Malaysia's online retail ecosystem, a significant contributor to the nation's digital economy, is facing challenges due to escalating shipping costs and inconsistent service quality. A recent survey by Milieu Insight indicates that buyers and online sellers are expressing dissatisfaction with inconsistencies and inefficiencies in logistics services. This sentiment extends throughout the entire online retail sector, encompassing marketplaces, social commerce, and small home-based businesses, underscoring the urgent need for industry-wide initiatives to improve service standards and reduce costs.

Shoppers Seek Consistency and Affordability in Delivery Services

Malaysian shoppers are increasingly concerned about the rising costs and reliability of delivery services in their online shopping experiences. The convenience that once drove the surge in online purchases is being dampened by higher shipping fees and inconsistencies in delivery experience across various platforms and channels.

The survey reveals that a significant 82% of shoppers do not consider the brand name when selecting shipping providers. Instead, their primary concern is timely and hassle-free delivery, along with flexibility in service options based on speed and cost. Nearly half (44%) are indifferent to which company delivers their parcels, as long as their orders arrive on time and without issues.

Quality of service and affordability have become critical factors influencing shopper satisfaction. Many consumers are expressing only moderate approval of their current logistics providers, with 57% only somewhat satisfied and 23% feeling neutral about the services received. These sentiments suggest that even minor inconsistencies in service standards can significantly impact customer satisfaction. If left unaddressed, this could lead to a further erosion of trust in online shopping as a whole.

Shipping costs have also emerged as a significant pain point. 64% of consumers believe that shipping fees should be reduced, indicating that rising costs are becoming a barrier to online shopping. The potential impact on shopping habits is considerable, with 73% stating they would shop online less if shipping fees increased, emphasising a threat to the growth and sustainability of the online retail industry.

The survey also indicates that 66% of consumers are likely or very likely to switch to alternative sellers if delivery fees rise. This further highlights the fragility of customer loyalty in this environment and the urgency for businesses to address these concerns. In a market where alternatives are readily accessible, meeting consumer expectations on cost and service quality is crucial to maintaining market share.

“Inconsistencies and inefficiencies in the delivery experience, coupled with rising costs, are chipping away at consumer confidence in Malaysia's online retail market," said Juda Kanaprach, Chief Commercial Officer at Milieu Insight. “Shoppers are sending a clear message: timely, reliable, and cost-effective delivery matters more than brand names. Our findings show that the majority of shoppers have abandoned purchases due to high delivery fees, while 44% don't care which company delivers their parcel as long as it arrives on time and without issues. The challenge for the industry lies in maintaining the affordability that drives online shopping while addressing the logistical hurdles that could impact both consumer trust and seller profitability.”

Online Sellers Face Operational Challenges Amid Rising Costs

Online sellers, including micro, small, and medium-sized enterprises (MSMEs), social commerce entrepreneurs, and home-based businesses, are also facing challenges due to escalating logistics expenses and service inefficiencies. These issues are impacting their operations and competitiveness across various online selling channels.

The financial burden of rising logistics costs is significant. The survey shows that over 52% of sellers are spending more than 10% of their operational costs on delivery and shipping, a substantial proportion for businesses operating on tight margins. This allocation of resources to cover logistics expenses limits their ability to invest in other critical areas such as product development, marketing, and customer service.

Concerns over future financial stability are growing, prompting sellers to seek ways to stay competitive. With 54% of businesses anticipating profit reductions due to rising delivery and shipping costs, and 58% worried about future cost increases threatening their sustainability, the challenges are clear. Despite significant revenue declines, sellers are still willing to shoulder the burden. Notably, sellers outside of key cities, 68% of sellers in tier 2 cities remain willing to subsidise shipping costs to maintain their competitiveness and reach broader audiences. This highlights the urgent need for solutions that mitigate escalating expenses while ensuring the sustainable growth of online sellers across all platforms.

Inefficient shipping services compound these financial challenges by affecting customer trust and brand reputation. 43% of sellers have received negative online reviews related to delivery issues, and 36% of businesses reported an uptick in delivery-related customer complaints. Handling these complaints requires additional time and resources, diverting focus from core business activities and innovation. Moreover, dissatisfied customers are less likely to make repeat purchases, impacting long-term revenue streams.

However, only 35% have reported losing sales directly linked to poor shipping services, demonstrating inconsistent service quality levels across the industry.

"Higher costs without improvements in service quality put immense pressure on businesses, especially MSMEs," added Kanaprach. "It's more than just the financial burden; it's about staying competitive and meeting customer expectations in a rapidly evolving market."

Variations in Service Quality Across Channels Highlight Need for Collaboration

The survey's findings suggest that performance and service quality can vary significantly depending on the channel and platform used for online selling and shopping. While some platforms and service providers are actively addressing these pain points—introducing features like delivery guarantees and free shipping—others are lagging behind.

This inconsistency affects both consumers and sellers, emphasising the need for industry-wide collaboration. Stakeholders—including logistics providers, online sellers, platforms, and policymakers—are encouraged to collaborate on innovative solutions. 

Potential initiatives include embracing advanced technologies to optimise delivery processes, enhancing infrastructure, and implementing operational efficiencies. Collaborative efforts can lead to more consistent and reliable logistics services, benefiting all parties involved.

To read more about the survey by Milieu Insight, visit: https://www.mili.eu/my/insights/rising-costs-and-service-inconsistencies-threaten-malaysias-online-retail-growth

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Interested in having your press releases, exclusive interviews, or branded content articles on Malaysiakini? For more information, contact [email protected] or [email protected]