MOBILE phone retailers are gravitating towards e-commerce as they grapple with high operating costs such as rent due to the prolonged movement curbs.

Many have closed some of their physical outlets to cut their losses.

Malaysia Mobile and Communication Association (PPTM) president Ng Keng Soon said about 30% of shops in urban areas have closed while up to 15% of shops in rural areas are shuttered.

However, he said it is difficult to gauge the exact number of closures.

“The losses registered will only be known after Chinese New Year. The government’s containment measures have failed and the industry is taking a wait-and-see approach as it is unable to operate without capital.”

He told The Malaysian Insight that sales were below par at outlets during the movement-control order (MCO).

This led businesses with multiple branches to close some outlets.

For example, some stores with 10 outlets closed nine and maintained only the head office.

“Many businesses are turning to online sales but there are also drawbacks. Although online sales save on rental cost, there is a lot of competition among players within the same industry.

“Therefore, advertising is necessary. However, there is no guarantee that a RM300 to RM400 advertisement might even rake in a RM1 sale,” he said.

The mobile phone industry turned to online platforms simply to survive and not to make money, said Ng.

Profits are low while the cost of running a mobile phone business is high.

“Malaysian sellers are resilient. They switched to online platforms when sales started to dip. They have been selling things through live streams. This is simply to maintain operations, not make a profit.

“They cannot maintain the rental cost of their physical stores through the money made through online sales. So, they have to let go of staff, maintain cash flow and close non-lucrative branches,” he said.

According to Expert Phone’s Jason Ho, since the implementation of the MCO on March 18, 2020, the company closed down 15 of its 18 retail stores in Terengganu and Kuantan.

Currently there are only three stores in operation.

He has no intention of renewing the lease for the stores once it expires.

“In order to maintain the company’s cash flow, and with no end to the pandemic in sight, the company has decided to close its branches. The profits in this industry are less than 10%, and the billing period for the goods is short so cash flow is very important.

“Rental accounts for 50% of the operating cost and employees and other expenses also account for nearly 50%. At least 40 employees will be laid off. Although e-commerce is not costly, there are problems with trust and quality among customers. The elderly customers may not be familiar with online buying, and they prefer to go to physical stores.”

During the MCO, customers’ purchasing power increased, Ho said.

People started spending on phones and tablets for school from the i-Sinar withdrawals.

He said the requirement to have lessons online boosted sales.

“As people work at home and stay at home for long periods of time, online shopping is another option for them. We are gradually turning to the online business, but we cannot service devices. So, mobile companies must find a way to complement online and offline offerings.

“The online customer base can be broader, but we can’t retain regular customers. The offline customer base is from the local community.”

The industry cannot rely solely on mobile phone sales but should also diversify their businesses to include home appliances to survive, said Ho.

Another mobile phone company owner, Ray Chua, said that 90% of sales are from physical stores and only 10% are online.

Nevertheless, the rent and labour cost is high at physical stores.

However, he said that he was lucky to have survived the pandemic, albeit with a significant decline in income. – February 4, 2021.