E-commerce fuels digitalisation in logistics and fulfilment

By Song Hock Koon, Director of eCommerce, Malaysia Digital Economy
Corporation (MDEC)


As the coronavirus pandemic frames our new normal, one thing is clear if nothing else – logistics, the commercial activity of transporting goods to customers, had risen to the position of being the key enabler for the digital future. As is, that trend is racing towards us faster than ever before.

The impact of the US-China trade war on the supply chain has been a drag on the short and medium-term outlook for the global logistics sector. However, in the wake of worldwide lockdowns to contain the COVID-19 pandemic, the focus had shifted again to the long-term prospects of logistics as its importance becomes even more apparent.

Consumers in the Driver’s Seat of E-Commerce

Since the Movement Control Order (MCO) went into effect in 18 March, 2020, businesses and stores deemed non-essential were ordered to suspend operations. A key thing to notice is that e-commerce was quickly declared by the Government to be an essential service in Malaysia and allowed to operate.

The most visible evidence of the shift towards adoption of e-commerce by both merchants and consumers was in food and grocery deliveries. Malaysians took to ordering their daily supplies of groceries online and sending goods to friends and family using delivery services.

Home bakers and domestic cooks also began to expand their cottage industries operations via Instagram accounts and delivery services, like Grab and Lalamove.

Outside of essentials, 27% of respondents surveyed in a Janio Asia survey revealed how consumers purchased other items in wellness, home improvement, computing, and healthcare segments. The readiness by consumers in Malaysia to transact online during this pandemic indicated a fundamental and long-term behavioural change in embracing the adoption of e-commerce.

This trend was similarly observed around the world. Millions of people who were forced to stay at home ended up making online purchases for the first time. But more significant were the millions more who were infrequent online shoppers but now have become accustomed to buying things on e-commerce platforms. The forced habitualisation and the ensuing change of consumer behaviour could end up becoming the single largest catalyst the global e-commerce sector had ever experienced.

Logistics & Fulfilment Players at the Forefront of Digitalisation

Here in Malaysia, one of the largest logistics players with a commanding market share of fulfilment services in the e-commerce market is the incumbent, Pos Malaysia. Spearheading e-commerce for businesses through these challenging times, Pos Malaysia was among the prominent panellists at the recent e-Dagang Expo (eDX) – a five-day virtual expo hosted by MDEC with the support of the Ministry of Communications and Multimedia Malaysia (KKMM).

The 200-year-old company is embarking on a RM300 million digitalisation effort to improve operational efficiency and stand apart in a highly competitive marketplace. The huge investment in technology will be crucial to its ambition to be the nexus of a seamless and web-based e-retail ecosystem.

Meanwhile, other homegrown players, like GDex, have played a significant role in advancing e-commerce in Malaysia. Since 2016, the company had expanded its sorting hub capacity and delivery resources to cater to rising volumes of e-commerce transactions. Fast forward towards today, GDex already embraced digitalisation through its online shipping platform, myGDEX, making it easy for social sellers to scale distribution and boost revenue, particularly during these challenging times.

In their bid to offer the best end-to-end consumer experience, eMarketplaces like Lazada have started offering logistics and fulfilment services under Lazada eLogistics (LEL), on top of operating an e-commerce store. It also partnered with third-party logistics providers to ensure that the increase in volume of e-commerce transactions are catered to. Additionally, Malaysia e-commerce landscape has also seen innovative solutions offered by existing and new players in last-mile delivery services, such as DHL eCommerce and LWE Logistics; fulfilment management platforms, like iStore iSend and EasyParcel; and other services in the supply chain like locker/mid-mile service from Boxit and Collectco.

Sustainable growth and development in the nation’s logistics sector is critical for commerce to thrive, especially in these trying times. Forward-thinking logistics players are rapidly embarking on their digitalisation journey to meet fast-growing demand prompted by the explosive growth in e-commerce. To shorten delivery time to drive greater efficiency to be able to compete regionally and globally, digitalisation is critical to ensure there is seamless end-to-end data flow from merchants to consumers and across all players in the supply chain.

Vast Opportunity to Expand Market Reach

With restricted movement still in effect across many countries, and the preference for contactless deliveries, there is a vast opportunity for Malaysian small- and mediumsized enterprises (SMEs) to expand their reach. This includes selling their products to new marketsand boosting sales and revenue.

This could mean retailers selling to individuals (B2C), each other (B2B) or direct transactions between consumers via online marketplaces like Alibaba, eBay, Lazada and Carousell (C2C). These e-commerce platforms, among others, allow consumers worldwide to purchase products conveniently and competitively.

For Malaysian SMEs that have not yet jumped onto the bandwagon of cross-border e-commerce, now is the golden opportunity to increase the reach of their existing distribution channels, while also leveraging on the upward trend for the growing demand for online purchases. The Go-eCommerce initiative under the purview of MDEC, drives e-commerce adoption and digitalisation of cross-border e-commerce through its industry-led programmes for SMEs and micro-based SMEs (MSMEs).

Fulfilment Across Borders – A Double-Edged Sword?

One of the main challenges to become acompetitive brand in cross-border ecommerce is to ensure that the ever-growing number of parcels are delivered in the shortest time possible. This alsoincludes tracking and managing the accuracy and consistency of delivery timings. Due to the complexity arising from multiple delivery hand-offs between logistics partners in each leg of the journey and unexpected issues that may arise during border clearance, the fulfilment of package will require close cooperation between all stakeholders. This will drive the need to adopt standardisation and digitalisation for cross-border e-commerce and make the entire process seamless.

Within Southeast Asia, where e-commerce merchandise value will rise from USD38 billion (MYR 165bil) in 2019 to USD150 billion (MYR 650bil) in 20251, regional logistics players have a huge advantage arising from their deep understanding of the the region’s e commerce landscape and strong networks in all the ASEAN countries, as well as across the Asia-Pacific region.

However, cross-border e-commerce can create significant risk for SMEs if they are not prepared. Selecting a right-fit delivery partner can be a steep learning curve for most business owners, and meeting customs and trade regulations even with ASEAN can be daunting.

Truly embracing cross-border e-commerce as a business means ensuring a seamless customer experience end-to-end while navigating the increased complexity and aligning the various moving parts in the international supply chain. Nevertheless, the benefits are clear and it remains a business imperative for all SMEs to embark upon.

“SMEs must realise that especially for cross border e-commerce, logistics and fulfilment become a key determinant of success.”

Forecasting for Long-Term Growth

As SMEs contemplate the new normal – both the disruption it has wrought and opportunities it beholds, making the move to sell products to a global audience becomes paramount. Concentrating sales in the domestic market is no longer sufficient. As SMEs plan their cross-border e-commerce strategies, they should consider how a strategic logistics partner, with its global reach and end-to-end solutions, can be a competitive advantage while they compete for customers in the global marketplace.

Through its multi-stakeholder collaboration between the government, public and private sectors, industry leaders, and e-commerce partners, MDEC’s GoeCommerce programmes are unlocking inclusive growth opportunities and advancing the digital economy for the nation – and helping to accelerate the crossborder e-commerce journey for Malaysian SMEs.

For digitalisation success stories and to stay plugged into MDEC’s various ecommerce programmes, visit http://www.go-ecommerce.my for more information

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