And for Ruth Lim of Heriot-Watt University Malaysia, as well as Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, a thriving e-commerce market augurs well for the economy.
“(A thriving e-commerce market) generates jobs, fosters innovation and creates a wider range of choices for consumers,” Lim told FMT.
“(Combined), they have a positive impact on gross domestic product per capita.”
In July, Lazada reported positive earnings before interest, tax, depreciation and amortisation (Ebitda) for the first time. Its CEO, James Dong, attributed the improved performance to the company’s business strategy.
Lim, who is a member of Heriot-Watt University’s Centre for Social and Economic Data Analytics, said Malaysia’s e-commerce market, which is projected to reach RM50.3 billion by year end, is a great driver of economic growth.
It has been estimated that revenue from e-commerce in Malaysia will see a compound annual growth rate of 11.25% from now to 2029.
Lim pointed out that increased online shopping will boost economic activity, leading to the generation of jobs and fostering innovation which, in turn, will benefit the e-commerce business.
She said a booming economy typically leads to higher disposable income, which is likely to be spent on non-essential items, including online purchases.
“This can have a positive impact on the e-commerce businesses themselves,” she said.
Lee noted that Malaysians continue to shop online post-Covid-19, and expects the trend to continue, helping the e-commerce market to grow further.
However, he said, e-commerce businesses must also have the right strategy to gain from the economic expansion.
He said Lazada’s approach of managing cost efficiently, better use of technology to enable online sales and marketing as well as optimisation of logistics services are strategies that have helped the company post higher revenue.
Last year, Lazada introduced LazzieChat, the first e-commerce AI chatbot of its kind in Southeast Asia, to improve operations.
Lazada Malaysia chief operating officer Zed Li also said it was committed to supporting the growth of small businesses through the use of AI tools at the company’s Seller Summit in July this year.
Lee said Lazada’s move to expand its footprint across Southeast Asia despite the stiff competition in the region was a tactical move to ensure sustainable business growth.
He was echoing a view shared by a Singapore-based research firm in January in response to Lazada’s move to centralise its workforce and operational functions following slower macro e-commerce growth, a competitive landscape, more cautious consumer sentiments and the introduction of generative AI.
Consilz Tan, a fellow at the Center for Market Education, said e-commerce businesses such as Lazada should take advantage of the Alibaba-led Digital Free Trade Zone (DFTZ) concept.
“Through the DFTZ, the country can offer better platforms and create a bigger marketplace for existing micro, small and medium-sized enterprises, e-commerce businesses as well as new businesses,” she said.
Tan gave the thumbs up to the plan by Lazada, which is the Alibaba Group’s e-commerce unit, to continue investing in Southeast Asia to give its international sales a boost.
She said there is potential in Southeast Asia given that the region is a growing market.
However, she warned that while such investments could mitigate the high cost of logistics and raise production capacity, there would be challenges to address.
These challenges include pricing strategies, consumer purchasing behaviour in the region, market uncertainties, digital adoption of small enterprises, cross-border payment processing, and tax regime.