GROWING OF E-COMMERCE AND SHOPPING ONLINE:
IMPACT TO THE PROPERTY MARKET IN MALAYSIA
by
DR. AZMIZAM ABDUL RASHID
THE GROWING OF E-COMMERCE AND SHOPPING ONLINE
In a 1997 article, Baen and Guttery predicted that the emergence of the web as an open medium for commerce would threaten the role of the real estate professional as a market intermediary. They predicted that the internet would provide increased consumer access to information which in turn would lead to an increase in for-sale-by-owner (FSBO) listings, and a decrease in the employment and income level of real estate professionals. This prediction was tied to the belief that real estate professionals derived their power from the proprietary information they controlled, and thus this power and their position on the supply chain would diminished once this information became more accessible on the internet. At the time this sentiment was echoed by the National Association of Realtors (NAR). When first faced with the emergence of the internet in the industry the NAR fought to prevent the release of the coveted Multiple Listing Service (MLS). In 2003 the NAR proposed bylaws, that according to some, “illegally adopted rules that would discourage new real estate sales practices, including home sales over the internet and discounted realty services” by allowing real estate professionals to withhold their listings from online brokers.
In the developed world, 77 out of every 100 people are now connected to the internet2. This high level of internet penetration coupled with a generation brought up online and familiar with the digitally connected lifestyle, we think has led to comfort in sharing their personal details online. With this comfort in using both the internet and sharing personal details, it seems inevitable that savvy retailers would capitalise on these favourable market characteristics. E-commerce, one of the fastest growing market sectors, is to an ever greater extent affecting the pace and trends in development of the domestic industrial and retail market. The dynamic development of the e-commerce sector represents both an opportunity and a challenge for the industrial and logistics property sector. Due to the growth of the e-commerce sector, the existing distribution models are evolving, the time of delivery is becoming shorter and the range of additional services is now expanding. As per the estimates, the e-commerce sector is generating a combined 10-15% of the total annual demand for modern industrial space.
Unlike traditional stores, whose demand for warehouse space is relatively predictable, the e-commerce sector requires much more flexibility. The range of goods, the number of customers, as well as the place of delivery in case of an online shop vary considerably, therefore it is extremely important that warehouse properties be adapted to the changing demand and landlords enable their tenants to increase the space actually occupied in peak times, such as e.g. during the pre-Christmas rush.
Lease costs along with the quality of services are also an important factor as far as the e-commerce sector growth trends are considered. Therefore, many online shops take the decision to collaborate with specialised logistics and courier companies. The vast majority of the key players have a dedicated line of services focused on e-commerce, starting with preparing orders, storage, handling of returns and exchanges, through to management of incoming and outgoing payments, customer services and software management. Outsourcing this type of services means that the costs may be lower than in the case of managing the entire supply chain internally, as it allows the online shops to concentrate on their core business, which is the selling of goods and services.
E-commerce has entered our lives for good now, changing both the supply chain market and the warehouse property market. In order to gain maximum benefits and explore the sector’s full potential, companies involved in this type of business should understand it well and adapt to the changes that are taking place within it, including the logistics and warehousing aspect thereof. UK retailing is currently being reshaped by new competitive patterns and pressures, contributing to a weakening in retail property performance. The growth of online retailing has been perceived as a further threat to the sector, although the problems facing ‘pure play’ e-tailers mean that Internet shopping is likely to be increasingly dominated by multi-channel retailers. Web-based retailing will add to competitive pressures on retailers and increase general price transparency. Internet sales penetration will vary between products and services and also geographically. Even with Internet sales growth being concentrated on established retailers, there will be impacts on retail floor space productivity, property requirements and store networks, with implications for retail property performance. Online shopping could reinforce the existing trend of polarisation of retail spending into the larger and more attractive centres within the retail hierarchy. Retailers and retail property investors need to find ways of upgrading the shopping experience to respond to the growth of online sales.
E-COMMERCE AND SHOPPING ONLINE IN MALAYSIA
No one can predict how successful e-commerce will be in Malaysia in this competitive market. Malaysia is still lagging far behind developed countries. Online shopping is supplementary or complementary to existing business as an additional marketing, promotion and fulfilment channel. Malaysia has a huge potential for Internet procurement. It will be hard for Malaysians to rapidly adopt online shopping due to cultural inertia. Malaysians like going to the shops rather than browsing the Internet without an initial inspection of the goods. This culture will change for Malaysian consumers as they become aware of the advantages of online shopping. If the consumer can be convinced that it is safe and reliable to purchase online, the potential will be unleashed. A new economic culture that is in contrast to the traditional one of owning and keeping the intellectual property one creates, may flourish.
In Malaysia, the use of the internet be it via the mobile phone or desktop computer, to purchase things has been rising steadily over the years. In fact, Malaysia is one of only five places in the world where the use of smartphones is higher than computers (51% versus 39%), according to The Connected Consumer Survey 2014.These figures also reveal a shift in how consumers are researching what they want and their purchasing behaviour. For example, the Consumer Barometer with Google data reveals that of the 5,191 Malaysian respondents, 55% use the internet to do product research via smartphones, tablets or computers. Lazada Group was founded in 2011 by Rocket Internet in Singapore. A year later, it soft-launched Lazada Malaysia and other portals in Southeast Asia and Taiwan.
E-commerce platform Lazada Malaysia says on its website that it has “a broad product offering in categories ranging from fashion, consumer electronics to household goods, toys and sports equipment”. The company recently leased a 224,000 sq ft warehouse in Subang Jaya, Selangor. Before that, it had a warehouse of only 50,000 sq ft, 7km from its new premises. It also leased 25,400 sq ft of office space in Menara Worldwide on Jalan Bukit Bintang, Kuala Lumpur. “We consider the location of our main office to be strategic — an MSC-status building in the Golden Triangle. It is convenient for our employees, suppliers and partners,” says Lazada Malaysia CEO Hans-Peter Ressel.
Ressel says an ideal warehouse should have clear and separate access points to different areas of operations. “Couriers and suppliers do a lot of deliveries and pick-ups daily so ample space for loading and unloading is a must. “In terms of offices, landlords must be prepared to offer bigger space with supporting facilities to cater for staffing growth. Space is very important for an e-commerce business,”
THE FUTURE OF PROPERTY MARKET IN MALAYSIA
E-commerce in Malaysia is growing, but there has been little impact on the leasing of office and warehouse space by e-tailers as yet. Although retail sales from e-commerce is small — making up less than 5% of total sales, according to Deloitte Consulting Malaysia executive director Kavita Rekhraj — some companies are taking steps to cater for future growth in view of its potential. “Many of the leading logistics, distribution and warehousing players are seen to be increasing their warehousing capacity. These include Century Logistics and Tiong Nam Logistics Holdings, which are building multi-storey warehouses of up to one million sq ft. SingPost’s acquisition of Axis Plaza in Shah Alam in 2014 also supports the growth potential of e-commerce in the country,” says Kavita.Knight Frank Malaysia executive director for capital markets Allan Sim says, “With regard to warehouses, we understand that a few aggressive e-commerce companies are looking to increase their facilities to at least twice their current capacity, to nearly 200,000 sq ft. We also understand that they have plans to double that capacity in the next three to five years. “When it comes to offices, many e-commerce companies, especially those in the services sector, are occupying Grade A space in the city centre, taking up an average space of 20,000 sq ft, at rents of RM6.50 to RM8 psf per month. Many of the smaller players are scattered around the city, occupying offices of between 4,000 and 6,000 sq ft, which have lower rents of RM3 to RM5 psf per month.”
As online sales grow, industrial properties are expected to draw more attention.“From the real estate perspective, it’s more a matter of how the space is used, and in this case, the winner is the industrial real estate sector,” says Area Management Sdn Bhd chairman Datuk Stewart LaBrooy. “It’s much more efficient and cheaper to spend real estate dollars on distribution centres than on retail space. Stores of the future will have different footprint sizes. Retailers are configuring their stores so that they don’t need so much space for inventory.” Area Management is a regional private equity firm specialising in industrial and institutional real estate development and management. It provides real estate advisory services to institutional clients and due diligence services to institutions acquiring corporate real estate and is currently developing a 1.5 million sq ft inner city distribution hub in Ampang, Selangor. LaBrooy notes that e-commerce organisations will seek out warehouse and distribution spaces based on specific criteria to ensure their businesses are not impeded.“ Many companies in the e-commerce sector are searching for space that can meet heavy power requirements and have high clear heights, in addition to being centrally located. They are becoming more specialised and less generic in design as well. With same-day delivery models becoming increasing popular, companies will continue to invest in industrial properties located near their clients or major transport facilities,” he says. “Overall, we expect the industrial real estate sector to continue to transform and lead the way, with e-commerce as its main driver.”
CONCLUSION
Online shopping was introduced to the market in the last decade as many individuals and organizations purchase through the World Wide Web. This project investigates the influence of the World Wide Web online trading on Malaysian daily life, and future trends of online shopping in Malaysia .A number of dot.com companies have been established in Malaysia and about ten thousand websites exist in Malaysia, but only an estimated 30% are capable of providing online shopping facilities for Malaysian consumers. The focus of this paper is on the demographics of the use of online shopping in Malaysia. This study explores the development, current status and future trends of online shopping in Malaysia as well as factors that influence the decision on whether or not to use this form of commerce. Research findings include which and how often online shopping applications are used by consumers in their daily life, the benefits online shopping brings to the Malaysian communities, and factors contributing to the popularity of Internet sites. Initiatives to raise online shopping by various parties are also studied.
Shopping online as an alternative to in-store shopping can make much of traditional retail less attractive. There exists an obvious relationship between e-commerce and the demand for commercial real estate that accommodates physical retail shops. Substantial evidence supports the idea that the demand for physical shops has been affected by the rapid development of e-commerce in China. In order to better understand the sustainability of the commercial real estate market in a context of rapidly developing e-commerce in China, this study seeks to clarify the relationship between e-commerce and the demand for commercial real estate. Methods of inductive and comparative analysis are adopted. The findings show that from 2009 to 2013, the slowing growth rate of commercial property sales and the accelerating vacancy rate of commercial properties are closely related to the dramatic growth of e-commerce. We also found that different forms of commercial properties–supermarkets, department stores and shopping centers–are differently affected by the rise of e-commerce. However, due to the respective advantages and disadvantages associated with online and offline shopping, physical stores will not be completely eclipsed by virtual retail shopping.
Reference
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