INITIAL expectations that the movement control order (MCO) to curb the Covid-19 pandemic would see e-commerce platforms replace brick-and-mortar stores are fading, as retail sector players note a drop in online shopping, now that movement restrictions have been eased.

They told The Malaysian Insight only the e-commerce platforms that specialise in certain products may outlast their traditional physical competitors. When it comes to items requiring customisation, online stores may be no match, industry players said.

Malaysia Retail Chain Association (MRCA) deputy president Liew Bin said online sales are typically insufficient to cover a retailer’s operation costs.

Taking the food catering business as an example, this sub-sector performed very well during the pandemic lockdowns but when they were charged a 30% to 35% levy on their sales by delivery partners, they were unable to cover expenses.

“By now, everyone has been home for more than a year, and they are very tired of take-outs. People are more inclined to eat out,” said Liew.

“Unless you have a suitable product when you start your online business, and you have your own brand, it can be hard to generate income,” he added.

He expects traditional retailers who began online platforms during the pandemic to return their focus to enhancing their physical stores, as movement restrictions ease further. However, some would likely retain their online platforms as another revenue stream, Liew said.

Other sectors that might be impacted after vaccination becomes more widespread include transport service providers, who enjoyed a boon during the pandemic.

“As more and more people go out to eat and shop, online orders will decrease and this will affect those in transport and logistics,” Liew said.

Facing competition

Traditional retailers can focus on customisation and branding to avoid being replaced by e-commerce competitors, Liew added.

For restaurants, improving the dine-in experience is something online food deliveries cannot replace.

“For retail to compete with e-commerce, the key lies in distinguishing characteristics and customisation, which cannot be easily replaced.”

For similar reasons, Hong Chee Meng, the president of the Federation of Sundry Goods Merchants Association of Malaysia, believes online shopping platforms such as Shopee and Lazada will not become competitors of traditional grocery stores.

“These platforms will only lower the prices of certain products like Milo or certain brands, but not other goods. Some shoppers buy these items on sale online, and then resell it to mini markets.”

Hong added that transport costs are high, too, which is why despite selling goods cheap online, online shopping platforms are not able to replace physical sundry shops and supermarkets.

“For example, Shopee has done a good job in selling clothes, bags and shoes, but they have not been able to perform well in selling groceries,” said Hong.

Consumer behaviour is also such that when buying food and groceries online, people tend to compare prices and will only make a purchase if an item is significantly cheaper, he added.

However, there is a limit to how big a discount online platforms can offer, or they will have problems with wholesalers, Hong also said.

Wong Keng Fatt, the president of the Kuala Lumpur Vegetable Wholesalers Association agreed that customers prefer shopping in person at the market for fresh food.

During the pandemic last year, online purchasing of fresh vegetables delivered to the doorstep was popular, but now it is not easy to sell produce online.

Meanwhile, Hong said the signs are evident that physical retail stores are making a comeback.

“Lot 10 has opened Don Don Donki (a Japanese chain store) and Wanda City will open CU (a Korean convenience store).

“If it were true that small retail stores are having a bad business outlook, they would not be coming in, and there will be fewer and fewer chain stores opening in Malaysia,” Hong said.

Last year, Malaysia was touted as one of the five largest e-commerce markets in Southeast Asia. Total transaction volume last year doubled from RM3 billion to RM6 billion due to the pandemic, and this year it is expected to approach RM10 billion. – April 26, 2021.