Digitalisation and Covid-19 leads the way on consumer behaviour changes in Malaysia

Credit: Unsplash

Consumer behaviours have always been changing with time. The rise of e-commerce had  ensured those changes were inevitable. The arrival of the Coronavirus outbreak in addition had triggered drastic changes in consumer behaviour across the region.

According to a study by Bain & Company and Facebook, Digital Consumers of Tomorrow, Here Today, digital consumers will make up 69 percent of Southeast Asia’s population by end of 2020.

The growth was originally  forecasted for 2025 in the study, indicating a five-year acceleration within this year alone.  According to Bain & Company, the new normal that was ushered in by the outbreak gave birth to new purchasing habits and expectations.

“Malaysian consumers are not just spending more online as forecasted in 2019, they’re also buying into more categories online,” says Gwendolyn Lim, a Partner at Bain & Company.

Joining Gwendolyn at the launch of the study, Nicole Tan, Country Managing Director of Facebook Malaysia highlighted that in Malaysia alone, they are expecting approximately four million new digital consumers this year.

“It is crucial to connect with consumers in ways that are frictionless and to replicate in-person interactions through social platforms, messaging and short videos as much as possible to drive discovery and loyalty,” she says.

Digital, the way forward

“The power of digital consumer spend is exceeding expectations with online spend set to triple by 2025,” says Gwendolyn. Furthermore, across SEA, preference to buy from online channels has seen a leap, and with e-commerce becoming a platform for search or intentional buying.”

Evidently, over 12 million items were sold during the first hour of Shopee’s 9.9 Super Shopping Day.

The study also showed that Malaysian consumers are open to try different online stores, with unique products and good deals driving interest in new different stores. 40 percent of Malaysian consumers say they only shop from new stores only when there are good deals and promotions, with reliability and value said to be factors for switching in regular stores.

“The change in consumer behaviours can also be seen in the increasing preference for e-wallets as bank transfers are noted to have reduced, indicating that Malaysians are embracing the contactless way of life,” she highlights.

In June, the Mastercard Impact Studies had observed an increase in online shopping among Malaysians during the Covid-19 outbreak in March.  Malaysians had spent more time online with top activities comprising surfing the net for news and entertainment (75 percent), followed by online video streaming (57 percent), social networking (55 percent) and home delivery of food or groceries (50 percent).

40 percent of consumers reported they were using mobile or digital wallets more, followed by contactless debit cards (26 percent) and contactless credit cards (22 percent).

Rising unemployment

While the outbreak has accelerated the adoption of digitalisation, it has also contributed to an increasing rate of unemployment in the country. This brings about the question if consumption pattern, which the government very much relies on, will be able to pick up and remain consistent.

In Malaysia, the unemployment rate which rose to 5.3 percent caused by the current economic conditions is considered to be the highest in 30 years. While the rate has declined month-on-month to 4.9 percent from the record high rate, this begs the question if a more positive consumption trend can be registered in months to come?

“The trend of rising unemployment will continue as firms and businesses shift into survival mode for the rest of the year, with a few exception,” Fellow in the Economics, Trade and Regional Integration (ETRI) Division of ISIS Malaysia, Juita Mohamad tells Business Today.

Juita adds that the  consumption patterns will be different for various income groups and for different types of products. “For those in the middle income group and the B40 group, job security is a very big concern. Depending on how secure their jobs are at the moment, this will impact how they spend their income,” she says.

Facebook Malaysia’s Nicole goes on to say that the unemployment rate would hold up discretionary and non-discretionary retail spending with the non-discretionary segment experiencing some level of dampening.  

On the other end, a special report by The Edge Markets stated that a pivot from consumption to production is more favourable, instead of opting to push for growth from more consumption. “It is time to push growth by raising production and efficiency, generating high income and employment,” the report stated.

And while domestic travelling has somewhat picked up in speed in recent weeks, Juita believes that if a vaccine is available, the domestic tourism sector will be revived significantly and in return, will boost other related industries as well. This will also increase job availabilities for the youth and non-youth workers all over Malaysia.

“But such a progress will only be made early next year, in the best case scenario,” she opines.

The think tank researcher also believes that consumption of essential goods and services will continue to be strong, while consumption of expensive durable goods will remain weak until the end of the year. She further foresees that health insurance packages will remain popular among middle income and high income groups in the new normal.

“The pandemic has emphasised the importance of social security nets and also health coverage.”

Digitalisation comes at a cost

A report by WEF and Bain & Company, Fast-Growth Consumer Markets: ASEAN 2030, digital adoption in the region is said to be reaching an inflection point, fueled by consumer behavioral changes and investor programmes to accelerate the digital transformation process.

However, the report further points out that digitalisation will come at a cost. “While entirely new jobs will be created, automation will reduce employment in labour-intensive sectors, reducing wages and displacing low-skilled jobs,” it highlighted.

ADB estimates that up to 30 percent of activities in 60 percent of occupations could be automated. While high-skilled jobs will be in demand, the report points out at least 43 million people will need to be reskilled in Indsonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

“One of the few positives to come out of this pandemic is the push towards greater digitisation and the new economy. While this is beneficial, it does increase the risk of raising inequality within and between countries,” says Jayant Menon, Visiting Senior Fellow at the ISEAS-Yusof Ishak Institute.

He urges government bodies to intervene in order to reduce the digital divide – which will increase because of the pandemic – by widening access to digital connectivity.

“Apart from increasing investment in digital infrastructure, there is a role to provide affordable access through targeted subsidies to increase consumption expenditure on internet-related services by the poor,” Menon tells Business Today.

What can the government do?

In order to boost consumption, the right types of jobs are needed to match the supply of the local labour force availability, Juita says, and in order to attract the right types of jobs available, attracting the right kind of foreign direct investment is vital.

“To do so the government needs to push through with the ratification of the CPTPP and the finalisation of the RCEP negotiations. As long term planning is needed for such FTAs, continuous effort is needed by the government to engage in trade reforms and trade liberalisation activities from the ground up,” she stresses.

She further says that in order to help the B40 feel more secure, social safety nets are important and they need to be targeted and monitored well. “Data needs to be collected to see how effective their dissemination mechanism is and how they have impacted household spending in the short to medium term. Cash transfers like BR1M and BSH must have the continuity element for it to be effective,” Juita tells Business Today.

Previous articleMITEC successfully hosts nation’s first major business event
Next articleStrengthening enterprise & public sectors’ digital resilience with end-to-end cloud infrastructure


Please enter your comment!
Please enter your name here