Feeding the e-commerce machine

SMALL and medium enterprises (SMEs), whether on purpose or not, play a vital role in the socio-economic development of many countries.

Today, SMEs account for over 97% of all enterprises, employing more than 66% of all the workforce across the Asia-Pacific Economic Corporation (APEC) countries.

By focusing on the creation and growth of SMEs, governments have been able to increase wealth generation, market access, job creation and skills development.

Increased access, diffusion, and intensity of Internet use have, for the most part, directly contributed to the growth of e-commerce businesses. This in turn has resulted in positive results for entrepreneurs, especially youths.

Though e-commerce was initially developed as a mechanism to facilitate business transactions, the “digital economy” has since evolved into a powerful tool to create jobs and improve livelihoods.

It has enabled aspiring entrepreneurs to overcome barriers to market entry and to diversify their income streams. Traders have been able to generate demand for handicrafts through websites, connect to funders to drum up capital, and carve out a niche in new and expanded markets.

Combined with an enhanced ability to acquire resources, SMEs in developing economies can now readily plug into local, national, and even international supply chains.

Doing so not only expands SMEs’ delivery of goods but also employs more people to generate sustainable livelihoods that raise countries’ standard of living.

Indeed, the growth and strengthening of e-commerce holds great potential not just for business but for global development as well.

The Internet acts as a catalyst for a more connected world. It breaks the traditional geographical and business barriers by opening the market to SMEs like never before.

E-commerce connects vendors, businesses and manufacturers directly to the end users. It bypasses the traditional retail supply chain, increasing the profit margin for producers and bringing down prices for consumers.

But in Malaysia, even with highspeed broadband penetration surpassing 70% of the Malaysian population, it is estimated that only 5% of Malaysian SMEs are venturing into e-commerce. This must change.

Having a fast Internet connection and a reliable computer is not enough. In the age where information is transferred and spread in a matter of seconds, consumers expect their products and services to be delivered fast. Imagine if Netflix took between three and five working days to deliver a movie to its subscribers, where would it be today?

SMEs must have the necessary tools to adapt to e-commerce. Manufacturers who are used to producing in bulk to distributors and wholesalers may have to learn to quantify their production line into smaller batches to serve the requirements of online orders. The traditional documentation method of receiving an order or quoting a price to a customer must be changed.

Hotel booking apps and flight bookings would not be where they are today if customers are required to wait for an email to get the best quotation for a ticket or room.

It is important for Malaysian SMEs to understand that ordering through Whatsapp is not e-commerce. If you want a long-term and sustainable digital trading platform, you need to invest in more than just a smartphone.

Apart from adopting the basic business methods and operations to match the fast-paced digital transaction, SMEs need to also match their production and delivery time to complement the digital business ecosystem.

This is where the last-mile factor is important, from picking up an order from a vendor to delivering the goods to the customer. Almost anyone can start a trading website yet very few can actually guarantee a reliable delivery system.

This is where everyone needs to play their part, from the business community up to the Government. An efficient last-mile delivery ecosystem needs efficient infrastructure, from good roads and rail lines to smooth commuting traffic.

Bureaucracies also need to be cut down and simplified. Processes that would usually take days to complete need to be trimmed down to hours. Of course, businesses cannot be limited to operate only during weekday working hours.

The Government must also adapt to these requirements. We cannot compete with the rest of the world if our businesses cannot export their products every first Saturday of the month or during extended festive holidays.

When we look at successful big players like Ali Baba and Amazon, we see large multinational corporations with huge capital investing in algorithms and efficient online trading platforms.

We often do not see that beneath the big names are thousands of SMEs that feed the great big e-commerce machines. From producing good, reliable and high quality products to having a robust and efficient last-mile delivery and pickup system, these vendors and businesses are key in ensuring the continued success of the big brands and names.

Malaysian SMEs must also realise that we are competing with the rest of the world and not just the shop across the street. Consumers now can access products from companies that are thousands of miles away who offer competitive prices.

Although the challenges may be much tougher today, we must also realise that the opportunities are much bigger as well. We must think beyond just being a market leader in our district, state or even country. We have to go global.

Asean alone has a population of over 600 million, a market that is 20 times bigger than Malaysia. Malaysian SMEs must take advantage of the Digital Free Trade Zone to access this huge market.

For us to achieve the goal of being a high income nation, we must break the business and traditional trading barriers. I wholeheartedly believe that e-commerce is the key.

KHAIRUL AZWAN HARUN Pemuda Umno Kuala Lumpur