COVID-19 is dragging economies down around the world, but it is also driving the deployment of technology and digital innovation that helps to boost economic growth. In Malaysia, the e-commerce sector is expected to see 20 percent growth this year, possibly contributing up to RM170 billion (US$40 billion) to GDP for 2020.
People Matters asked Dato' Ng Wan Peng, the Chief Operating Officer of the Malaysia Digital Economy Corporation (MDEC), for her thoughts on what technology and digital innovations are most critical to e-commerce companies during this period, and what MDEC is doing to help move them forward. MDEC is a government-owned institution that oversees the formulation and implementation of digital policy, and since the beginning of COVID-19, it has been pushing even harder to accelerate the Malaysian digital economy.
What are the projections for e-commerce as a result of COVID-19?
COVID-19 has transformed e-commerce and expedited the adoption of e-commerce due to the enforcement of social distancing, lockdowns and other measures. The pandemic has led consumers to ramp up online shopping and contactless payment. According to Forbes, COVID-19 has accelerated e-commerce growth by four to six years in the US. CNBC reports that Southeast Asia’s online shopping boom is here to stay, even after the pandemic.
In Malaysia, MDEC is expecting a 20 percent growth in e-commerce contribution to the digital economy this year despite the enforced Movement Control Order (MCO) to contain the spread of COVID-19. The projected growth could be achieved through the active intervention of various ecosystem partners via ongoing initiatives and MDEC potentially sees the expected contribution to gross domestic product (GDP) to go up to as high as RM170 billion (US$40 billion).
What technologies are most critical to e-commerce companies?
There are many technologies supporting the growth of e-commerce. Some of these are:
Mobile Apps: With the rolling out of 5G connectivity in mobile networks, users are beginning to experience a faster and more reliable mobile internet experience – which in turn is giving rise to mobile commerce.
Digital supply chain: Ensuring on-time delivery is a key differentiating factor for companies in the e-commerce space. The successful management of extreme market and spiked-demand has, therefore, become the new focus area, optimizing the supply chain management process for these companies and playing a critical role in ensuring efficient and faster delivery models.
Artificial Intelligence: AI-driven tech is also able to understand consumer behavior and buying patterns. Being able to predict trends accurately will ensure that consumers' needs are better met and provide a more personalized customer experience.
Contactless payment: Customer experience has become a huge driving force in e-commerce, and the push towards seamless transactions affects payment processing. Faster, efficient and secure payment options have played a big role in driving the growth of the e-commerce market in recent years.
How important is it for e-commerce companies to upgrade, or scale, their existing technology during this period?
There are multiple reasons to upgrade existing technologies. Firstly, e-commerce is the new normal. Online shopping has gained momentum and become the norm for many people in the months of staying indoors. The growth of e-commerce is expected to continue.
Secondly, e-commerce enables market expansion. The Malaysian market is relatively small with a population of 33 million. E-commerce marketplaces have made it easier for businesses to do cross-border trade. With the Southeast Asian e-commerce market looking to be worth at least US$102 billion by 2025, SME digitization, upskilling and preparedness will be even more necessary to ensure entrepreneurs and SMEs have a keen competitive advantage.
Thirdly, as the barriers of entry to e-commerce are much lower today as compared to many years ago, adopting technology will help companies to stay competitive.
Beyond the hardware and software itself, what are the other considerations or challenges for e-commerce companies?
Competition from borderless economies is one challenge. Traditional boundaries are clearly blurring, with online retailers entering new geographies. This leaves companies with challenges in dealing with different countries’ government regulations, geopolitical status, "stateless income", and extensive local and international competition.
Another challenge is how they can build trust and brand as the key differentiator. Building consumer trust and brand loyalty is vital for any business to succeed. It is easy to lose an online customer to the "next big thing". Traditional brand building efforts must be supported by solutions. Failure to deliver on any one aspect of customers' demands would lead to failure in retaining them.
Rapid changes in technology are a third challenge. Technology is evolving at such a fast pace that companies have difficulty keeping abreast with the changes, because their core business is selling products, not technology.
Finally, they face challenges in generating traffic. Digital marketing channels are evolving such that retailers can no longer rely on any one type of channel to drive traffic to their online store. They need to continuously leverage latest developments such as key opinion leaders and social media platforms such as TikTok to attract and generate traffic.
What are some ways MDEC is helping e-commerce companies to adopt, upgrade, and better utilize their technologies?
In June, our Prime Minister announced the following two initiatives: the Micros & SMEs E-Commerce Campaign, and the "Shop Malaysia Online" initiative. Under the E-Commerce Campaign, MDEC is co-funding a program to onboard eligible micro-, small- and medium-sized enterprises onto e-commerce to shift towards business digitization. Meanwhile, the Shop Malaysia Online initiative is intended to encourage e-commerce consumption through digital vouchers that are co-funded by the Government and multiple e-commerce platforms. MDEC is also involved in the management of the SME Business Digitalization Grant that was announced in Budget 2020 earlier this year.
There are also ongoing initiatives on our Go-eCommerce Platform to help e-commerce entrepreneurs with reskilling and upskilling, business support, and business compliance needs. And in May, MDEC hosted the nation's first and largest e-commerce expo to help digitally enable entrepreneurs from the SME and MSME sectors by introducing them to the apps and tools they will need.