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COVID-19’s Impact on Malaysia’s eCommerce Market

Benedict Leong

COVID’s Impact on Malaysia’s eCommerce Market

Further update: As of 1st June 2021, Malaysia is reinstating a full nationwide lockdown with only 17 essential sectors being allowed to operate.

Previously on May 12th 2021, Malaysia was placed under lockdown under Movement Control Order 3.0 (MCO 3.0) from May 12th – June 7th 2021 as of the time of this writing. This article will be updated with more insights and information as we monitor the situation in Malaysia.

1 year into the pandemic, Malaysians continue to adapt to the impact that the pandemic and social distancing restrictions have on their daily lives. With the environment being so different compared to pre-COVID times, how has COVID-19 impacted Malaysia’s eCommerce industry?

Key Timeline, Statistics and Relevant Regulations

Malaysia's key timeline of covid-19 related events leading up to the movement control order

Here are some updates to the above timeline:

  • 4 May 2020
    • Conditional Movement Control Order, which allows almost all economic sectors to reopen imposed from 4 May – 9 June
  • June 2020 – 16 Feb 2021
    • Malaysia enters Recovery Movement Control Order with lighter restrictions, Conditional Movement Control Order ends
  • 16 Feb 2021
    • Multiple states re-enter lockdown
    • Conditional Movement Control Order extended in other states
  • May 2021
    • Movement Control 3.0 with tighter restrictions implemented
  • 12 May 2021
    • Nationwide lockdown reinstated
  • 1 June 2021
    • Full Nationwide lockdown reinstated, only 17 essential sectors allowed to continue working1

Malaysia announced its first confirmed cases of COVID-19 on January 25th 2020. As cases began increasing around February, interim Prime Minister Dr. Mahathir Mohamed announced the Economic Stimulus Package 2020 on February 27th. In March, a significant jump in cases was seen, which led to the Movement Control Order being imposed on March 18th.

During 2020’s Movement Control Order (MCO) lockdown, businesses and stores deemed non-essential were ordered to suspend operations. To limit places where people could gather, all schools, institutes of higher learning, and houses of worship were ordered to be closed during the period. There is also a restriction on entry of all foreign tourists and visitors to the country.

The 2020 lockdown saw various rules for social distancing have also been implemented, such as only allowing one person per household to leave the house for matters such as grocery shopping and closing roads in various parts of the country to limit movement. One key thing to note is that eCommerce is deemed as an essential service in Malaysia.

COVID-19 has caused massive disruptions to both the supply-side and demand-side of Malaysia’s eCommerce industry.

On the supply-side, there have been disruptions since Q1 2020 when China’s extension of Chinese New Year in February caused delays to eCommerce orders that were placed in January.2 The delays resulted in many international eCommerce sellers with supply chains from China having inventory shortages, affecting revenue and cash flows.

Thereafter, the travel restrictions imposed by many countries in March also caused a massive drop in air freight supply as airlines began suspending flights. These air travel shortage continue to persist so far in 2021.

Spending habits also changed after the MCO was implemented. People began saving more amid increased uncertainty over job security and income, and have instead been purchasing primarily essential goods like groceries, household supplies and even health supplements. Foot traffic to most physical stores reduced significantly and non-essential businesses were ordered to cease operations during the MCO lockdown periods.

But things aren’t all grim. Malaysians have been spending more time online and have shown more willingness to purchase items online now. In fact, two-thirds of them are now more comfortable with online shopping as shown in a September 2020 poll.3 Changes in behaviour such as needing to work from home or exploring new hobbies while staying at home also present new opportunities for eCommerce.

Anticipating the economic impact of both COVID-19 and the regulations imposed to keep it contained, Malaysia’s government has announced a stimulus package to support the Malaysian economy during these uncertain times.4 The stimulus package has a budget set aside for initiatives aimed at helping SMEs and MSMEs, through providing discounts on rent and electricity, and one-off payments to provide relief to various groups. These groups include e-hailing drivers, students and those in the M40 and B40 income groups.

But before diving into what eCommerce merchants can do to adapt to COVID’s impact on the Malaysian market, we can look deeper into COVID-19’s supply-side and demand-side disruptions on one of Southeast Asia’s larger economies.

Supply-chain related disruptions

Manufacturing

In February this year,5 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 to delay production for that period.

This caused disruptions 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.

In Malaysia, this was reflected by a drop in the Purchasing Managers Index,6 a measure of the prevailing 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 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. MITI has stopped processing approvals since 25th March 2020 according to Lazada.7

In May 2021, manufacturers and retailers are still allowed to operate although with limited manpower. Malaysia’s Ministry of Finance forecasted the manufacturing sector may rebound by 7 percent in 2021, driven by improvements in export and domestic-oriented industries.8 From 1st June 2021, Malaysia has again returned to full lockdown with only 17 essential sectors allowed to operate.

Logistics

In late 2020 and throughout 2021, deliveries continue to experience delays. According to a study by iPrice and Parcel Monitor, deliveries were delayed on average by an additional 2.5 days in Malaysia.9

The lack of international air travel affects international deliveries. This is because a large proportion of air freight deliveries are shipped in the belly hold of passenger planes. Local deliveries in Malaysia are affected by:

  • Increased roadblocks between states and districts manpower restrictions
  • Increased operations related to sanitising the premises
  • Potential shutdowns for cleaning due to infections
  • Safe distancing requirements and potential split work arrangements

The disruption in China also had an impact on eCommerce experiences in Malaysia as well, particularly in the first quarter of 2020.

Prior to 2020’s lockdown being imposed, orders that were placed in the middle of January on multiple popular eCommerce platforms in Malaysia warned their customers to expect delays3 for their orders from China. The delays in China were likely to be attributed to delays in both outbound international shipping and domestic shipping within China.

In a New Straits Times11 article, National University of Singapore Professor Lawrence Loh said that delays could be due to a shortage of workers at manufacturing companies, warehouses and transport companies due to the outbreak. The New Straits Times also interviewed eCommerce customers and found that many of them were not receiving proper explanations why their deliveries were getting delayed and, in some cases, had cancelled their orders for deliveries that had taken too long.

Along with the MCO being imposed, March 2020 saw many countries imposing international travel restrictions. With a huge drop in demand for international flights and so many flight cancellations, many airlines responded to this reduction by suspending flights12, such as Malaysia Airlines Bhd suspending 4000 flights13 as of 18th March 2020. They also adapted their network by adjusting low-load flights by cancelling and merging them to manage costs and their customer expectations.

With many other airlines also taking similar measures, the supply of international flights had plummeted. This negatively impacted air freight as passenger flights also use their bellyhold for cargo shipments.

With air freight demand now far outstripping supply, rates can jump between 2 and 10 times higher depending on the type of airfreight you were using previously. Even for those paying premium rates for air freight, the shortage of air freight meant that it would be hard to even guarantee that your parcels would get space. Delays could possibly double delivery times. This led to many looking to alternative modes of transportation during these uncertain times, such as sea freight and cross-border trucking.

With air freight deliveries from China to Southeast Asia having higher chances of getting delayed, shipping eCommerce parcels via sea freight is a much cheaper and potentially faster method. Shipments from Shenzhen or Guangzhou take on average 9 days to reach Port Klang. Sea freight shipments from South Korea to Malaysia also take roughly a week.

With the MCO in place in Malaysia, last-mile delivery has also been impacted. Some roads have been closed and logistics service providers currently need to implement extra precautions to ensure the safety of customers and their staff. Some of these procedures include split work arrangements or operating only on certain days, and carrying out routine disinfection.

If you are an eCommerce merchant, it’s good to find out from your logistics service provider how deliveries at every step of the supply chain have been impacted by all these circumstances and which you can use to manage your customers’ expectations.

Another issue that eCommerce merchants and brands could face now is logistics shipping partners invoking Force Majeure clauses in their contracts. For eCommerce merchants and other businesses, this means that logistics service providers could legally void their existing contractual obligations for deliveries by pointing to the negative impact of the COVID-19 outbreak on their logistics capabilities.

Force Majeure means that one of the contracting parties can void the contract due to circumstances out of their control preventing them from fulfilling the contract despite their best efforts to overcome it.

This can be seen as an opportunity though. Prior to the outbreak, air freight was the best method of delivering eCommerce parcels. But with conventional wisdom upended and logistics providers invoking Force Majeure, it’s a good time for one to revisit their supply chain design.

If your business has recently been affected by these circumstances, you can consider talking to supply chain management experts at companies like Janio Asia to redesign your supply chain to incorporate cheaper and more efficient transportation solutions.

The COVID-19 outbreak has thrown a lot of original supply chain plans out the window. Have a supply chain consultation with us to find out how to work more efficient and cost-effective solutions into your new supply chain design!

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Demand Related Changes

Changes to People’s Lifestyles

Faced with consistent lockdowns and social distancing restrictions since last year, there’s a high chance that the online shopping habits Malaysians formed in 2020 are still going strong this year. In 2020, we observed that:

  • Health supplement demand increased
  • Fashion demand recovered briefly during the Hari Raya Aidilfitri period, driven by traditional customs and heavy discounts
  • Some shopping platforms were confident in premium cosmetics purchases by the middle class and developed a specialised platform to sell them in 2020.

You can find a more detailed breakdown of these shopping habits throughout 2020 in our collaboration article with Google.

Below details consumer behaviour changes seen early in the 2020 lockdown.

During the 2020 MCO lockdown, many in Malaysia began adapting by working and studying from home. According to the Malay Mail,14 many businesses have been equipping their workers with laptops while schools are inquiring about expanding their online capabilities for teaching and delivering virtual classes.

For those working in essential services, such as banking, split work arrangements15 have been adopted. At least half of the banks’ staff would be working from home, with plans in place to shift more people off-site as much as possible to further limit the spread of COVID-19.

From discovering new hobbies, finding their work-from-home groove, to ordering more groceries and food deliveries online,16 Malaysians have been finding ways to keep themselves comfortable, entertained, and busy at home during the MCO.

According to the New Straits Times,17 many have started taking up different habits like reading more, playing more games on various devices, and binge-watching shows on platforms like Youtube and Netflix. Some have even had more time to do gardening or indoor exercises like yoga. Some are even embracing these lifestyle changes by buying yoga mats online.

Social media hits are also influencing what Malaysians are spending their MCO time on. Recent hits like Dalgona coffee and their friends sharing posts of their home-cooked meals are inspiring Malaysians to try some of these recipes out for themselves.

In light of the MCO, Malaysians have been spending less. A survey by the Department of Statistics Malaysia18 found that the average monthly household expenditure has fallen 55 per cent from MYR 6,317 to MYR 2,813. This can likely be attributed to the current environment putting a strain on many businesses, which has created a lot of uncertainty around Malaysians’ job security and incomes.

The same survey showed that the product categories that took the largest hits are clothing and footwear, followed by transport, restaurants and hotels.

Malaysians are currently more focused on stocking up on essentials, according to a survey about how consumer purchase behaviour has changed by vase.ai19. They report that consumers are primarily buying groceries (97%), personal hygiene items (91%) and preventive care items like face masks, hand sanitisers and disinfectants.

COVID-19 Malaysia Infographic showing that Malaysians are primarily buying groceries more online. 27 per cent are also purchasing health supplements, work from home equipment, DIY Hardware and Home Cleaning Products

69 per cent of respondents say they are only spending on essential food and household items currently, while 27 per cent say they have purchased other items besides food. They mentioned that current ongoing promotions and sales provided them with great savings they didn’t want to miss. This is supported by a survey that we also conducted on a similar topic. Respondents to our survey were also focused more on purchasing items like packaged food and household items while cutting back on non-essential items like fashion.

Our 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 levels. Vase.ai’s study showed that popular online grocery stores included Tesco Online and Mydin Online. 60 percent of them reported they shop both online and offline, while 5 per cent shopped online only. Popular online grocery stores included Tesco Online and Mydin Online among vase.ai’s respondents.

But what about the 27 per cent who are buying more than just groceries? These products have more to do with how people are adapting to their new lifestyles.

While hand sanitisers, masks and cleaners represent more reactive health management products, products like health supplements and vitamins represent more proactive health-minded purchases, according to Nielsen20. Purchasers of these want to maintain their immune systems and overall health to reduce the likelihood of becoming infected.

40 per cent of our respondents mentioned that they’ve stepped up purchases of health supplements ever since the outbreak began. This is further supported by a spike in searches21 for health-related topics, including vitamin C during the week the MCO was imposed.

Google Trends Health MY COVID-19 2021

For those who are working from home more, tools such as monitors that can make telecommuting easier are likely to be sought after. In this case, a Google Trends report shows that search traffic for ‘computer monitors’22 saw its largest spike in traffic in 5 years around the time of the MCO. Besides monitors, it’s likely that other products that assist in telecommuting such as headphones and other computer accessories may see a spike in demand during the MCO.

Google Trends Computer Monitors MY COVID-19 2021

Another notable activity here is DIY home repair. MR. DIY, a popular store that sells primarily DIY hardware as well as other home and living products such as gardening tools was previously not open during the MCO. On the 31st of March23, Netizens pointed out the importance of having access to DIY hardware to fix any emergency issues their homes could face, such as broken pipes or lighting issues.

The government eventually allowed24 these stores to be open on Mondays and Thursdays each week. With Malaysians still needing DIY items during and after the MCO, this could be a potential opportunity for eCommerce merchants to tap into in Malaysia. 2021’s lockdown sees retail still being allowed to open, albeit with restrictions on the number of people in the store at any given time.

Changes to Consumption Habits and Consumer Sentiment

While the previous product categories discussed are likely bought by vase.ai’s survey respondents, most Malaysians have cut back on spending in general, and may likely only gradually go back to their initial spending levels after the MCO ends, predicts the Department of Statistics Malaysia.25

The MCO is currently still ongoing in 2021. Fitch Solutions26 estimates that consumer spending will recover over 2021 in light of the increasing cases seen in recent months this year, which means that most of the points mentioned below are likely still applicable this year.

The Socio-Economic Research Centre also posits that Malaysians are likely to continue saving until they feel more secure about their job security and income. Until they feel less anxious about the future, expenditure on big ticket items, such as renovations, housing or vehicles are also likely to be impacted.

Travel-related purchases are likely to remain low. Travel restrictions will likely still be in place as the rest of the world comes to grips with how to handle COVID-19. Many are likely to continue to save until the situation and consumer confidence returns. In fact, research by Picodi27 found that searches for foreign language courses also dropped by 39 per cent during this time, which they attribute to loss of international travel interest.

With a heavier reliance on online shopping now, Malaysians are also showing greater expectations on merchants and logistics partners to be more communicative during the eCommerce experience. From our survey, two-thirds of our respondents expect eCommerce players to be more communicative.

Some of the reasons they provided for these expectations include believing that the MCO is a great opportunity for eCommerce merchants to gain loyal customers from the larger market of Malaysians going online during this period. They also believe that fast responses, setting the right expectations from the get go, and keeping customers assured would be good ways to achieve this.

Malaysians have also increased their consumption of online content as well. The Malaysian Communications and Multimedia Commission28 (MCMC) noted that demand for bandwidth increased ever since the MCO was imposed on March 18th. Malaysians appear to be spending more time on social media, playing games on devices, or streaming shows on platforms like Youtube and Netflix.

According to the same Picodi study, podcasts, PC games and online games all saw large increases in search traffic. Our earlier point about Malaysians inspiring each other to try different recipes online also shows that they are making more use of social media during this period as well.

Opportunities Created

The broadband usage report by the MCMC and the consumers we surveyed pointed out that the MCO period sees a larger number of people spending more time online. This presents a great opportunity for merchants to focus on online channels for sales and marketing and also to engage audiences in a meaningful way.

Online Channels for Sales and Marketing

With non-essential stores like fashion, consumer electronics and home and living becoming harder to access during the MCO, online advertising is definitely the way to go. In fact, in 2020 Shopee’s 11.11 sales saw transactions grow 1939 percent year on year compared to 429 percent in 2019.29

With non-essential stores like fashion, consumer electronics and home and living becoming harder to access during the MCO, online advertising is definitely the way to go. We Are Social’s30 2020 Malaysia report mentions that the most used social media platforms are YouTube, Facebook, Instagram and Twitter. Whatsapp and Facebook Messenger are Malaysians’ two most used messaging apps.

We Are Social’s report also showed that 85.5 per cent of Malaysians only access Facebook via mobile, so you’ll want your ads or your content to be optimised for mobile experiences. Malaysians’ high usage of Whatsapp can also be an opportunity for you to create viral content if you’re able to produce posts that resonate with them.

Engaging Audiences in a Meaningful Way

People are more willing to share posts, stories or videos of things that are useful or relevant to them or even empathise with what they feel like on the inside.

For instance, during the earlier stages of the MCO, helpful tips and memes on safety and social distancing were all over the place. Smart copywriting and clever visuals were seen by how brands like Celcom, Telekom Malaysia and INTI International University and Colleges made changes to their logos31 to remind people to stay home.

Brands like Nike32 pivoted their brand messaging to encourage more people to stay home. Brands started making subtle changes to their logos as a way to remind people to stay home and stay safe. IKEA33 began posting ‘home-made’ videos about home to encourage the same message.

Some eCommerce marketplaces and merchants have also been quick to recognise people’s need to work comfortably from home. Products like computer mice, monitors, printers, chairs, adjustable laptop stands, and portable hard disks among others are now being widely promoted.

Companies have also been using this opportunity to conduct themselves in a socially responsible way. Many companies who are able to spare resources to help keep people safe or even assist front-line workers have been doing so. One example here is from Fatimah Mohsin34 of Propup Store, who is making and distributing reusable masks to frontline workers facing the outbreak head-on.

What eCommerce Businesses Have to Do to Be COVID Proof

While the outbreak and the recent restrictions have put an initial damper on spending, eCommerce merchants can still take a number of steps to thrive during these uncertain times.

Demand-side

On the demand side, merchants can make use of Malaysians’ increased time spent online by focusing on the channels where their customers are at. Facebook and Whatsapp can be powerful tools to spread organic content if you’re able to create content that resonates with what Malaysians want to express.

Tailor your communications to reflect that you understand the issues that matter and remember to engage potential buyers in a meaningful way. As Malaysians expect eCommerce merchants to be more communicative during the outbreak, remember to provide frequent and timely updates. These shouldn’t just be on promotions, but also the status of the deliveries. Setting the right expectations for the buyers from the get-go will go a long way.

Supply-side

Ensure that the logistics service provider that you are working with has a business continuity plan in place and safe practices to remain reliable during this period. Usual procedures include shift work arrangements, ensuring workers have masks and other protective equipment on-hand, and regularly scheduled disinfecting of the premises and equipment.

As a contingency, you should also consider having more than one service partner or work with a partner that has a wide network to ensure capacity. This way, in case any one of your logistics providers’ capacity is compromised, they will still have sufficient international freight capacity to carry out your international deliveries. Janio has a wide logistics network across Malaysia and Southeast Asia, which lets us provide merchants with sufficient capacity to weather these uncertain times.

Lastly, with conventional wisdom on what’s best for eCommerce logistics turned on its head, it’s a great opportunity for eCommerce merchants and brands to consult with supply chain experts to find out how they can redesign and further optimise their supply chains this year.

 

Looking to ship internationally throughout Southeast Asia? Contact us to find out how.

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References:

  1. Malaysia Now – 17 sectors allowed to operate under lockdown
  2. South China Morning Post – Coronavirus: China’s southern manufacturing hub facing supply shortage as global fears grow
  3. The Edge Markets – Over two-thirds of Malaysians now more comfortable shopping online after Covid-19 — StanChart
  4. The Edge Markets – Industry 4.0: SME digitalisation: Are government initiatives really effective?
  5. China Briefing – China Extends Lunar New Year Holiday to Feb 2, Shanghai to Feb 9
  6. The Edge Markets – Malaysia manufacturing PMI retreats further in February
  7. Lazada – Seller Help Center
  8. The Edge Markets – Malaysian economy’s supply side seen rebounding in 2021 after 2020 contraction
  9. Supply Chain Digital – The ASEAN Logistics Industry is Turning the Tide on COVID-19 | Logistics
  10. Orders on e-commerce sites delayed, cancelled as China retailers unresponsive
  11. Ibid
  12. Business – Insider – Coronavirus Global Airlines Suspending Operations-as-Demand-Worsens (accessed 16 April 2021)
  13. The Edge Markets – Malaysia Airlines suspends more flights, cancelling over 4,000 in all
  14. Malay Mail – Covid-19 shutdown tests readiness to work from home in Malaysia | Malaysia
  15. The Edge Markets – More than half of Malaysian banks’ staff working from home
  16. South China Morning Post – Coronavirus: Malaysia’s food delivery workers help nation stay connected amid lockdown
  17. New Straits Times – 10 ways Malaysians spend their time under the MCO
  18. The Star – Consumer spending to slowly normalise post-MCO
  19. Vase.ai – Consumer Purchase Behaviour Changes Amidst Covid-19 [Data]
  20. NielsenIQ investigation: ‘Pandemic pantries’ pressure supply chain amid COVID-19 fears
  21. Google Trends – search interest for Vitamin C, Health Immunity from 1st Jan 2019 to 26th May 2021
  22. Google Trends – Computer Monitor search interest for Malaysia from 1st Jan 2019 to 26th May 2021
  23. World of Buzz – Malaysians Are Pleading The Government To Reopen MR.DIY For Their Home Repair Problems
  24. World of Buzz – MKN: Hardware Stores, Spare Part Shops Will Be Open Every Monday And Thursday Starting Today
  25. The Star – Consumer spending to slowly normalise post-MCO
  26. Malay Mail – Malaysia’s household spending expected to make a slow recovery in 2021, according to Fitch Solutions
  27. The Star – MCO: Malaysians Googling new hobbies to fill their time
  28. Malaysian Wireless – MCMC observed High Internet Usage in Malaysia during MCO Period
  29. New Straits Times – Business Malaysian e-commerce industry continues to flourish, says Commerce.Asia
  30. We Are Social – Digital in Malaysia: All the Statistics You Need in 2021 — DataReportal – Global Digital Insights
  31. Marketing Interactive – Malaysian brands and agencies put a fun twist to logos to reflect social distancing
  32. Digiday – Play inside: Sports brands like Nike pivot to encourage social distancing
  33. Marketing Interactive – IKEA uses home-made videos to promote stay at home
  34. Berita Mediacorp – Pereka fesyen Fatimah Mohsin sasar jahit 600 pelitup muka bagi pekerja barisan hadapan
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