The Muslim population is projected to reach 3 billion people in 2060, increasing at a growth rate faster than the world’s population and set to make up 31% of total population. As their consumer affluence becomes more prevalent, this demographic has become key for certain retail brands trying to grab market share.

In Southeast Asia, where 25% of the global Muslim population lives (1.6 billion), the young female Muslims, also known as Muslimah, present a new opportunity with their religious yet more worldly outlook than the previous generation.

This influential, trend watching group is open to a wider range of fashion, travel and product choices — prompting the Halal industry to move beyond the food sector.

Southeast Asian Muslim preference

Other sectors quickly catching up in Halal industry. Source: Global Islamic Finance Report

 

“Young Muslim women are showing a new set of aspirations and behaviors which represent both opportunities and challenges for brands,” said Chen May Yee, APAC director at The Innovation Group

But they also present new challenges and to better target this tech-savvy audience, companies need to combine trends, digital channels while meeting religious requirements.

Muslimah representation matters

A recent survey by JWT Intelligence’s Innovation Group focused on the Muslimah population in Indonesia and Malaysia, two of the biggest Muslim populations in the region, found that Japanese brands are regarded the highest among the 1,000 individuals surveyed.

http://gifr.net/gifr2013/ch_13.PDF

Japanese brands are the most popular among Muslimah in Indonesia and Malaysia compared to brands from other countries. Source: JWT Intelligence’s Innovation Group

It’s not too surprising given that more Japanese brands have geared marketing efforts towards the Muslim population, especially in fashion and beauty.

For example, Uniqlo recently collaborated with Muslim designer Hana Tajima and while textile brand Fukusa launched a silk-kimono hijabi fashion line in Indonesia.

Clothing remains the most popular category, followed by beauty, technology products, travel, and groceries.

Southeast Asian Muslim preference

More Indonesian Muslimah shop online as local players provide more options for them. Source: JWT Intelligence’s Innovation Group, Daniel Abd Halim.

As with the rest of the region, this demographic is showing a higher aptitude towards digital. They are spending at least four hours online every day, and one of the activities of choice is online shopping.

24% of Malaysian Muslimah shop online once a week and 56% do it at least once a month. The number is higher for their Indonesian counterpart, likely because of more Muslim choices provided by local players in Indonesia like HijUp, MuslimMarket, and Wardah.

However, the two cohorts differ on their opinion regarding representation in the ads that circulate in the market. Majority of Muslimah in Indonesia (82%) feel that the ads reflect the reality of the needs of their everyday life, while only 56% of Malaysian Muslimah feel the same — showing the gap for brands to provide more relatable products or experiences for this audience in Malaysia.

Tapping into a multi-trillion industry

The Halal or “lawful/permissible” industry is estimated to be worth around $2.3 trillion worldwide, growing at an annual rate of 20%. The products are not only for Muslims and also gaining more popularity among non-Muslims as a symbol of quality assurance and a lifestyle choice, but in order to capture more customers, brands need to be more than Halal.

Recognizing that Muslims have different experiences and reasons to purchase such as increase in shopping for household or beauty goods during certain holidays, brands can optimize marketing strategies to attract more loyal customers.

A bit about Malaysia

Malaysia is one of Southeast Asia’s smallest nations, but that hasn’t affected its digital ambitions. In 2015, Malaysia’s ecommerce market was estimated at $1 billion and is on equal footing with Singapore in terms of market size and developed infrastructure, which may explain why the nation’s ecommerce industry is expected to increase by 8X to $8 billion within the next ten years.

It is no surprise then, that Alibaba recently announced the construction of a regional distribution hub (e-hub) that will act as a centralized customs clearance, warehousing and fulfillment facility for Malaysia and the Southeast Asian region in order to speed up clearance for imports and exports. The hub is set for a launch in 2019.

Out of the e-hub was born the Digital Free Trade Zone (DFTZ) – a joint initiative by Prime Minister Najib Razak and Alibaba Group to accelerate Malaysia’s digital roadmap that aims to double ecommerce growth from 10.8% to 20.8% by 2020.

What is the free trade zone?

In March 2017, Malaysia formally launched the Digital Free Trade Zone initiative at the Global Transformation Forum. This is the first digital global trade platform beyond China, and the Malaysian government believes that a collaboration with Jack Ma will increase SMEs’ contribution to the nation’s GDP, which currently stands at 37%, despite 97% of businesses in Malaysia currently being micro or SMEs.

The free trade zone is composed of three zones:

    1. The satellite services will facilitate end-to-end support and knowledge sharing for companies targeting the Southeast Asian market.

 

    1. The eFulfillment Hub will be connected to Hangzhou’s Cross-Border ecommerce pilot zone – Alibaba’s HQ – via Alibaba’s OneTouch platform. According to VulcanPost, it will digitise many of the trading operations like customs clearance, foreign exchange services, financing services and logistics solutions which will ease bilateral trade.

 

  1. The eServices platform is virtual and will complement the satellite services and Ma’s e-hub by digitally connecting users with government and business services.

Through DFTZ, the purchase of goods via the Internet worth $276 and below will be exempted from paying tax. Currently, goods worth $115 and below purchased online were not subjected to tax.

But what does the free trade zone really mean?

The partnership between Jack Ma and the Malaysian government was born from Ma’s concept of providing SMEs the infrastructure and overcome difficulties involved in conducting global trade – namely clearance and inspections.

If successful, DFTZ has the potential to double the growth rate of Malaysian SMEs’ goods export and create 60,000 direct/indirect jobs by 2025.

It is also estimated to support US$65 billion worth of goods moving through DFTZ.

“The establishment of DFZ would stimulate the economy as it gives room for online traders to compete in a healthy environment. Locations of the businesses will no longer be a hindrance to traders. For instance, a trader in Kota Belud would have an equal opportunity to market or sell his items, as a trader from the Klang Valley,” said Abdul Rahman, Head of Economic Planning Unit.

Although it is currently too early to quantify the benefits of the digital free trade zone, analysts have predicted that its launch will be good for the logistics sector. More specifically, for Malaysia Airport Holdings (MAHB) and postal company Pos Malaysia’s subsidiary, KL Airport Services.

The heightened connectivity should propel the growth and development of ecommerce in the region, lower trade barriers and benefit local players due to increased opportunities.

However, it isn’t simple infrastructure that Malaysia is building.

In order to create a functional logistics ecosystem that can improve regional level trade, it requires collaboration from various parties, companies and more. The success of the digital free trade zone also depends on the rate of retail growth – both offline and online in Malaysia and the region because it will need to grow in tandem with the scale of the free trade zone itself.

To leverage from the initiative, smaller players and SMEs need to scale their businesses to ensure that they are ready to utilize the ecosystem.

As this is the first time the free trade zone has ventured out of China, it simply cannot be a copy and paste of what has worked in the past with Chinese SMEs. Smaller Southeast Asian companies currently need help in shaping their businesses, along with help in lowering trade barriers.

Although the free trade zone will surely bring opportunities, SMEs will also need to be ready for 2019, as increased opportunities often come with increased competition.

When successful, established businesses tell their story, it usually sounds all very straightforward. The founders get an idea, work hard to execute it, and miraculously, it all works smoothly from the very beginning to result in millions of dollars earned.

The reality of start-ups in today’s economy is different – the initial idea is only the starting point that almost always evolves at any point of time. The founders of TheLorry, Malaysia’s on-demand logistics start-up, experienced this firsthand and have been on the tips of their toes since deciding they would capture the market’s overlooked opportunities.

TheLorry is a technology-enabled platform that matches lorry owners and drivers with private and corporate customers who need help moving house, office and/or general cargo.

Founded late 2014 by ex-colleagues Nadhir Ashafiq and Chee Hau Goh, TheLorry was initially intended to be the “Expedia for logistics”, but then became the “Uber for lorries” to focus on the business-to-consumer (B2C) market and then later switched focus to the business-to-business (B2B) market.

Ex-colleagues Chee Hau Goh (on the left) and Nadhir Ashafiq (on the right) have reinvented TheLorry three times within two years, showing how startups can adapt to unexpected factors.

It may sound like there was a lack of vision, but this is the reality of businesses in dynamic markets, especially developing ones. The growth of any company involves adapting to unexpected factors such as new competitors, new technologies or customer demands.

ecommerceIQ sits down with TheLorry co-founder and executive director Nadhir Ashafiq to find out how his company carved out a niche in Malaysia’s competitive logistics landscape and why they decided to pivot.

The Business Model Evolution of TheLorry

2014 – early 2015: Expedia for Logistics

At first, TheLorry built a website that allowed customers to access instant lorry rental price quotes online after sharing some common variables: the type and size of the lorry needed, the start and end points of the journey, etc.

The whole business was a two-man team at that time. While Chee Hau was pumping up marketing and sales, Nadhir was running around Kuala Lumpur and Selangor meeting lorry drivers and giving them Excel sheets to fill in their prices, which would afterwards be uploaded on TheLorry website.

TheLorry initially wanted to be “Expedia for Logistics” where users could choose lorry rental on the startup’s platform from selected service providers based on ratings and prices

Right away, there were several downsides to this model, the most pressing being the scalability of the model. It was a time consuming and tedious process to acquire the price quotes from service providers that sometimes involved over 900 price points.

The other reason was that TheLorry could not prevent customers from going directly to the service provider instead of booking through the website. There were several cases when TheLorry got to know that people were searching for their providers online either by customers’ own admissions or comments from the providers.

“Therefore, around the mid-2015 we moved to an Uber-like model where we would be setting the prices ourselves,” explains Nadhir.

Early-2015: Uber for Lorries

The switch meant TheLorry would need to match providers with jobs. At first, it was done manually until the company built an app in-house and the minimum viable product (MVP) within two months. The drivers could accept the job on the app, and thus the process became automated.

TheLorry built an app for drivers in-house within two months. It automated the process of matching lorry drivers with the jobs available.

As TheLorry had attracted funding at the beginning of 2015 from pre-accelerator program WatchTower and Friends and Singapore’s venture capital KK Fund, the company started scaling up by hiring people for their team. Their obsession became to grow bookings through their website and increase their fleet size.

The need for a second major pivot came when the company realised that lorry rental aimed at individuals was mostly a one-off event as people did not often move homes or offices. And apart from customer referrals, the company would find a difficult time sourcing new clients.

Mid-2015 – present: Lorries for B2B  

This is when TheLorry decided to push for B2B sales targeting commercial cargo market – manufacturers, distributors and freight forwarders with urgent trucking needs. Now business customers make around 60% of the company’s sales when it was only expected to make up around 30% of the entire business.

But every business model, no matter how successful, has its own set of challenges.

“There are a few drawbacks for B2B. First, the onboarding process of each client is longer and sales managers have to be hired to pitch our services and build a long-lasting relationship. Then, we also have to give corporate clients a credit meaning at least 30 or 60 days to pay for the services. But chances of repeat business are high and generated revenue is healthy,” says Nadhir.

Servicing Different Customers: B2C versus B2B

Targeting B2C and B2B segments obviously require different approaches. TheLorry adopted online marketing strategy to acquire more individual customers and invested in Google adwords, Facebook ads and content marketing to drive as much traffic to website as possible.

This tactic, however, did not really work for targeting corporations where it is more effective when sales managers knock on client office doors for a face-to-face meeting – especially in the Southeast Asia business world.

“Online marketing gave us visibility, but to seal the deal, we needed a salesperson on the ground and account managers to meet customers to clearly explain our solutions. B2B sales is all about creating and maintaining relationships,” says Nadhir.

Once onboarded, corporate clients can use TheLorry app to hire drivers directly or in the case of any special needs they can turn to an account manager, assigned to each business. Through the TheLorry platform, clients can view all the past and present bookings and invoices as well as track drivers who are on the job.

As TheLorry is a technology-enabled platform, around two thirds of its business is automated. Compared to other start-ups, Nadhir says the company wants to be fully transparent with its clients and does not promise full automation because of the difficulty it entails.

“There needs to be a bit more scrutiny and a bit more manual intervention in order to get the business to run properly,” explains the entrepreneur.

As quality of service is important to any type of customer, TheLorry interviews all drivers and puts them through 2-3 test drives where their skills and professional manners are assessed. If clients give them 1-star rating after these test jobs, they don’t get the opportunity to join TheLorry driver family.

TheLorry team interviews all their drivers face-to-face and gives them test jobs before accepting them to TheLorry driver family to ensure quality of the service.

What’s in The Cards for TheLorry?

TheLorry still has plenty of room to grow. The B2B lorry rental market in Malaysia is estimated at $3.9 billion. There are no solid figures for the B2C market, but the company estimates that this segment is worth around $22.5 to 45 million based on property sales data.

TheLorry wants to become profitable in 2017 and expand to Thailand in addition to its existing services in Malaysia and Singapore.

Jumping on new and unexplored opportunities to raise revenues is one way to grow. Yet, one piece of advice Nadhir hopes other entrepreneurs remain mindful of is that potential top line revenue always carries costs.

Lured by potential revenue growth last year TheLorry took a business opportunity, which Nadhir did not want to disclose, in a field they had no experience and no clear plan to make unit economics profitable.

“In the end, we ended up in a situation where we were selling our service for 1 ringgit and our cost was 2 ringgits. And there was no way for us to increase the price to 3 ringgits,” said Nadhir, adding they decided to quit the business opportunity later that year.

On the bright side, there also have been surprising successes. In 2016, TheLorry introduced a new product – 4 wheel drive car rental, which turned out to be a hit for small and medium mom-and-pop shops who use them on a more regular basis.

As for 2017, the company’s end goal is to grow revenue by a certain multiple, not disclosed, to become profitable. In the second half of the year, TheLorry hopes to expand to Thailand in addition to its existing services in Malaysia and Singapore.

After raising $1.5 million in Series A funding early last year, TheLorry is still in touch with many investors but has no plans for fundraising as yet.

You can read more about TheLorry in SPARK40 here.

Nadhir Ashafiq’s Tips for Aspiring Entrepreneurs

  1. Validate your business idea – test the product, see whether you will have a market before spending money on it. Prior to TheLorry I spent RM 200,000 ($USD 45,000) on a thing which did not work. Don’t spend so much money for nothing!
  2. Read The Lean Startup by Eric Ries, create minimum viable product and get as many people to review your product and launch as fast as possible at the lowest cost possible.
  3. Learn about online marketing, things such as how to drive traffic, conversion rates, upsell and do email marketing, if you will be working in ecommerce space. Good resources for this are kissmetrics.com, backlinko.com, quicksprout.com, neilpatel.com.  

 

By Aija Krutaine based on an interview with Nadhir Ashafiq

In 2015, Malaysia’s ecommerce market was estimated at $1 billion. The country’s ecommerce landscape is actually on par with Singapore, in relations to the well developed infrastructure and market size. Mixed in with the global powerhouses such as Lazada and eBay, Malaysia also has an influx of prominent local players.

Here are the top 5 apps you should be aware about if you’re planning to enter the commerce market.

1. Lelong (B2B/B2C)

malaysian apps

An online incumbent in Malaysia’s ecommerce scene, the country’s alternative to eBay currently has over 8 million monthly visitors and over 1.3 million products available across different categories, from mobile phones to frozen food.

Since then, Lelong has also launched a virtual marketplace, Lmall, the first premium platform that allows Malaysian shoppers to find authentic products and shop from a variation of brands such as Nescafe and Durex.

 

2. Go Shop (B2C)

Owned by Astro Group, Go Shop is growing from strength to strength. The startup is currently serving 691K customers in Malaysia. Go Shop is a 24/7 online home shopping app, which is in tandem with its online TV shopping channel, giving those classic TV infomercials an ecommerce twist.

Recently, GoShop has expanded its services to serve ecommerce shoppers in Singapore through a partnership with StarHub cable.

 

3. imSold (C2C)

Previously shoppingKaki, imSold is a mobile shopping destination in Malaysia. A classic C2C platform that allows users to buy & sell their own things from iPhones to handbags and caters towards university students who can easily shop among friends on the platform.

imSold was recently included in one of Google Play’s most popular apps, as the third most downloaded app in the store.

 

4. MyBazar (C2C)

MyBazar is an online marketplace that connects merchants to the rest of the ecosystem. Merchants are given a personal space to operate and run, as if they were actually running a physical store in a bazar. A C2C platform that aims to support SME merchants, regardless of their technology capabilities or business size.

Originally founded in Dubai, MyBazar currently operates in both Dubai and Malaysia.

 

5. Gemfive (B2C)

gem5

Founded by the youngest son of the Hong Leong Group family, Gemfive launched in Q2 2015 and has since then, offered over 300 brands and over 10,000 to its shoppers (2015). The app is a local alternative to Lazada.

From electronics to fashion, Gemfive insists on no parallel imports on its platform.

 

Want to know more about Malaysia’s ecommerce landscape? Check out eIQ’s ECOMScape Malaysia here. 

Malaysia Ecommerce Landscape

Malaysia may be the second smallest Southeast Asian nation but it doesn’t lack ambition to develop itself into a powerhouse. Prime Minister Najib Razak recently out-hustled neighbour Indonesia to appoint China’s ecommerce tycoon Jack Ma to advise the country’s government on its route to develop a strong digital economy.

These ambitions don’t come out of thin air. In 2015, Malaysia’s ecommerce market was estimated at $1 billion, which constitutes 1.1% of country’s total retail sales (though these numbers may be skewed). Malaysia’s ecommerce market is on a par with Singapore not only in market size, but also in terms of the well-developed infrastructure within the country compared to the rest of Southeast Asia. This might explain why Malaysia is the origin for some of the biggest tech companies in the region such as the taxi hailing app Grab and Catcha’s iProperty Group.

In the next ten years, Malaysia is predicted to increase the online shopping market size eight-fold to $8 billion, but where does the country’s ecommerce stand now? ecommerceIQ shares ECOMScape: Malaysia to provide a quick overview.

1. Surprise, surprise, Lazada emerges as the leading mainstream platform

Lazada, Southeast Asia’s clone of Amazon, has emerged as the leading business-to-consumer (B2C) marketplace in Malaysia with around 20 million visitors per month while closest rival 11street.my, a South Korean marketplace, grew to become the second biggest online marketplace with more than 7 million visitors per month only a year and a half after launching.

Malaysia Ecommerce Landscape

Locally-run Lelong.my, which started as an electronics auction site but now turning itself into a B2C marketplace, gets around 6 million visitors per month.
While these companies are still competitors to Lazada, none of them pose a real threat to Lazada’s leading position, especially after its acquisition by Alibaba earlier this year (deep pockets)

2. Service providers are early online adopters

Malaysia’s online space is filled with service providers who choose to sell services through ecommerce to happy users. A smart move considering 50% of Malaysians in a recent PwC Survey said they shopped online because of convenience.

These early adopters include:

  • KFIT: started its fitness business in Malaysia offering a subscription model for unlimited access to various gyms, and has now expanded to other categories such as selling online spa and beauty procedures.
  • GoCar: car rental by the hour or day through mobile app that offers an alternative to car rental and car ownership in Malaysia’s capital Kuala Lumpur.
  • ServisHero: a mobile marketplace that allows search and booking of home service providers such as a plumber or repairman.

Malaysia Ecommerce Landscape

3. Mobile shopping platforms on the rise

66% of consumers surveyed in the PwC report have used their phones to make purchases. It implies that the majority of 50% of respondents who have started shopping online in Malaysia within the last three years are heading straight to mobile marketplaces.

Among Malaysia’s most popular shopping apps are companies such as local imSOLD, Singapore-based Shopee and Carousell, Japan’s Qoo10 and global players like Taobao and eBay.

Malaysia Ecommerce Landscape

As Malaysians on average spend 3 hours per day on social media, social commerce becomes quite popular – 31% of online shoppers in Malaysia have purchased directly via a social media channel. The most common being Facebook and Instagram, which is preferred by 41% and 22% of Malaysians, respectively.

4. Good banking system means one less problem for ecommerce

Malaysia has well-developed banking infrastructure and as a result, its residents are more accustomed to digital payments than most Southeast Asian nations. 37% of Malaysia’s population uses mobile banking, while nearly 20% made digital payments and used banking cards in 2014.

According to the global payments solution provider Adyen, the preferred payment method of 42% online shoppers is online banking where shoppers are redirected to their online banking environment to complete purchases.

Malaysia Ecommerce Landscape

Source: The Global Ecommerce Payments Guide by Adyen

As a result, there are plenty of payment gateway solution providers in Malaysia, yet few companies offer mobile wallet solutions as they would struggle to change Malaysian habits regarding using online banking.

Malaysia Ecommerce Landscape

5. Newcomers fight to grab a share of logistics

Successful ecommerce in Malaysia has contributed to increased competition among logistics service providers. The country does not have major infrastructure issues such as islands or bad roads like in the Philippines and Indonesia, posing less obstacles for startups to offer straightforward parcel delivery.

Malaysia Ecommerce Landscape

Traditional last mile delivery companies such as POSMalaysia, Nationwide Express and SkyNet have been somewhat lagging behind adopting new technology and are now being challenged by newcomers like Ninja Van, who proudly states it’s “powered by proprietary cloud-based technology”.

And it’s not only rookies in logistics fighting for their share. In Malaysia, the competition is quite tough among fulfillment service providers who focus on serving the needs of online merchants.

Companies such as DHL, SP Ecommerce, aCommerce, theLorry.com and others are battling for clients not only among themselves, but also with the biggest client – Lazada.

Malaysia Ecommerce Landscape

Lazada already pushed its own logistics service, Fulfillment by Lazada (FBL) in Malaysia, Singapore and the Philippines. The online marketplace offers end-to-end fulfillment solution at a fixed cost per item delivered. As the biggest player in the market and scaled operations, Lazada’s price may be hard to beat.

“Increasingly, having an online shopping functionality is becoming the norm, rather than the exception and it is only going to be more widespread,” said Jon-Paul Best, Head of Financial Services for Nielsen Malaysia.

Click here to download the full, high resolution version of ECOMScape: Malaysia and join the ecommerceIQ network to not miss out on ecommerce market trends and insights.

For more information on other ecommerce landscapes, take a look at:

ECOMScape: Indonesia

ECOMScape: Thailand

ECOMScape: Singapore

ECOMScape: Philippines

1. Singapore’s Onelyst to launch ‘Rely’: Shop online pay later

Rely allows individuals who do not meet minimum income requirements for credit cards to buy items via installment plans. The eighteen-month-old startup has nabbed a major online retailer as one of its first partners for Rely. It also has plans to enter the Indonesian market next March.

Read the rest of the story here

 

2. Nestlé aims to boost ecommerce contribution to revenue

Nestlé (Malaysia) Bhd expects to increase its ecommerce contribution to its revenue from the existing one per cent to 10 per cent within the next three to four years. It was also stressed that this continuous increased demand would also mean a positive impact to all its stakeholders, from farmers who supply the raw products, to shareholders and to also the government as Nestlé is here for the long term.

Read the rest of the story here

 

3. Grocery Wars: Alibaba and JD.com Compete Against Supermarkets, Corner Stores

By 2020, online sales of fast-moving consumer goods will grow at a much faster pace than apparel and electronics to expand fivefold from today and reach 1.2 trillion yuan, according to Yihaodian, one of China’s earliest online grocery sites.

Read the rest of the story here