three_common_ecomerce.htm

When it comes to e-commerce, there is still a lot of skepticism and disbelief among Malaysian entrepreneurs, especially in the small business and home-based business segment. Most Malaysians have jumped on board the Internet since 1994, and the government has aggressively introduced plans to promote Malaysia as the e-commerce and technology hub of the region.

However, after more than 10 years since mainstream entrepreneurs jumped on the Internet bandwagon, and after the government's Multimedia Super Corridor mega-project caught the attention of the world, there is still skepticism when it comes to starting an e-commerce business here.

Here are the common e-commerce myths in Malaysia:

E-COMMERCE MYTH #1: Malaysians Don't Shop Online

It's difficult to believe that even though Malaysia was one of the first to introduce Internet-equipped "Smart Schools" and affordable broadband in the region, the general public is under the impression that Internet shopping is for the Americans and the British, and not so much for Malaysians.

During my conversation with a few start-up entrepreneurs in Kuala Lumpur, most of them voice the concern that the "national pastime of Malaysia," which is shopping in mega-malls and superstores in the weekends, is the primary influence to online buying behaviur, or the lack of it.

Why would people want to buy on the Internet when they actually like going to shopping malls in the weekends, preferring to spend "quality family time" browsing and window-shopping from morning till evening? While this may be true to some extent, the underlying cause of dismal online shopping is not in consumer behavior; it is in the unique benefits of what you have to offer online.

The more tech-savvy and informed Malaysians have been buying online for years. I bought a $3,000 electric guitar from GuitarTrader.com and regularly purchase from Amazon, not to mention advertising dollars spent on PPC and software programs for my online business. I estimate that I have spent more than $8,000 online over the past 5 years, and many people I personally know, as well as several entrepreneurs I have spoken to, spent similar amounts in the same time frame.

The key to this spending behavior is that all the products and services I bought online cannot be easily obtained in local supermarkets and retail stores. So, I turned to the Internet, where I had access to these, and as long as the shipping costs were reasonable, the decision to buy online was clear to me.

Another key to gauge online shopping behavior is the widespread use of credit cards in Malaysia. Although there are many different online payment options, credit cards remain the most widely accepted payment medium. Most start-up entrepreneurs are under the impression that the majority of the population either do not have credit cards, or are not using them online. The following research will indicate whether that statement is a fact or a mere myth.

Yahoo recently did a financial survey on online spending habits on a random group 3,486 Malaysians. The Yahoo Financial Survey of Malaysia clearly states that

Almost 50% of surveyed Malaysians have at least one credit card.

35% of those surveyed have more than one credit card.

Most are comfortable with online shopping and would prefer to conduct online purchases with a credit card.

Online shopping was reported as the number one use of credit cards, ahead of dining, travel and offline shopping.
This would give you an indication on the real situation in regard to credit cards and their usage for online shopping. In fact, how often can you take a stroll in Kuala Lumpur without coming across booths put up by banks and credit card companies? How many major employers in Malaysia are affiliated with various banks to have co-branded credit cards available to their employees?

Although the Yahoo survey is based on visitors to their Yahoo Finance portal, the big sampling size ensures the findings are interesting and useful for the e-business entrepreneur in Malaysia. Another research done by Euromonitor suggest this:

"The rate of growth of Malaysia's financial cards market will generally be in sync with the growth of its domestic economy...".

This means that the use of credit cards is expected to experience a growth of 5-7% yearly, which is the actual GDP (Gross Domestic Product) growth in Malaysia for the past few years since the nation recovered from the economic crisis of 1997.

Is there a future for online shopping in Malaysia? Yes sir, there is. But, you can expect Malaysians to do so only if the product or service cannot be easily obtained in the places they patron locally. The product or service that they can get online, inclusive of shipping charges, must represent value to the consumer. If the Internet is the only place where they can get that value, they will fill up that order form.

Isn't that how e-commerce works in most countries anyway?

E-COMMERCE MYTH #2: Online Credit Card Transactions Are Not Safe

In the early days of the Internet in Malaysia, there were many credit card fraud cases which biased the public's opinion on using their credit cards for online purchases. And in most cases, these fraud reports were true.

The sad part is that, 10 years later with 128k bit encryption technologies and SSL (Secure Socket Layer) implemented by almost all payment gateways as the standard for online credit card transactions, the Malaysian public is still skeptical. For most, the old wounds never heal.

The general public though, is not aware that they are more likely to face fraud using their credit cards in petrol stations and roadside kiosks than they are on the Internet. Due to lack of information and educational measures by the government, this myth is fast becoming a fact in Malaysia, much like a self-fulfilling prophecy.

According to the Euromononitor study (2004):

Financial card fraud in Malaysia is amongst the highest in the world. Over the review period, the year-on-year value lost to fraud has been steadily climbing, collectively realizing a hefty sum to the tune of RM242.5 million.

Over 5 years of spending on the Internet myself, I have not faced a single fraud case or made a chargeback for unauthorized purchase, even though some friends who have never shopped online do so on a regular basis and had to change their card many times.

The point I would like to make is that there is nothing wrong with the Internet, but rather there is something wrong with the financial security situation in Malaysia itself. Affiliate marketers in Malaysia would testify to the fact that most affiliate programs have stopped accepting Malaysian registrations, and the list includes Commission Junction, ClickBank, and many more.

E-COMMERCE MYTH #3: The Malaysian Market is Too Small

One fundamental flaw in the thinking of most Internet based small business and home business owners is the tendency to "think Malaysia." Most of them have difficulty getting to grips with the fact that the Internet is global in nature and that their e-commerce venture has much more potential than a market of 24 million people.

Putting that aside, lets analyze the Malaysian market itself. According to NITC, approximately 62% of the Malaysian population (8.7 million people) is already on the World Wide Web as of 2003. This alone is a sizeable market for any local business, especially an Internet-based one. If an entrepreneur manages to stake a very small percentage of that market, called a niche market, and fill their needs, then it's possible to have a healthy e-commerce business.

The success of companies like Blooming.com.my puts many things into perspective. Firstly, all you need to succeed in the Malaysian market is to find a niche market that has no other viable alternative other than to buy your products or services online. Blooming did this by targeting overseas students and executives who needed to buy last-minute flowers and gifts for their loved ones in Malaysia. Instantly, they became the number one online gift shop for overseas Malaysians.

The second lesson is that for any online business to succeed, a large amount of offline advertising is needed. Remember those advertisements on buses, bus stops, road signs and print ads about the company? Some of them are still around till today. Online advertising is also crucial, but the money is still in the offline audience and how you get them to go online to your Website to purchase products and leave their contact details as a potential future customer.

More recent successes like MusicCanteen.com also points to the same direction. As long as you can fill a niche market with a unique need that cannot be satisfied with offline products and services, your chances of e-commerce success significantly improve. In the case of MusicCanteen, they offer easy downloads of digital music for unknown local artists that is scarcely available offline. With a profit sharing model with the artists themselves, MusicCanteen acts as merely a platform to connect music lovers with their favorite bands or singers. The formula seems to be working so far.

Conclusion

The fact is that although the government has made major efforts in bringing the Malaysian public online, they never told them what to do after they got connected to the World Wide Web. Education is what the public really needs, and constant campaigns should be made to ensure that the public is educated about online shopping and security, e-commerce start-ups, and how to find and research information on the Internet.

Entrepreneurs cannot be expected to fight the battle alone, and until the government steps in with solid measures, these e-commerce myths will prevail.

Sources

Euromonitor International, "Financial Cards in Malaysia," May 2004. http://www.euromonitor.com/Financial_Cards_in_Malaysia#

Yahoo Financial Survey, June 2004. http://sg.solutions.yahoo.com/download/
survey/malaysia_finance_survey_june2004.pdf

Reyna, Steve Ma., "Red Flags For e-Fraud." http://www.powerhomebiz.com/vol61/efraud.htm

MyMoneySkills.com. "Protecting Your Payment Card." http://www.mymoneyskills.com/visa/
my/en_US/card_security/payment.shtml

The Star. "Internet Access for All Schools." http://thestar.com.my/news/story.asp?file=/2005/3/30/nation/10545983&sec=nation

Internet World Stats. "Malaysia Internet Usage Stats and Marketing Report." http://www.internetworldstats.com/asia/my.htm

Gobala Krishnan is a freelance writer, Internet marketer, and home business entrepreneur based in Kuala Lumpur, Malaysia. Visit his personal portal http://www.gobalakrishnan.com