Lining Up Retailing


Economic News

22 Jul 2010
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With Malaysia’s economy posting near-record growth in the first quarter and even thoughts of recession a thing of the past, many Malaysian retailers can look forward to a surge in sales.

Malaysia’s GDP expanded by 10.1% year-on-year in the first three months of 2010, with the wholesale and retail subsectors among the best performing, growing by 9.6% thanks to renewed consumer confidence and a resulting willingness to spend. Increasingly, that willingness is finding an outlet online.

According to estimates from the National ICT Association of Malaysia (PIKOM), the country’s online business-to-consumers transactions are expected to total $3bn this year, while business-to-business e-commerce could reach some $20bn.

While the $3bn may only be a fraction of the approximately $39bn that market research firm Business Monitor International estimates will be Malaysia’s total retail spend for 2010, it is on the rise. E-commerce is expected to post annual growth of 16-20%, a result of both private initiatives and supportive government policies, PIKOM officials said in mid-April.

The potential takeoff of electronic retailing could have a positive flow-on effect into other sectors, with mail delivery services set to benefit, reversing a decline in recent years caused by the internet eating into their core business of personal communications.

While the state-owned mail carrier Pos Malaysia has seen a slide in its regular mail volume, this is increasingly being offset by the growing demand for door-to-door parcel delivery services.

Pos Malaysia’s courier arm, PosLaju, has seen demand climb, to the point where it commands a 27% market share of the $540m domestic courier industry. This is a market that will likely continue to grow if internet infrastructure is strengthened and more Malaysians start to shop from home, says Syed Faisal Albar, Pos Malaysia’s CEO.

“If broadband penetration in the country improves, this will encourage online transactions further and with that comes online shopping,” he said in an interview with the local press mid-May. “In fact, the growth of courier services in these areas has been synonymously linked with online shopping.”

Pos Malaysia was also looking at getting on the online shopping bandwagon by marketing itself as a retailing service provider, combining its existing infrastructure and brand name with a new sales portal. This could encourage consumers to buy online through an established outlet with a proven track record, Syed Faizal said.

According to Ahmad Shukri, the head of the public sector unit of business analytics software and services firm SAS Malaysia, Pos Malaysia should make greater use of communications technology and look for niches where it can play a crucial role, such as online retailing.

Mobile phone operator Maxis is another firm that has logged on to the e-commerce business, joining forces with international online payment service provider PayPal in mid-May in a deal that will give Maxis subscribers the opportunity to make quick and secure purchases electronically using their phones or computers.

Announcing the collaboration, Maxis COO Jean-Pascal Van Overbeke said that with the broadband initiative in place, mobile internet was fast gaining traction, as was online retailing.

“Some 80% of consumers go online to identify what they want to buy and where they want to buy it from. About 30% of consumers actually proceed to make an online purchase,” he said.

Data issued by the market research company IDC late last year said that Malaysia should have 17.5m internet users by the end of 2010, of which 8.9m will likely be buying products online. This is a sizeable segment of the consumer base and one that retailers would do well to target.

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