Where's Malaysia's Amazon.com

I’ve always been fascinated by e-commerce, in particular, the B2C kind, otherwise known as online retailing.

The concept of online retailing first came to my attention, long before the Internet era, when I was a student in university. An economics professor painted a picture of the future for us, where people got their news and entertainment online and bought goods online.

A few of my classmates thought he was an eccentric given to more than a few flights of fancy. But I thought his vision was great. Imagine ordering something online and having it delivered right to your doorstep!

That doesn’t seem radical or quaint in any way now, but back then, there was no Amazon.com and not even Netscape or even the Internet (at least not as we know it).

Since 2000, when the dotcom boom first hit Malaysian shores, I’ve been waiting for a Malaysian answer to Amazon.com to emerge. It’s been a decade since and I’m still waiting. I can’t help but wonder why it hasn’t happened here in Malaysia. But more importantly, what would it take to make it happen?

There is one thing Amazon.com founder Jeff Bezos figured out early on which is still as applicable today as it was in 1995, when he started. There are only three reasons people would want to shop online:

i)                    Cost savings

ii)                   Convenience

iii)                 Variety

So, in planning an online retailing proposition, the factors to consider should be centred around these value propositions. Without these three elements in place, your venture would be stillborn.

Getting the right product is crucial. Why? Because you need to find something that is in demand, has a high-enough profit margin to allow for deep discounting, can be easily shipped and which can be offered with a wider range online than is possible offline.

Amazon.com started off with books because it’s something people buy all the time, the margins for books is around 40%, they are light and non-fragile and you can display way more books online than any bookstore can possibly hold.

Shortly after that, Amazon.com sold CDs and DVDs (also in-demand, high margin, small-sized and there’s more titles than any physical store can stock). Only later, when its customer base was huge, did Amazon.com start selling everything under the sun.

Would that strategy necessarily work in the Malaysian context? Maybe it’s not books but something else that you should start with. Considerable thought needs to be given to the product roll out strategy. Also one should factor in digital products that can be downloaded, something that didn’t exist back in 1995.

Logistics and fulfillment is another key issue. The natural inclination is to find a way to go inventory-less. That means not stocking items but getting them on a “Just-In-Time” basis. That’s easier said than done. If you don’t hold stock it means you won’t be able to deliver as fast as if you had the items in your warehouse.

If you expect the distributor to pack and ship the items from their premises, in order to save on time, it means you have little control over the fulfillment process. What if the distributor fumbles the order? It’s you whom the customer will blame.

But if you stock items, it is very costly. Even if you get the distributor to give you the products on consignment, there is still the cost of warehousing. It’s not going to be cheap.

Any online retailing venture would require an investor or financier who has a sufficiently long-term outlook. Hey, Amazon.com took seven years to break even! How many local angel or corporate investors or venture capitalists do you know have that kind of time horizon?

And lastly, you need a really smart and passionate team of people who are true believers of e-commerce to implement and drive the project forward. Ideas – even the best ones – are a dime a dozen. It’s the execution that counts. And for that, you need really good people with a mixture of web and business savvy.

Is it easy to do online retailing? Of course not – that’s why it hasn’t happened yet in any significant way here. But online retailing, like my old professor predicted, will surely become a way of life. It will be the main way our children shop. It’s just a question of when this will happen and who will be the one to do it.

Oon Yeoh is editor of New Media at The Edge. He invites you to follow him at www.twitter.com/oonyeoh.