How is the e-Commerce industry impacted by the Covid-19 pandemic and how can it bounce back in the new normal? How influential is China in changing the face of e-commerce?

The Covid-19 outbreak has impacted just about every aspect of people’s lives in Malaysia. With most people needing to stay home more, Malaysians have been adapting to both the outbreak and the regulations. But with the environment being so different to pre-Covid times, how has Covid-19 impacted Malaysia and the world’s e-Commerce industry?

Supply-Chain Disruptions

In February this year, China extended its Chinese New Year holiday by two weeks in a bid to reduce the spread of COVID-19 in the country. This caused factories globally to delay production for that period. This caused waves around the world that were also felt in Malaysia. With Chinese factories offline for a longer period of time, their demand for raw materials and components to produce goods would reduce during that period. They would also be producing fewer inputs needed by factories elsewhere, including Malaysia.

Overall the automotive, metals products, chemicals, communication equipment, rubber and plastics, and office machinery sectors were disrupted. Many online businesses were facing shortages of products which are unable to satisfy the demand of the customers over there.

In Malaysia, this was reflected by a drop in the Purchasing Managers Index, a measure of the direction of economic trends in manufacturing based on a monthly survey of supply chain managers. Malaysia was hit by a combo of having less demand for their goods in China due to this regulation and they also faced a shortage of required materials.

After the Movement Control Order (MCO) was imposed in March, only essential businesses and organisations could run. Manufacturers of non-essential goods are not allowed to operate during the MCO in Malaysia. Further, manufacturers of essential goods require approval from the Malaysian Ministry of International Trade and Industry (MITI). After gaining this approval, their operations need to be carried out according to permitted conditions.

To encourage micro-enterprises and SMEs to move to the digital or online services, the government, together with the private sector, will finance the venture through a matching grant of RM140 million.

“This allocation will be used for training sessions, vendor subsidies and sales assistance and it will be spearheaded by the Malaysia Digital Economy Corporation (MDEC) along with selected e-commerce platforms. The government, in collaboration with private companies, will be running a ‘Shop Malaysia Online’ campaign with RM70 million fund to encourage people to shop online, where promotional codes and various discount vouchers will be provided through the e-Commerce platform,” – Prime Minister, Tan Sri Muhyiddin Yassin

Consumer Behaviour Influences e-Commerce Demand

Studies suggest that the behavior of consumers in Malaysia will influence e-Commerce demand. The purchasing behaviour of customers can be attributed to the lack of availability of products and services in the various outlets and stores. This will make customers depend solely on e-commerce platforms for purchasing activities.

A survey by the Department of Statistics Malaysia found that the average household spending has fallen from RM6,137 to RM2,813 (a drop of 54%!). This can be largely attributed to both the pandemic creating uncertainty around Malaysians’ job security and incomes, and also a lack of options to spend disposable income.

One survey also showed that Malaysians are making the shift to online shopping. In response to the question ‘Have you been purchasing more frequently online?’ 60% of respondents mentioned that they have been making more purchases online compared to pre-COVID-19 levels. The most popular online grocery stores include Tesco Online and Mydin Online.

Malaysians are currently more focused on stocking up on essentials, according to a survey about how consumer purchase behaviour. They report that consumers are primarily buying groceries (97%), personal hygiene items (91%) and preventive care items like face masks, hand sanitisers and disinfectants. According to a study by Nielsen, In Malaysia, sales of hand sanitizers hit almost RM1 million (US$237,176) in the week ended Jan. 26, 2020; that’s more than 800% above the weekly average.

Overseas especially in China, we are seeing more goods being sold via online influencers aka key opinion leaders (KOLs) via social selling. Top influencers in China sell out millions of dollars of products ranging from lipstick to rice cookers to cars in a matter of minutes! Anything can be sold online apparently with a rocket launch service sold online via auction in China for $5.6 million. Entertainment meets e-commerce live forming a new trend for the future of online selling.

Overall

The impact of Covid-19 to e-Commerce can be quite significant especially to the buying behaviour of Malaysian. People are more inclined to stock up for essential needs and health related products, and thus this line of products can last longer compared to others. But, with the reopening of businesses for Recovery Movement Control Order (RMCO) period, we can see people start to buy from physical stores again even though they most are still cautious and try to avoid close contact with others. Mid-long term wise we can see the inevitable shift to e-commerce and online being inevitable with  social selling helping reduce the distance and online disconnect. The pandemic and need for online interaction has further accelerated the online shopping trend.

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