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Cross-border Shipping or Local Distribution? Logistics for Health and Beauty Products into Malaysia

Benedict Leong

Logistics for Health and Beauty Products into Malaysia

Malaysia Health and Beauty eCommerce Shipping Cross-border Shipping or Local Distribution

Malaysia – being Southeast Asia’s third-biggest market – still offers decent eCommerce opportunities for health and beauty products. Our earlier articles covered why our target audience is buying various health and beauty products, but their online shopping experience is incomplete without the delivery.

There is a huge variety of ways to ship a product to your customer, but here we’re breaking it down to two general categories: cross-border shipping and local distribution methods. Both have their pros and cons, and there isn’t a one-size-fits-all solution as your choice depends on a variety of factors.

Before we carry on, it’s important to define what cross-border shipping means. Cross-border shipping means that your inventory is not stored in the destination country, and needs to go through customs before it reaches your customers. Local distribution, on the other hand, means that your inventory is stored in the country itself then delivered straight to customers within the same country.

Infographic flowchart comparing cross-border shipping or local distribution

Considerations When Choosing What’s Best for Your Health and Beauty Deliveries

 

Where are your customers located and what’s your delivery volume like?

This point depends on whether you have an established customer base in Malaysia and where they’re located. If you have a large customer base that provides regular demand located in the same region of Malaysia, it makes sense to invest in speeding up their delivery experience by putting your distribution centre closer to them. One example here is likely the Klang Valley, which a Malaysia Communications and Multimedia Commission survey1 found has the highest adoption of eCommerce in Malaysia.

Local distribution also works if you need to ship large quantities of inventory into Malaysia to serve the market. If your volume is large enough, shipping that inventory in bulk to a local distribution centre then delivering it locally from there will end up being the cheaper option.

Bulk freight: air freight vs sea freight

Air freight:

For many eCommerce merchants, air freight is the transport mode of choice as it provides fast and reliable deliveries. West Malaysia’s main airport is Kuala Lumpur International Airport2 (KUL), Sarawak has Kuching International Airport (KCH) while Sabah has Kota Kinabalu International Airport (BKI).

Sea Freight:

Sea freight is cheaper but much slower than air freight. Consider your health and beauty inventory requirements and shipping model before picking this option. Malaysia’s primary port in the Klang Valley is Port Klang3. Sarawak’s main port is Kuching Seaport (MY KCH) while Sabah’s main port is Kota Kinabalu Seaport (MY BKI).

Cross-border Trucking:

West Malaysia has road connections with Thailand and Singapore, so line haul trucking is a viable transport method of delivering to the Klang Valley if your warehouses are in those countries. This transport method is cheaper than air freight and faster than sea freight, but only if your warehouse has access to Malaysia’s road network.

However, setting up local distribution networks comes with time and money investments, such as setting up local entities, registering for official documents required to import health and beauty products and setting up warehouses and fleets. You may also need multiple local distribution centres depending on how much of Malaysia you want to cover.

An example here are the states of Sabah and Sarawak. Sabah and Sarawak are separated by an ocean from Peninsular Malaysia and may need their own distribution hubs if you have high demand there as well.

Another thing to bear in mind is that these make up a hefty upfront investment and can be risky if demand for your products isn’t as high as you expected it to be.

If you’re in the process of building up demand in the country, it may make sense not to commit any major investments into warehousing until you have more data on where most of your customers are. If this is the case, it makes sense to use direct to consumer cross-border shipping as delivery charges are only incurred on guaranteed sales. While this method is not as fast as delivering from a nearby warehouse, it carries much less risk if your demand estimates are wrong.

Pay for shipping only for confirmed orders with Janio’s flexible, end-to-end cross-border shipping services tailored to your company’s shipping needs! Contact us to find out more:

Talk to Us

On the other hand, you also need to factor in where your inventory is stored when making these operations decisions.

Where is your inventory for Malaysian consumers stored?

Where your products are shipped from – the origin – also has an impact on the kind of shipping methods you should use. Distance to your customers and the frequency of deliveries to your target country are just some of the things to bear in mind when it comes to where your inventory currently is stored or should be stored.

If you currently have a hub that can serve multiple countries in Southeast Asia, such as in Singapore, it becomes easier for you to ship products cross-border into Malaysia. This is because a hub like this is close enough to Peninsular Malaysia so even cross-border deliveries can be achieved within the week.

Most of the time, if you’re planning to serve the region with one centralised hub, it makes sense to store your items in a free trade zone warehouse or bonded warehouse. Items stored here are not counted as entering the borders of the country itself, and hence do not incur taxes like Sales and Service Tax until they officially enter the country’s borders.

Distance to your destination isn’t the only thing to bear in mind when it comes to the location of your regional hub. Different locations have pros and cons, such as different schedules for shipments to different destinations. Singapore, for instance, has frequent flights to most of Southeast Asia, in particular Malaysia. Hubs in countries like Indonesia have lower labour cost and offer better rates.

On the other hand, if delivery speed to your regular customers is paramount, then it makes sense to have your local distribution centre closer to your customers. Since you’re delivering to Malaysian customers to begin with, you’ll be incurring taxes on these shipments anyway. With that in mind, local warehouses make sense.

How fast do you need to set-up your Malaysian health and beauty product supply chain?

There’s a huge difference in time taken to set up cross-border shipping capabilities and local distribution capabilities into Malaysia. If you urgently need to start shipping into Malaysia, cross-border shipping via a network partner can be set up in just a few working days. Local distribution has more steps involved and can take months to properly set up.

Cross-border shipping your health and beauty products directly to your Malaysian consumers requires a lot less paperwork and preparation steps compared to local distribution. If you’re planning on working with a shipping partner for this, you’ll need to find one with a strong local presence and an extensive and proficient network in Malaysia. Finding one with a strong network in the Klang Valley would be quite helpful.

Malaysia’s de minimis value is MYR 500, which means that any deliveries to consignees (a.k.a recipients) which are below this amount are not charged additional taxes. If each of your shipments to each of your Malaysian customers are below MYR 500, Malaysia’s de minimis value, your shipments should be able to move through customs without much hassle or additional paperwork. If you’d like to find out more about customs clearance to different countries in Southeast Asia, you might want to check out our recently updated SEA customs clearance eBook.

Some health and beauty product types may also incur duties and taxes. For one example, fitness supplements incur a 15 per cent import duty and 5 per cent SST which needs to be paid at customs before it can be released into the country. Most health and beauty products incur a Sales and Service Tax (SST) ranging from 0 per cent to 10 per cent, but it’s recommended to check the official Malaysian Customs duties and taxes portal4 to see the exact duties and taxes that apply to your product.

The portal allows you to search for products by description or by HS code. To help you out further, here are some header HS Codes to better make use of the above portal:

  • Skincare and makeup – 3304
  • Health supplements – vitamins – 2936
  • Health supplements like ginseng, protein powders and others – 2106
  • Fragrances – 3303
    • Perfumed bath salts and bath prep 3307
  • Razors and blades – 8212
  • Hair care – 3305

If the demand for your products is high enough to justify setting up your own local distribution centre, you’ll have to go through quite a number of steps to get it ready. Warehouse and fleet preparation is needed as well as finding an appropriate local entity to help with registering with the relevant government agencies.

While you’re likely to be partnering with a provider for local deliveries, preparing the warehouse itself is a heavy upfront investment. Your local partner needs to be registered with the relevant Malaysian government agencies to ensure your health and beauty products can make it through customs and into your local warehouse. This helps with delivery speed in the long run, but we need to bear in mind all these set up steps can take a while to finish.

What Do You Need to Prioritise?

Infographic on when you should choose local distribution or cross-border shipping for your health and beauty products into Malaysia based on your priorities

To wrap up, the choice between cross-border shipping and local distribution is based on what you are prioritising:

When to use cross-border shipping

Cross-border shipping is great for when you need to test the demand for your products in the country and when your time to market is paramount.

Direct to consumer cross-border shipping provides great flexibility and can be set up in just a few days. As you’ll be delivering only once you’ve made an online sale in Malaysia, you only pay for deliveries that already have guaranteed revenue behind them. This reduces the risk of setting up the supply chain as opposed to setting up local distribution operations with incomplete information.

When to use local distribution

Local distribution is best used when you have an established consumer base in the country and want to provide them with a speedy delivery experience.

Local distribution is best used once you’re confident that demand for your products in the country can justify the time and upfront cost of setting it up. By this time, the focus would be on using increased delivery speed to provide a good boost to your customer’s online shopping experience to build customer delight.

To many consumers, delivery to their homes or offices is the moment of truth for the whole shopping experience. You’ll want to ensure that your products make it into their hands safely and without delay. Whether you’re using cross-border shipping or local distribution, look out for the right shipping partner with strong capabilities in Malaysia and good local presence to give your consumers the online shopping experience they’ll come back to you for.

Want to test the demand for your cosmetics via cross-border eCommerce to Malaysians, but don’t want to be bogged down by sunk costs for logistics set up?

Pay for shipping only for confirmed orders with Janio’s flexible, end-to-end cross-border shipping services tailored to your company’s shipping needs! Contact us to find out more:

Talk to Us

 

References:

  1. Malaysia Communications and Multimedia Commission – E-COMMERCE CONSUMERS SURVEY 2018
  2. Ministry of Trade Malaysia – List Of Airports
  3. World Port Source – Map of ports in Malaysia
  4. Jabatan Diraja Kastam Malaysia – HS Code Explorer
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