Changing the e-commerce game

Changing the e-commerce game

Monday, 22 Jul 2019
by C.H. Goh
The Star Online – Business SMEBiz

HAVING pioneered the trading of gold and jewellery on online platforms more than 12 years ago, Datuk Louis Ng is aware of the enormous potential that the Internet has to offer.

Ng, the founder and managing director of the Penang-based gold trading firm Public Gold Sdn Bhd, witnessed first-hand how taking a business online could bring efficiency to its operations, change consumer behaviour and even investment habits, as well as provide access to a much wider customer base.

“When we started offering an online platform for trading of pure gold bar, silver and jewellery, we managed to help turn gold, especially pure gold bar, into a viable alternative for people looking to invest in something that can help to store and preserve their wealth.

“They could check on real time international gold prices, decide on their own when to buy or sell and know exactly how much is our margin. It was all done very transparently, and this helped to change how people look at high value investment, and built trust in our integrity and customer loyalty along the way,” says Ng.

Leveraging his experience with the gold trading platform, Ng aims to make a similar success out of his other business – PG Mall, which operates in the fast growing but highly competitive e-commerce marketplace space.

PG Mall, which started operations in 2017, is an e-commerce platform for local small businesses.

Notably, PG Mall is a newcomer playing in a market dominated by deep pocketed e-commerce giants, namely, Lazada, which is owned by Chinese e-commerce giant Alibaba, and Shopee, which is backed by China’s Internet conglomerate Tencent Holdings.

Still, Ng thinks there is a fighting chance.

Ng recently moved PG Mall’s operating base to Kuala Lumpur, where he says all the action is taking place, as a testament of his seriousness in turning the company into a leading Malaysia-based e-commerce marketplace operator.

He also expects Public Gold’s large established network of customer service centres and e-trading back-end operations to come in handy in helping PG Mall grow.

A booming market

While it may seem to be a challenging market for PG Mall, Ng says the timing is ripe for e-commerce ventures and his task is made easier as Malaysia, like many other Asean countries, is in the midst of an online economy boom.

The infrastructure to support the e-commerce boom is much more developed and consumer participation is helped by greater Internet penetration. Ng says Internet penetration in Malaysia stands at 67%.

Additionally, the revenues generated by the industry is growing rapidly. E-commerce contributes about 5.8% to the nation’s gross domestic product, or just 0.6% below the target set by the government for 2020, says Ng.

However, the size of Malaysia’s e-commerce is relatively small compared to its neighbours given our small population base of some 32 million. But there is ample room for growth, which will be largely driven by increasing consumer spending, the surge of Internet users and greater acceptance of mobile e-commerce.

Nonetheless, Ng points out that the industry landscape is also becoming more competitive with the direct entry of foreign players. Indonesia’s leading e-commerce platform Bukalapak recently expanded its reach to Malaysia with the launch of BukaGlobal.

Ng is unfazed. His sights are set on becoming the champion of its home ground.

“While we see these established marketplaces as our main competitors, we aim to be on par with them with our own local specialisation and by ensuring a sustainable business model. We are driving opportunities for merchants with engagement tools on our platform,” he says.

He notes that customers’ shopping behaviours have been different across markets. Success in one country does not guarantee success in another market. As such, it will be a challenge for companies to directly duplicate the success of China, and likewise, for any foreign player to duplicate their success here.

Additionally, many local merchants have not been able to effectively use the tools provided by many of the e-commerce giants, he says.

To compete head-to-head with deep-pocketed Lazada and Shopee, PG Mall will be leveraging its local knowledge and understanding of Malaysia’s SME landscape. Ng also has the advantage of being able to duplicate the marketing and customer loyalty programme honed over 12 years of operating in Malaysia.

He adds that e-commerce players around the region have managed to stay on top in their own local markets despite the presence of bigger regional players, which is a big encouragement for him.

Ng has another ace card up his sleeve. He plans to put Public Gold’s proprietary products up for listing on PG Mall. This arrangement will allow PG Mall to have a unique price advantage over its competition due to lower operating costs.

Forever cashback

Since its inception, PG Mall has already received more than RM25mil in investment from Public Gold. It currently has more than 500,000 stock keeping units (SKUs) from 10,000 local small businesses on its platform. It expects its SKUs to reach the 1 million mark from more than 20,000 merchants by year-end.

Ng’s ambitious plan for PG Mall to be ranked among the largest marketplaces in the country will be helped by Public Gold’s large customer base.

“We will be adopting our marketing strategy from Public Gold, making sure that we spend and reward our customers with up to 3.5% cashback reward. We call this ‘forever cashback’, which means that there is no expiry and no limit on how much they can make, by getting relatives, friends and other recruits to sign up and shop on our platform,” he says,

Ng is projecting revenue of RM20mil for PG Mall this year. The company has recorded a year-on-year growth of more than 200% in the first half of this year, mainly due to its low base.

The company currently has about 200,000 customers.

In the midterm, once the Asean markets are ready for cross border e-commerce trade, Ng says PG Mall will be looking at forming strategic tie-ups through various means, including minority stake sale to a regional Internet or e-commerce firm, to help scale its operations in South-East Asia.

He believes the company will be able to attract investments from market leaders in the region once PG Mall becomes the leading player in Malaysia and is in a stronger position to tap the other countries in South-East Asia.

“Additionally, we don’t believe any one player is going to win or lose the South-East Asian market over the next one to two years. Rather, the question is which players have the right mindset, strategy and business models to capture the tremendous potential of the region in the next decade or so,” he says.

Ideal strategic partners for PG Mall will be companies in the e-commerce industry with a leading market position in their respective countries, he adds.

Ng is eyeing Indonesia and Singapore as its priority markets in the next phase of its expansion plans. What will help the company is that Public Gold has service centres in those countries.

Certainly, there is potential for the company to grow across the region as Ng points out that issues such as cross-border transactions, payments and delivery are more easily resolved for SMEs using e-commerce platforms. This gives PG Mall an opportunity to service the sector through its platform.

PG Mall will also consider strategic equity partnerships by acquiring minority stakes in start-ups so that it can explore new trends and technologies in e-commerce to enhance its ecosystem and marketing platform to be able to expand outside Malaysia.

On its expansion plans, the managing director says the next three years will be a good time to start exploring market entry into South-East Asia with strategic partners since PG Mall would have grown enough to be ranked as the third largest e-commerce operator in Malaysia after regional players Lazada and Shopee.

Ng is confident that its focus on local SMEs and in building a platform exclusively for Malaysia-based brands and businesses will be its key advantage in the industry. Besides, its familiarity with effective personalised marketing will be a big boost for the company. PG Mall has spent years analysing the strengths and weaknesses of the current e-commerce marketplace industry, Ng says, and he aims to prove his concepts within the next three years.

Time will tell if PG Mall will indeed be another goldmine for Ng.