Thinking out of the box the way forward for industrial players

Despite the challenges arising from the health crisis, some industrial players ranging from hotel, tourism, retail, and food and beverage (F&B) industries in Malaysia managed to unleash their creativity – transforming their businesses with new approaches.

Rather than direct selling, many industrial players switched to a more human approach – showcasing their products or services via digital platforms to maintain customer intimacy during these challenging times. Many industrial players are exploring more varied content, from live videos to product videos, shifting spending habits of targeted audience towards online platforms.

The hotel and tourism industry are undeniably one of the hardest-hit industries in Malaysia. Even before the MCO was taking place, many hotels and tour agents have already started to feel the pain from the Covid-19 pandemic.

Without the option of accepting new booking reservations, hotel operators have shifted focus to food and beverages, from cooking demonstrations to food delivery from their restaurants, to stay connected with consumers who mostly remain at home due to the restrictions of the MCO.

With the reintroduction of travel ban across state borders and reimplementation of the Conditional MCO till Dec 6, several hotel chains across Malaysia have introduced Work from Hotel package from as low as RM 19 per day, allowing those who are tired of working from home a refreshing change.

As people began to spend more on essential goods like groceries and household supplies since the imposition of the MCO, Shopee, which is Malaysia’s most popular e-commerce app introduced a comprehensive and aggressive promotional strategy like RM1 deals on groceries, fashion and kitchen appliances to expand their online customer base.

On the other hand, Lazada took a relatively different approach from Shopee by launching a business stimulus package, ‘Pakej Kedai Pintar’, to support e-commerce entrepreneurs and small and medium enterprises (SMEs) in e-commerce adoption.

The businesses which had set up their selling platform on Lazada are also entitled to enjoy free shipping services and access micro-loan facilities.

Besides helping e-commerce entrepreneurs and SMEs to weather the storm, Lazada also assisted farmers based in Cameron Highlands to sell perishable product such as fruits and vegetables.

It also launched an e-bazaar platform, which generated income among the hawkers involved in the traditional set up of Ramadan bazaar. In turn, these efforts helped low-income groups like farmers and hawkers to survive in this health crisis.

For the sellers and buyers to enjoy e-commerce platform with no commissions or hidden fees, Malaysia data firm INVOKE Solutions has launched the Meniaga app on Oct 15, the only cash-on-delivery (COD) platform that is completely free of charge. This would encourage buyers and sellers to transact within a 10km radius and start a microbusiness from home.

Meanwhile, to prevent further loss from the aviation industry, AirAsia expanded their services ranging from airline and accommodation services to digital payment services which offer a prepaid Mastercard, delivery services which include duty-free products and fresh groceries and e-commerce platform.

With the launch of Asean super app on Oct 8, AirAsia introduced Super Sale with storewide discounts of up to 90% across all product offerings from Oct 12-18 – a strategy to boost their online sales.

Some hypermarkets have experienced a big jump in their online shopping platform’s traffic during the first week of MCO, notably Jaya Grocer (600% increase) and Tesco (450% increase), as compared to the first two weeks of March before the MCO. With the extension of the conditional MCO, more households are expected to purchase fresh groceries online.

Moreover, Malaysia’s online food delivery service saw an increase of more than 30% since the imposition of the MCO. According to Statista Market Forecast (2020), revenue from food delivery services in Malaysia will amount to RM896 million this year – about 46% increase compared to last year’s revenue. This trend is expected to continue although dine-in is allowed in the Klang Valley during this conditional MCO period.

The success of food delivery portals like GrabFood and FoodPanda has forced existing restaurants owners with brick-and-mortar eateries in Malaysia to develop new products such as DIY home kits. Espressolab, MyPizzaLab, MyBurgerLab and Tealive also developed their respective DIY kits for customers to recreate their favourite menu at home, in addition to boost their revenue stream.

Some local home-based businesses and aspiring F&B business owners are moving towards ghost kitchens or cloud kitchens that are gaining traction in Malaysia.

While ghost kitchen are where virtual brands are produced without a brick and mortar location because they are simply facilities that are made solely for producing virtual brands, cloud kitchens are centralised licensed commercial food production facilities where anywhere from one or two to dozens of restaurants rent space to prepare delivery-optimized menu items.

Cloud kitchen menu items are optimised for ease of production and reliability of food quality upon delivery. These kitchens provide shared cooking facilities with minimal start-up cost, which is at least 50% lower than opening a brick-and-mortar restaurant.

As expressed by a discussant in the EMIR Research’s focused group discussion in the third quarter of this year: “Now it seems the surrounding suburban areas, with the start of Covid-19, we see a lot of these kind of businesses, suddenly a lot of entrepreneurs appeared. Meaning to say that (Covid-19) has created an economic opportunity and we even now see a lot of online businesses and these many online businesses are doing very well, as they say.”

The Budget 2021 also provides the chance for the hotel, tourism, retail, and food and beverages (F&B) industries in Malaysia to ride out the economic storm by utilising the following schemes:

• Extension of the Wage Subsidy Program for another three months with a more targeted approach, specifically for the tourism sector, which includes the retail sector at a rate of RM600 per month for workers earning RM4,000 and below.

• Provide training and placements for 8,000 employees of airline companies in Malaysia.

• Provide six months exemption from the HRDF levies effective 1 January 2021, which covers the tourism sector and companies affected by the Covid-19 crisis.

Moving forward, industrial players could also utilise Malaysia Digital Economy Corporation (MDEC) related initiatives such as Go-e-Commerce initiative, Digital Transformation Program (DTAP) and SME Business Digitalisation Grant – extending their reach into lucrative markets, enhancing online marketing capabilities and strengthening their supply chain.

It is time for the industrial players to move forward by constantly thinking out of the box – reviewing their business model and supply chain network, while building more resilient and agile businesses to survive and recover from the Covid-19 pandemic.

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Amanda Yeo is Research Analyst at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.