors have been committed to aid SMEs’ digitalisation, a more integrated policy framework would make its support more impactful, he said. 

Part of it is fostering the use of digital technology through the implementation of the government’s Malaysia Digital Blueprint (MyDigital) framework. 

A large and growing number of public agencies have provided support to firms in this area through over 100 different programmes in recent years. 

The Malaysia Digital Economy Corp (MDEC), for example, has embarked on various efforts to help SMEs adopt digital tools such as remote working, e-commerce and payment-related operations. 

Private sectors such as SME Bank Bhd have also given financing relief and access for SMEs to fund their business and also utilise the funding to leverage technology. 

UOB SME app is an all-in-one digital banking platform to meet the financial needs and other business requirements of SMEs (pic source

Meanwhile, UOB (M) Bhd has announced the launch of the UOB SME app, an all-in-one digital banking platform to meet 

the financial needs and other business requirements of SMEs. 

Its study revealed that 63% of local SMEs surveyed have planned to continue digitalisation and tapping on the digital economy. 

“In that regard, the government also must ensure the application process for such aids to be much easier with better advice and consultations. 

“They should also consult with NGOs such as SME Association to find the best way to assist the SMEs,” Chin added. 

He contended that SMEs are unable to get any more loans from banks and it is rather tough to operate with the high-interest rate by going to peer-to-peer (P2P) financing. 

“SMEs have to look into cutting down operational costs such as rental, director remunerations, as well as employee’s benefits such as transport allowance and more,” he added. 

He suggested new strategies to increase revenue such as partnering with other companies that are doing similar businesses to reduce manpower costs. 

“SMEs can also consider outsourcing in both manufacturing and human resources while looking into utilising digital marketing tools to make changes from the old traditional marketing. In fact, new digital marketing is much cheaper now,” he added. 

Meanwhile, Small and Medium Enterprises Association (Samenta) chairman Datuk William Ng said that based on a recent survey in partnership with Affin Bank Bhd in July, 21.7 % of SMEs have not embarked on any form of digitalisation at all. 

In Malaysia, over 98.5% of all businesses are SMEs. 

“While another 48.1% started some form of digitalisation but are still at a very early stage. In short, some 70% of all SMEs are new to or have not digitised,” he told TMR. 

Describing the situation as worrying, he said the reason so many SMEs failed during the pandemic was due to low profits margin. 

“This was mainly a result of low labour productivity, our reliance on unskilled or semi-skilled workers and outdated machinery and processes,” he added. 

However, in comparison to after the pandemic, the trend is declining with some rather remaining subdued despite the economy having widely reopened. 

“We are seeing the urgency to digitalise taking a step back as businesses are busy fulfilling orders due to the pent-up demand from the pandemic.

“But this must not be the case. SMEs must prioritise digitalisation so that we are better prepared for another black swan event like the Covid-19 pandemic,” Ng stressed.
For the SMEs in the retail segment, 

Retail Group (M) Sdn Bhd MD Tan Hai Hsin said traditional sellers are going online because they are now embracing modern technology and view that as an alternative distribution channel to their customers. 

“They are now competing with bigger retailers such as H&M which has an online presence with all the great offers such as the special holidays’ promotions,” he told TMR. 

Nevertheless, Ng noted that online retailers also realised that they still need brick-and-mortar stores even though the future of the retail industry in cyberspace is undeniably bright. 

Meanwhile, Vive Snack founder and director Eric Khor said the best part about digitalising SMEs is that it allows them to connect and spread their services to everyone conveniently. 

Vive Snack sells local farm-to-bar crafted chocolate snacks where its farmers plant the cocoa trees by themselves and turn them into the end products.

“We offer varieties of cacao nibs, chocolate bars, mess bite (coated chocolate), cacao husk tea, chocolate cookies, chocolate spread and cocoa powder. 

“With the connection we have online, we can receive information and feedback faster, so that we can make any improvement or adjustment faster,” added Khor. 

To publicise the brand, he started by participating in booth events, and as the brand grew in popularity, Khor started placing his products in retail outlets such as The Hive Bulk Store, Justlife Organic and NGO Grocery. 

“However, as the public wanted a more convenient option, we started setting up our online platform. Not long after that, the Movement Control Order (MCO) happened. 

“With the MCO, the public also started to realise and experience the benefits of digitalisation. Another good part of it is that without meeting face-to-face, we could still connect with our customers. 

“The business outcome depends on the influence or publicity of the event organisers or platform, and for us as a locally hand-crafted product brand, public awareness is important,” he said. 

Khor added that the cost or fee to engage in digitalisation is a big challenge for small business owners. 

“There are many platforms providing such services but in many different ways, which can create confusion and wrong choices, then result in more unnecessary spending,” he said. 

According to him, one system might not be able to sync or connect with other systems or platforms, which sometimes causes a lot of headaches for business owners. 

For Vive Snack, the digitalisation effort includes setting up its own website, and joining other e-commerce players such as Shopee, Lazada, AirAsia travel mall as well as PG Mall. 

“I consider our digitalisation a success and we just have to know how to engage and utilise these brilliant tools. For the longer term, it can help the business spread globally and connect easily,” he said. 

However, he believed that it can be challenging to stand out and appeal to customers while boarding into commerce platforms with the vast options and sellers available there. 

“To improve, I think the system must be uniform so that all formats can be integrated and applied in any seller platform. 

“More pop-out and surfacing opportunities in e-commerce platforms will also help and allow customers to see our products or services,” Khor concluded. 

  • This article first appeared in The Malaysian Reserve weekly print edition