Momentum Works Jianggan Li believes that there is always room for growth in the e-commerce market.
PETALING JAYA: It came as no surprise that eCommerce took off and experienced a boom during the Covid-19 pandemic in 2020 which had forced brands and businesses to evolve.
Fast forward to 2024, the eCommerce industry is on a sustained growth path.
Estimates showed that the sector’s contribution to the country’s gross domestic product (GDP) had increased to 13.3% in 2022, up from 13% in the previous year.
It is also projected that the country’s gross merchandise value in the eCommerce market will reach US$16bil by 2025, a 23.08% hike compared with US$13bil posted in 2023.
Despite global macroeconomic headwinds, the government will continue to champion the industry’s expansion.
Tough competition
Although these are exciting times for the industry, Momentum Works founder and chief executive officer Jianggan Li said players in the eCommerce space need to be aware of the shifting dynamics to maintain competitiveness while seizing growth opportunities.
He told StarBiz that the success of players will depend on their ability to deliver good customer experiences at a competitive cost structure.
“The four most important pillars of customer experience are selection, speed, quality and savings. I feel that especially in terms of selection and savings, there is a lot more eCommerce players can do to grow the online shopping pie,” he said.
Powerhouses like Shopee and Lazada will continue to lead the market in the region. Shopee, which made its debut in 2015, was reported to have the highest number of visits due to its efficient consumer financial technology operations and strong localisation. Lazada, meanwhile, continued to redefine the boundaries of retail in Malaysia through its tailored experiences in addition to its brand exclusivity.
The rivalry is heating up with the entry of TikTok Shop and Temu. It is imperative for industry players to adapt to the constantly changing market trends and the wider spectrum of customer demands in the years to come.
Models to explore
From price wars to rolling out fully-managed models, to fight for the dominance has caused eCommerce players to constantly innovate for better margins.
Li said price wars would not persist and players who will prevail are the ones who could mitigate costs while building on their strengths.
Shopee rose to prominence in 2021 by leveraging on low prices. That approach has come at a hefty price tag as it proceeded to enter a sluggish growth phase due to logistics development and a revenue-generation.
While “shoppertainment” is not a new phenomenon with Shopee and Lazada, TikTok is aiming for dominance in the social commerce space with its short-video format and its powerful algorithm that keeps users scrolling.
Social commerce, as a model, is on the rise and rapidly changing the way brands interact with their audiences.
According to Statista, the social commerce sales value globally is expected to grow at compound annual rate of 30.8% to reach US$8.5 trillion by 2030 from US$992bil in 2022.
However, caution and affirmative policies are needed to ensure data privacy to protect users.
Another interesting model to enter the eCommerce space is the fully-managed model. Lazada is believed to be the first in South-East Asia to introduce the concept under its “Choice” channel, where sellers are supported end-to-end in terms of operations and logistics. Seller insights
To gain some insights, StarBiz interviewed AutoBug Club founder Tan Quan Ming, who operates on both the Lazada and Shopee platforms.
Having been in the industry for almost 10 years, Tan stated he preferred Lazada over Shopee due to its strong integrated back-end system and strong seller community support structures. As an example, he pointed out that in Lazada’s in-house logistics system known as “Lazada Express” or LEX, which notifies buyers an hour before their parcel arrives, has been a plus point from the consumers’ perspective.
“However, it can be a bit difficult for new sellers to operate because it is more complicated compared with Shopee,” he said.
According to Tan, Shopee makes it easy to list as a seller, which is said to be the basis for the platform’s large seller population.
“But this is probably because Lazada requires sellers to have an SSM certification to register while Shopee doesn’t, so there are less controls on Shopee,” he added.
He said seasoned sellers, including himself, typically favour Lazada’s system due to its stronger back-end and features that enable a better showcase of products. Stringent processes also ensure greater transaction security for both buyer and seller.
“Because of this, a lot of the big brands are listed on Lazada. Most people would also prefer to purchase expensive items from Lazada due to its reliable LazMall customer guarantee,” he added.
Future of eCommerce
The challenges faced by eCommerce platforms are diverse, set against a global economic downturn although consumer spending in Malaysia is relatively stable.
Li pointed out that in 2016, many believed the eCommerce battle in China was over with Alibaba owing more than 80% of the market share.
He said barely two years ago, many thought Shopee and Lazada would continue to hold the top two spots in the area, but TikTok’s entry into has given the landscape an unpredictable outlook.
“One thing we do know for sure is the incumbents need to fight a tough battle to defend their market position,” he said.
