Amidst the challenges of coping with the pandemic three years ago, Little Nut Tree Toys emerged as a beacon of perseverance and growth within the Malaysian micro, small and medium enterprises (MSMEs) sector.
Founded in 2021 during the peak of uncertainty, the Malaysian toy retailer’s humble beginnings in a small warehouse marked the start of a remarkable journey.
Despite its early success, the path to expansion was riddled with obstacles familiar to many small businesses – limited resources, financial constraints and unpredictable supply chain disruptions. At one point, their e-commerce account was unexpectedly suspended, casting a shadow on their hard-earned progress.
“During our early days, my sister and I were a one-stop shop, meticulously packaging orders and hustling to get them shipped out ourselves. Together, we tackled numerous challenges head-on,” said the founder of Little Nut Tree Toys, who only wanted to be identified as Tan.
Recognising the company’s business potential, the account manager of a leading e-commerce player in Malaysia actively advocated for its account to be reinstated, allowing the company to regain its footing, paving the way for a new chapter of growth.
Leveraging insights and tools from the e-commerce platform, the team honed their business strategies, leading to a surge in sales and market presence.
“Over time, we honed our business acumen with invaluable support from a leading e-commerce player in Malaysia, which equipped us with crucial market insights and analytical tools. This empowered us
to understand market demands and devise highly effective sales strategies.
“As a result, our once modest order volume surged dramatically, scaling from hundreds to thousands per month, while our turnover soared to remarkable heights,” said Tan, adding her company embraced the momentum, expanding their operations and scaling up their workforce and warehouse
space to meet the demand.
By 2024, the company's achievements were nothing short of impressive – boasting a monthly order volume of 34,000 and daily sales exceeding RM80,000.
MSMEs AS BACKBONE OF MALAYSIA’S ECONOMY
Little Nut Tree Toys exemplifies the resilience and potential of MSMEs, illustrating how strategic partnerships and digital platforms can foster sustainable growth and success.
According to data from 2022 by SME Corporation Malaysia (SME Corp), MSMEs are the backbone of the Malaysian economy, representing 97.4 percent of total enterprises and contributing to 38 percent of the nation’s Gross Domestic Product (GDP), while accounting for 48 percent of employment.
As the retail landscape evolves, the growing importance of e-commerce becomes increasingly evident.
E-commerce platforms are not only transforming how businesses operate but also expanding their reach and enhancing their competitive edge in the market.
This shift presents both opportunities and challenges, highlighting the need for MSMEs to adapt and innovate to thrive in the digital age, rapidly shifting to the e-commerce model and leveraging online platforms to maintain and grow their customer base.
According to Putrajaya Malay Chamber of Commerce Malaysia Youth Wing chairman Azrul Zafri Azmi, e-commerce growth significantly benefits MSMEs by creating jobs, stimulating consumer spending
and boosting the overall economy.
Citing research by market research company Mordor Intelligence, he said e-commerce can create up to 12 million new jobs in Southeast Asia by 2025. “In Malaysia, the e-commerce market is projected to reach US$10.72 billion in 2024 and grow to US$20.93 billion by 2029, highlighting substantial opportunities for youth employment and entrepreneurial ventures,” he told Bernama recently.
Azrul Zafri said government agencies like Malaysia Digital Economy Corporation (MDEC), SME Corp and Majlis Amanah Rakyat (MARA) have been pivotal in providing training and resources to help young entrepreneurs seize these opportunities.
“The Malaysian e-commerce sector was valued at RM44.6 billion in 2023 and is expected to grow by 12.8 percent in 2024. Increased consumer spending stimulates demand for local products and services, benefiting MSMEs and promoting economic stability,” he added.
He said in an environment where the increasing cost of doing business has become a pressing concern for MSMEs, e-commerce has emerged as a critical tool for them to stay competitive. By adopting digital platforms, these businesses can expand their market reach, reduce operational costs and enhance customer engagement.
“E-commerce provides invaluable opportunities for growth and innovation, helping MSMEs to thrive amidst evolving market conditions. Besides that, supporting mechanisms, especially by the government, are essential to ensure that MSMEs can leverage e-commerce effectively,” he added.
BRIDGE THE GAP
Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said e-commerce tools serve as a powerful mechanism to bridge the gap between small businesses and their target markets, offering a cost-effective means to engage with clients and consumers.
“However, it also needs to be clear that e-commerce is not a panacea: firms need to have a clear value proposition to bring to the market and e-commerce platforms can facilitate that. But, without a clear value proposition, e-commerce platforms would only be carrying ‘fried air’.
“Therefore, while e-commerce platforms can reduce the gap between businesses and the market, they are better exploited in the realm of businesses scaling up and exploiting economies of scale to grow in terms of their value proposition, innovation and market outreach, for long-term competitiveness,” he said.
Acknowledging that e-commerce platforms may implement changes to enhance the ecosystem for MSMEs through technological advancements and marketing support, Ferlito underscores the importance of these adaptations for long-term sustainability and resilience.
When asked about the necessity of upskilling for MSMEs in the e-commerce sector and the role of e-commerce platforms in facilitating ongoing learning and development, Ferlito noted that while MSMEs are typically more receptive to e-commerce due to its immediate advantages, further consolidation and upskilling are vital for their long-term success.
REACH A GLOBAL AUDIENCE
Commenting on the transformational impact of e-commerce platforms, head of the School of Business at the International University of Malaya-Wales Dr Nadisah Zakaria said e-commerce platforms enable MSMEs to extend their reach beyond local markets and necessitate the expansion of their workforce.
This expansion includes roles in customer service, logistics, marketing and IT support, she said, adding e-commerce also stimulates demand in related sectors such as packaging, delivery services and digital marketing agencies.
“E-commerce makes shopping more accessible and convenient, allowing consumers to shop 24/7 from any location. Additionally, e-commerce platforms frequently offer various promotions and discounts, attracting more consumers and potentially leading to increased sales volumes for MSMEs,
thereby boosting their revenue,” she explained.
Nadisah said the e-commerce ecosystem also drives innovation as MSMEs strive to capture and retain customers, resulting in improved products and services that contribute to broader economic growth.
“MSMEs can leverage social media platforms and live streaming to connect with customers, showcase products and enhance brand awareness, and chatbots which offer real-time interactions with customers. Effective utilisation of these tools requires a focus on video production, storytelling and
audience engagement.
“Additionally, skills in graphic design, photography and video editing are essential for impactful digital marketing,” she said while encouraging MSMEs to partner with influencers and bloggers for affiliate marketing, emphasising the importance of soft skills such as relationship building and negotiation.
She also said broader growth is encouraged via data analytics that provides valuable insights from customer data, facilitating better decision-making.
Referring to DataReportal (2022 data), Nadisah said Malaysia boasts an impressive Internet penetration rate, with 89.6 percent of its 32.98 million population having access to the Internet.
Furthermore, 30.25 million people, or 91.7 percent of the population, are active social media users.
“It also revealed that 54.7 percent of Malaysian Internet users frequently use social networks to search for information about products and services, significantly outpacing the use of other tools.
“Unlike many other markets, the Malaysian audience is notably receptive to promotional and sales-related content.
According to Digital Business Lab, e-commerce adoption was high, with over 66.6 percent of the population having made a purchase online,” she added.
DEVELOPING A MORE ROBUST ECOSYSTEM
The shift towards e-commerce has profoundly impacted consumer behaviour, with heightened expectations for seamless online experiences, prompt delivery and customer service putting immense pressure on MSMEs.
Nadisah opined that e-commerce platforms should continuously reinvest in their infrastructure to create a more robust ecosystem that drives long-term growth for MSMEs.
She said ongoing enhancements to their infrastructure, user interface and user experience are crucial to ensuring that MSMEs have access to the latest technology.
E-commerce platforms can also host seller communities and forums where MSMEs can connect, exchange experiences and learn from each other, she added.
On how e-commerce reduces operational costs, she said the availability of payment methods like e-wallets, coupled with automated systems such as inventory management, help lower costs significantly.
The improvement in logistics services has also enabled MSMEs to serve their customers nationwide with minimal investment, she said, adding it has reduced shipping costs and optimised supply chains, leading to faster delivery services which, in turn, have improved customer experiences, fostered repeat business and garnered positive reviews.
COLLABORATION AMONG STAKEHOLDERS
Azrul Zafri, meanwhile, said it is essential to support the continuous growth and improvement of the Malaysian e-commerce ecosystem, particularly in facilitating regional selling.
He said all stakeholders including the government, e-commerce platforms, industry leaders and logistics providers must collaborate to create a supportive environment for Malaysian MSMEs within the e-commerce landscape.
“The potential of e-commerce to propel Malaysian MSMEs towards regional competitiveness, economic prosperity and long-term success is immense. A collective effort to strengthen the e-commerce ecosystem, with a focus on regional trade, will unlock this potential and drive sustainable growth for MSMEs and the broader economy.
“According to Malaysian Investment Development Authority (MIDA), e-commerce is poised to contribute RM1.65 trillion to Malaysia's GDP by 2025, underscoring its critical role in economic development. Embracing e-commerce and supporting MSMEs in this transition, particularly in accessing similar larger markets, will not only drive economic growth but also enhance Malaysia's regional competitiveness,” he added.
He said the government should in the meantime expand training programmes, with a special focus on developing digital literacy, online marketing and cross-border trade skills for young entrepreneurs.
He also said providing incentives such as tax breaks or grants for MSMEs engaged in cross-border e-commerce will encourage more businesses to expand their reach.
“The government can invest more in digital infrastructure such as improving Internet accessibility and enhancing cybersecurity measures which are crucial for ensuring a safe and efficient online business
environment.
“Cross-border trade regulations must also be streamlined to make it easier for MSMEs to enter new markets,” he added.
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