Virtual Shopping in Malaysia

Introduction

During the period between late 18th and early 19th century, the world experienced the Industrial Revolution era, when major changes in agriculture, manufacturing, mining and transportation had a profound effect on the socioeconomic and cultural conditions in most parts of the world. The commencement of the Industrial Revolution marked a major turning point in human society because almost every aspect of daily life was eventually influenced in some way.

Now, again the world is experiencing a similar kind of a revolution - the era of the Internet. The Internet has already earned a permanent place in history as the innovation that has changed the way the world sends, receives and shares information. The effects of the Internet are felt by everyone from young preschoolers to senior adults, from rocket scientists to casual bloggers. The immediacy of the Internet gives people the means to latest news and updates, to network with friends and to buy almost anything they want or need, without ever having to get off the couch. These phenomena can be attributed to the increasing use of the Internet in conducting businesses.

Overview: Virtual Shopping

From business point of view, the Internet has changed the ways companies sell products to customers and distribute products to retailers. The Internet has sprung e-commerce, by which companies or sites offer to transact or facilitate the selling of products and services online (Kotler & Keller, 2009). Virtual shopping is the process consumers go through to purchase products or services over the Internet and it is a type of e-commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions (Wikipedia, 2009). Virtual shopping has experienced rapid growth since the early years and it is well known to most of the Internet researchers that, the volume of online business-to-consumer (B2C) transactions is increasing annually at a very high rate. According to ACNielsen (2008), more than 875 million people in the world have shopped online. The 2007 global survey conducted by ACNielsen also revealed that, over 85% of the world’s online population has used the Internet to make a purchase, up 40% from 2005. More than half of Internet users are regular online shoppers, who make online purchases at least once a month. ACNielsen also reported that, across the globe, the most popular and purchased items over the Internet are books (41% purchased), clothing/accessories/shoes (36%), videos/DVDs/games (24%), airline tickets (24%) and electronic equipment (23%). Meanwhile, Forrester (2008) forecasts that online retail sales will grow from US$174.5 billion in 2007 to $235.4 billion in 2009. Similarly, Internet World Stats (2009) cited that about 24.7% of the world’s population in 2009 is Internet users, which represents more than 1.67 billion people on the globe.

The most common method of payment for online purchases is via credit cards, as 60% of global online consumers have used their credit card for a recent online purchase, according to ACNielsen. However, consumers also seek for alternative payment channels and 25% of online consumers do prefer alternative methods such as PayPal, whereby consumers could pay directly by debiting their current or savings account.

Unlike traditional in-store retailing, where shopping information is conveyed to consumers through several channels, i.e. through store environment, product trial, product offering or service (Schiffman et al., 1977), virtual shopping relies solely on the web interface for communication and for managing customer relationships (Jiang & Benbasat, 2002; Benbasat & DeSanctis, 2000). A distinctive feature of virtual shopping is transactions no longer require the physical coordination of buyers and sellers. Now, market participants find each other almost easily on their computer screens. There are many aspects of market interaction which are affected by this online nature of trade. On the supply side, there are all kinds of cost reductions, resulting from new ways of organizing production and sales processes. On the demand side, the major impact of the Internet is mostly on consumers’ ability to acquire information about firms, their products and their prices.

Virtual Shopping Mechanisms

Consumers usually find a product of interest by visiting the website of the retailer directly, or do a search across many different vendors using a shopping search engine. Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, by analogy with filling a physical shopping cart in a conventional store. Checkout process follows (another physical-store analogy), in which payment and delivery information is collected. There are also stores that allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete.

Generally, online shoppers use credit cards to make payments. However, they can also pay by alternative means, such as debit card, cheque, various types of electronic money, cash on delivery (C.O.D), wire transfer, postal money order, gift card, direct debit and so forth. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined), or might be done later as part of the fulfillment process.

Once a payment has been accepted, the goods or services can be delivered in several ways. The most common ones are shipping and downloading. Via shipping method, the product is shipped to the address customer provided; meanwhile downloading method is often used for delivery of digital media products such as software, music, movies, or images. There is also drop-shipping, by which the order is passed to the manufacturer or third-party distributor, who then ships the item directly to the consumer. This method could save time, money and space as it bypasses the retailer’s physical location. Next, there is an in-store pickup, where consumers order online, then find a local store and go pick up the product at the closest store. Additionally, in the case of buying an admission ticket, consumers will be given a code, or an e-ticket that can be printed out and used just the same as conventional paper tickets.

Virtual Shopping and Consumers

Virtual shopping offers convenience to consumers as it is easy to find and ‘visit’ firms’ website and compare prices as searching or browsing an online catalog can be faster than browsing the aisles of a physical store. Online stores are usually available 24 hours a day and many consumers have Internet access both at work and at home. Meanwhile, a conventional retail store requires a physical visit and travel and could only take place during official business hours.

Another advantage of shopping online is customers can have a worldwide access and have greater choice online by seeking out deals for items or services with many different vendors. This could be done very quickly as they could simply access the information from their computers when comparing with shopping in traditional brick-and-mortar retail shops, where consumers must physically visit all the other stores to widen their choices. This could be time-consuming and cause inconveniences.

This new mode of transaction, however, also has raised several concerns for consumers as consumers could be exposed to unfair marketing practices, such as insufficient information disclosure on refund policies, cancellation terms, warranty information; contract terms enforceability; lackadaisical merchandise and delivery practices, i.e. failure to perform and lateness; payment policies; transaction confirmation and cancellation policies, i.e. consumer’s lack of knowledge on cancellation rights for online transactions, including for mistakenly made purchases; fraud and deception, i.e. lack the means to authenticate merchandise purchased online; and loss of personal privacy and risk misuse of personal information (Kaur 2005). Therefore, every time consumers attempt to engage in virtual shopping, they must weigh all the positive aspects of virtual shopping with all the inconveniences and uncertainties as well.

In terms of online store preference, consumers tend to stick to what they know when it comes to online shopping, according to Nielsen. 60% of online shoppers say they buy mostly from the same site, proving that online shoppers are uniquely loyal. In selecting sites on which to shop, 33% used a search engine or just surfed around to find the best online store. One in four relied on personal recommendations. Recommendations from fellow consumers, whether they are people consumers know or fellow online shoppers, play an enormous role in consumers’ decision-making process.

Virtual Shopping and Firms

For firms, the use of Internet in businesses may be used as an alternative retail channel to gain market shares by offering enhanced competitiveness and better quality of service. Through e-commerce, companies can also offer mass customization and personalized products and services to consumers. If companies engage in e-commerce appropriately, they could also achieve greater efficiency and lower costs through the elimination of intermediaries and enhanced product availability. Moreover, if the online shopping convenience is large enough, companies may try to exploit the fact that consumers are willing to pay for this convenience by charging higher prices online. These positive aspects however, are offset by the fact that online competition is stronger as it is easier for consumers to compare prices. Moreover, the online infrastructure and the reorganization of sales processes require firms to make an investment upfront.

Virtual Shopping in Malaysia

According to IDC (2009), most Malaysian Internet users are white-collar workers (58.7%), followed by students (13%), others (11.5%), business owners (8.4%), retirees (3.7%), blue-collar workers (3.2%) and housewives (1.5%).

In terms of Internet usage, on average, Malaysian spend 15.7 hours a month online in 2007, well below the regional average (21.2 hours) and global average (26.2 hours). But when it comes to media consumption, Malaysians are seen as ‘the biggest media junkies’ in Asia, with Malaysian respondents to a survey saying they spent 12.9 hours online on watching TV, DVD/VCD/videos, readings newspapers/magazines or listening to the radio (iPay88, 2008).

According to Lincoln Lee, a research manager of Telecommunication Research of IDC Malaysia, the Malaysian e-commerce market was expected to reach US$22.3 in 2007 and further expected to grow by 21.9% in 2008. Obviously, the industry is slowly attaining maturity, yet there are numerous hurdles and concerns that need to be addressed, to ensure sustainable growth.

In Malaysia, virtual shopping is still not at a satisfactory level (Kaur, 2005). With total population of 27.73 million (Department of Statistics, 2009), there were only 16 million Malaysian Internet users in 2008, which accounted for 57.3% of the population with penetration rate 62.8% (IDC Malaysia, 2009). Out of 16 million Malaysian Internet users, only 46 percent or 7.4 million shopped online in 2008.

Statistics by IDC also shows that Malaysia online consumers comes from young age brackets - out of 1 million online consumers in Malaysia, 52.9% of them are from age range 21-35 year-olds and 16.5% are from 36-40 year-olds.

Malaysian Internet users’ hesitancy to engage in virtual shopping could be attributed to several factors. Generally, security-related issues including trust were cited as the main reason for not shopping online. According to IDC, 56.4% of Malaysians felt insecure to shop online and perceived that it is safer buying goods or services through conventional stores. 50.8% of them have trust and reliability issues in regards to online shopping, while 38.1% viewed online shopping as not necessary. Another 31.8% do not own credit cards, which hinder them to pay when they make purchases online. Also, Malaysian consumers attribute their caution with delivery problems (28.6%), expensive postage and handling charges (13.5%) and lack of knowledge/experience/facility (12.7%).

In 2008, Malaysian users use the Internet to buy mainly airline tickets/reservations (82.2%), followed by books (69.4%), general consumer goods (59.4%), movie tickets (57.3%) and so forth. This differs significantly from global habits where the most popular and purchased items over the internet are books (41%), clothing/accessories/shoes (36%), videos/DVDs/games (24%), airline tickets (24%) and electronic equipment (23%) (ACNielsen, 2008).

Consistent with the global trend, Malaysia online shoppers also tend to stick to the shopping sites they are familiar with, with 60% saying they buy mostly from the same site (Lim, 2008). According to Linda Lim, director of Nielsen Malaysia, if shopping sites can capture consumers early and create a positive shopping experience, they will likely capture consumers’ loyalty and their money. In Malaysia, over half of the customers (53%) who shop online tend to rely on personal recommendation, according to Nielsen Global Online Survey. Other main deciding factors are search engine results (37%) and special offers (34%). Therefore, Malaysian companies should focus on word-of-mouth strategies in their online marketing efforts in order to encourage more online shopping activities.

Recommendations: Virtual Shopping in Malaysia

In order to encourage more businesses and consumers to engage in virtual shopping in Malaysia, several recommendations could be employed:

i. To build critical mass Malaysian government must strive to increase the number of online users and online hosts as well as to increase the number of access devices (i.e. personal computers) in Malaysia. There also the need to create cost effective network access for businesses and consumers entering e-commerce and to create an efficient telecommunication infrastructures. These critical infrastructures and facilities must be readily available and functioned properly in order to attract more people to subscribe and use the Internet to make virtual purchase.

ii. To build trust on the Web Malaysian government must encourage and promote the use of trusted payment systems and applications to establish proper protection for personal information of business merchants and consumers. Also, a trusted and competitive logistic and fulfillment infrastructure must be designed for e-commerce products and services. The integrity of electronic data and protection from infringement also must be properly maintained. Providing sufficient training and education on e-commerce could also help to build trust and confidence when engaging in online businesses.

iii. To attract inbound and outbound consumers Malaysian government must ensure that proper and sufficient web contents are being developed in order to build pools of local contents that meet international standards and demands. Malaysian web hosting capabilities also must be developed and enhanced as well as ensure they are being utilized optimally. Our global connectivity must be enhanced to create better connections with international communities.

iv. To deploy organizational transformation Malaysian government must encourage all companies to improve flexibility and make better use of technology to exploit e-commerce. Entrepreneurial culture must be promoted in order to assist newcomers to start new businesses. Government could also offer special venture funding, i.e. venture capital and IPO markets to aid and encourage innovative companies. Finally, there are also incentive schemes that could be offer by the government as the intervention could help to bring out the best of the firms.

v. To setup policy and regulatory framework Policies on consumer protection must be developed, employed and enforced in order to increase consumers’ confidence in transacting over the Internet. Policies and procedures on dispute resolution also must be developed and enforced. Finally, government also could review and revise current taxation laws and tariffs to encourage the startup of more businesses.

Conclusion

The unique characteristics of virtual shopping have captured the interest of many businesses and consumers. Virtual shopping has the potential of becoming a dominant alternative shopping channel in the near future that cannot be easily challenged by the conventional retailing method. The future of virtual shopping through e-commerce seems to be very bright. However, it can only remain so if there is consumer trust and confidence in it. Therefore, there is a need for online businesses to be accountable and responsible to the consumers. Both the business and government have a role to play to ensure ultimate consumer protection in the online marketplace, which is becoming global and borderless.

References

ACNielsen (2008). ‘Over 875 Million Consumers Have Shopped Online - The Number of Internet Shoppers Up 40% in Two Years’, viewed 20 September 2009

ACNielsen (2008). ‘Trends in Online Shopping: A Global Nielsen Consumer Report’ viewed 12 September 2009

Benbasat, I. & DeSanctis, G. (2000), Communication Challenges: A Value Network Perspective, In G. Dickson and G. DeSantis (Eds.): Information Technology and the Future Enterprise: New Models for Managers. Englewood Cliffs, NJ: Prentice-Hall

Department of Statistics (2009). ‘Malaysia Population (Updated 31 July 2009)’, viewed 7 September 2009

Forrester Research (2008). ‘Projected Online Retail Sales: 2007 to 2012’, viewed 18 September 2009

International Data Corporation (IDC) Malaysia (2009). ‘Malaysia’s E-Commerce Statistics’, viewed 22 September 2009

International Telecommunication Union (ITU) (2009). ‘Internet indicators: subscribers, users and broadband subscribers’, viewed 15 September 2009

Internet World Stats (2009). ‘World Internet Users and Population Stats’, viewed 10 September 2009

iPay88 (2008). ‘Malaysia 's E-Commerce Habits (2007)’, viewed 15 September 2009

iPay88 (2008). “Malaysia Online Demographics (2007)’, viewed 14 September 2009

Jiang, Z. & Benbasat, I. (2002), Virtual Product Experience: Effects of Visual & Functionality Control of Products on Perceived Diagnosticity in Electronic Shopping, University of British Columbia.

Kaur, K. 2005. Consumer Protection in E-Commerce in Malaysia: An Overview UNEAC Asia Papers. No. 10, 1-14, viewed 18 September 2009

Kotler, Philip and Keller, Kevin L (2009). Marketing Management. Pearson International Edition, Prentice Hall, New Jersey, pp. 474.

Lim, Noelle (2008). ‘WOM best for online shopping’, Marketing-Interactive.com, viewed 9 September 2009

Schiffman, L., Dash, J. and Dillon, W. (1977), The Contribution of Store Image Characteristics to Store-Type Choice, Journal of Retailing, Vol. 53, Summer.

The Economist Intelligence Unit Limited (2006). ‘Overview of e-commerce in Malaysia’, viewed 13 September 2009

Wikipedia (2009). ‘Online Shopping’, viewed 10 September 2009

References: ACNielsen (2008). ‘Over 875 Million Consumers Have Shopped Online - The Number of Internet Shoppers Up 40% in Two Years’, viewed 20 September 2009 ACNielsen (2008) Forrester Research (2008). ‘Projected Online Retail Sales: 2007 to 2012’, viewed 18 September 2009 International Data Corporation (IDC) Malaysia (2009) International Telecommunication Union (ITU) (2009). ‘Internet indicators: subscribers, users and broadband subscribers’, viewed 15 September 2009 Internet World Stats (2009) iPay88 (2008). ‘Malaysia 's E-Commerce Habits (2007)’, viewed 15 September 2009 iPay88 (2008) Jiang, Z. & Benbasat, I. (2002), Virtual Product Experience: Effects of Visual & Functionality Control of Products on Perceived Diagnosticity in Electronic Shopping, University of British Columbia. Kaur, K. 2005. Consumer Protection in E-Commerce in Malaysia: An Overview UNEAC Asia Papers. No. 10, 1-14, viewed 18 September 2009 Kotler, Philip and Keller, Kevin L (2009) Lim, Noelle (2008). ‘WOM best for online shopping’, Marketing-Interactive.com, viewed 9 September 2009 Schiffman, L., Dash, J The Economist Intelligence Unit Limited (2006). ‘Overview of e-commerce in Malaysia’, viewed 13 September 2009 Wikipedia (2009)