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Domestic Niche Players Jump Start Malaysia's B2B E-commerce sector

With the global players failing to make an impact, several local start-ups have emerged to fill the B2B e-commerce gap.

Photo: Online fraud remains a real bar to the growth of e-commerce across Malaysia.(Shutterstock.com/shahreen)
Online fraud remains a real bar to the growth of e-commerce across Malaysia.
Photo: Online fraud remains a real bar to the growth of e-commerce across Malaysia.(Shutterstock.com/shahreen)
Online fraud remains a real bar to the growth of e-commerce across Malaysia.

Malaysian SMEs are increasingly turning to e-commerce as one of the primary channels for growing their businesses, according to the SME Corporation Malaysia, the Ministry of International Trade and Industry Malaysia's central co-ordinating agency for nurturing and developing the small-business sector. Despite this largely upbeat assessment, though, many believe that B2B e-commerce has yet to truly take off in the country.

According to Bank Negara, the country's central bank, some 50% of Malaysian firms had some form of digital presence – websites, email addresses or online contacts – by the end of 2015. Less impressively, though, only 5% of Malaysian companies are actively involved in e-commerce. Chan Kok Long, Executive Director of iPay88, a Kuala Lumpur-headquartered provider of online payment services, however, predicts that the number of Malaysian companies involved in e-commerce will double by the end of this year, representing some 10% of the total number of registered firms in the country.

A number of analysts and investors believe that the relatively low penetration of B2B e-commerce across the country represents a real opportunity for both global businesses and local companies to make real inroads in the sector. In line with this, there are now signs that several local start-ups are already building successful niches for themselves. Many of them also offer overseas suppliers quick and cost-effective access to a range of lucrative niche markets.

These niche players are thriving in areas where the global platforms – most notably Alibaba, which has a dedicated Malaysian service – are failing to deliver. In April this year, Alibaba took a controlling stake in the Lazada Group, one of Southeast Asia's most high-profile B2C e-commerce players. Despite this, it is yet to really make an impact in the B2B arena.

One niche player finding real B2B success, though, is Red Wheels Trading, a company with a focus on providing rain and safety wear solutions to Malaysia's corporate industries. Targetting quite a different niche is zilzar.com, which supplies halal food products to catering businesses in Malaysia and Indonesia.

A relative newcomer to the scene is AsiaTradex.com. Launched just over a year ago, it acts as an online marketplace for a broad range of machinery, equipment and supplies.

Despite these promising start-ups, the country's e-commerce sector is still seen as facing a number of key challenges – particularly with regard to investment, skill shortages, technical expertise and lingering concerns over online fraud. Focussing on these challenges, Michael Kang, National President of the SME Association of Malaysia, said: "These barriers to adopting e-commerce are turning off business owners and investors. To be truly successful, e-commerce requires considerable investment, as well as a high level of technical and management skills.

"It's also vital that businesses learn how to integrate e-commerce into their existing business operations in ways that add value. Having said that, I can see a number of reasons to be optimistic at present."

With concerns over fraudulent transactions and fake products also making local business owners wary, the Malaysian government has enacted a number of bills designed to protect online businesses and buyers. Chief among these has been the Electronic Commerce Act (2006) and the Personal Data Protection Act (2010), both of which protect businesses and consumers from fraudulent transactions as well as from any privacy or security violations.

Geoff de Freitas, Special Correspondent, Kuala Lumpur

Content provided by Picture: HKTDC Research
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