Retail on wheels and its cost factor

Retail Group Malaysia managing director Tan Hai Hsin says it is correct that high delivery charges, sometimes as high as 15% to 30%, are putting potential consumers off. This is hurting the broader e-commerce business, he says.

VANI wanted to help a colleague who ventured part-time into the food business, offering nasi lemak and banana fritters among other local favourites, after Covid-19 pandemic struck.

“The nasi lemak was RM1 a pack. The other items were just a couple of ringgit, ” Vani says.

She ordered up to RM50 to make the purchase worthwhile but balked at the RM15 delivery charges.

Delivery services where her colleague lived were limited. Besides, her home operations were too small for larger established food deliverers.

Besides the retail sector – which encompasses malls, non-malls and small businesses – among the hardest hit economic sector as a result of the varying decrees of restrictions, the issue today is expensive delivery charges.

“I am fine with RM5 but not RM15, ” says Vani.

Whether it is to help the little men and women doing a homegrown business, or a retail chain, many have opted or are considering delivery services because of the stubbornly high Covid-19 cases.

With the Chinese New Year celebration less than a week away, a retail industry source says high delivery services may eventually “kill” those in the food business and other forms of retail if charges continue to be high and arbitrary.

For many, be it making cookies for sale or relying on restaurant dine-in celebrations, the lunar month sales help to tie over a good part of the year’s revenue and profit. This underscores the importance of the CNY period, which is in a way, pretty much like the year-end Christmas and new year festivities.

Their lament is “my food is cheap but nobody is buying because the delivery is expensive.”

Retail Group Malaysia managing director Tan Hai Hsin says it is correct that high delivery charges, sometimes as high as 15% to 30%, are putting potential consumers off. This is hurting the broader e-commerce business, he says.

“It depends on the bargaining power of the retailers. Very established and highly-reputable operators (big food outlets) are getting low rates.

“It also depends on delivery operators. New or small operators charge lower rates in order to get more food and beverage (F&B) operators to use them.

“This is market demand and supply. F&B operators may also invest to set up their own food ordering platform, ” says Tan.

It is this “last mile delivery” that will hurt retailers with little or no bargaining power.

Retail Group Malaysia tabulates data for Malaysia Retail Association members.

A retail industry source who declined to be named says this “last mile delivery” was brought up in the last quarter of 2019, before Covid-19 struck because at the time, most retailers especially the larger ones already has some form of e-shop.

“It costs too much to move that last mile. That is our challenge today, ” the source says.

“To make it worthwhile, a household may order a lot. But singles and those who live alone do not need so much. So they make the trip, or they do an order-and-collect.

High delivery charges, he says, were precisely why some online shopping platforms offer free delivery. Some of the items sold online are cheaper than the delivery charge.

He expects high delivery charges to crop up again with the coming CNY, particularly for food deliveries, as hotels and restaurants are working towards delivery meals as dining-in is prohibited.

How charges are calculated can come across as rather arbitrary, depending on the vendor and the distance.

According to Ballagee Chandra, who launched a new e-hailing app in December 2020, the charges incurred by the consumers vary according to distance and the restaurant they order from.

Ballagee says some restaurants waive delivery charges while a charge may be incurred on others.

Ballagee launched the e-hailing and delivery app with a focus on small and medium enterprises in the food, auto part and pharmaceutical deliveries.

Ballagee says the pandemic has catapulted delivery services a few notches up as more people are working at more than one job to make ends meet and as consumers turn to this service to avoid leaving the confines of their home.

He has 150 bike riders and more than 500 vehicle drivers versus the 100 and 300 he started with a couple of months ago, respectively.

However, he says not all his delivery partners and riders are attached with the company. They are on multiple platform as well, he says.

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