Sunday, June 2nd, 2019


Mexico’s Economy Minister to meet Wilbur Ross over US tariff threat

MEXICO CITY, June 2 — Mexico’s Economy Minister Graciela Marquez said today she would meet with US Commerce Secretary Wilbur Ross in Washington on Monday, two days before the neighbouring countries are due to discuss possible tariffs on Mexican…

Logistics and merchants’ capacity weak links in Malaysian e-commerce chain

KUALA LUMPUR: The local e-commerce ecosystem sees weakness on the logistics and merchants’ front, especially in delivery time and where merchants may not be equipped to cope with the surge in demand, according to e-commerce player Shopee.

Shopee regional managing director Ian Ho (pix) said from a logistics point of view, there are still ways to improve on delivery time given that shipping in Peninsular Malaysia takes two to three days after purchase and longer for Sabah and Sarawak, while in China, one can expect same-day or next-day delivery.

“We work with logistics players on how to shorten the delivery time. This is important especially during peak or festive seasons like Raya, when buying behaviour spikes. For the logistics players, are they able to cater to these spikes? We constantly work with them to project (the surge in demand), plan and how they can improve their services,” he told SunBiz in an interview recently.

For Malaysia to move to same-day delivery is possible, Ho said, but for a price.

“Everything is for a price and depends on whether you need the product to be delivered on the same day. If you buy a shirt, it takes a few days (to be delivered). Unless you need it for a function tonight, and you should be prepared to pay a bit more to get it immediately.”

Shopee’s main logistics providers in Malaysia are Pos Laju, DHL, J&T Express and it is constantly on the lookout to partner more players. It also works with AirAsia Bhd’s logistics arm RedBox as its logistics partner in Sabah and Sarawak.

Meanwhile, Ho pointed out that SMEs and brands who are new to e-commerce may not be equipped operationally to cope with its growth, adding that packing is a major issue for these sellers.

“If a brand used to be selling B2B (business-to-business) and now they’re selling directly to customers, which means that in their own warehouse, they’re doing their pick and pack in a different way.”

Ho explained that in the past, these merchants’ pick and pack used to be sending the entire box of products to stores, which then unpack and sell the products. Now the warehouse needs to be changed as they need to pick individual items from master boxes and pack them for shipment at the warehouse.

“The entire customer experience is based on how fast they get their products. While last mile logistics takes a bit of time, if you take a long time to pick and pack, that will also affect the whole buying experience. We’re working closely with brands and SMEs to help them improve the entire flow.”

He said packing is the major issue that boils down to one’s efficiency. For example, a merchant gets 1,000 transactions on the first day and clears 800 of them. The next day the merchant gets 1,000 and puts this on top of the remaining 200 and clears the top 800.

“That remaining 200 is always there and the next day, they put them on top again. They constantly fail to clear. What they did was the first-in, last-out approach, which doesn’t make sense. The 200 will always be at 200 and that was where the complaints came. This is a simple example but you’d be surprised. To most people it is common sense but because of the pace of growth, merchants may not have thought it through.

“There’s more demand than they can cope with. We double our gross merchandise value (GMV) regionally and it is consistent among all the countries. Doubling means 10-15% growth month on month and most companies are not equipped at that pace.”

Even then, Ho said, Malaysia is relatively underpenetrated compared to the rest of the world with a lot of potential for growth, said Ho. E-commerce shopping constitutes less than 2% of total retail sales in Malaysia, while in China it is over 20%.

Malaysia remains an important market for Shopee with 16 million users, 600 brands and retail partners as well as 450,000 local sellers and entrepreneurs. Shopee is present in Malaysia, Indonesia, Thailand, Vietnam, Singapore, the Philippines and Taiwan, and its largest market is Indonesia.

Ho said its priority for 2019 is to grow its seller base and improve its infrastructure to have more payment options for customers, as well as ensuring delivery time goes down.

Shopee posted a GMV of US$10.3 billion (RM43 billion) last year in seven of its markets, 2.5 times higher than US$4.1 billion in 2017. Its adjusted revenue was US$290.7 million, 16 times more than US$17.7 million in 2017.

Shopee is part of New York Stock Exchange-listed SEA Group, which is also the parent of digital entertainment Garena and digital financial services AirPay.

IATA warns of US-China trade war spillover

SEOUL: The intensifying US-China trade war and rising fuel prices will continue to bog down airline profits this year, the International Air Transport Association said today.

The warning came at the annual meeting of global airlines in Seoul, where it was revealed that 2019’s collective net profit was forecast to be US$28 billion (RM117 billion), down from an outlook of US$35.5 billion released in December.

The grim outlook was driven by rising costs across the board, including labour, fuel and infrastructure, the IATA said, adding the worsening trade war between the two world powers was not helping.

“Weakening of global trade is likely to continue as the US-China trade war intensifies,” said IATA chief executive Alexandre de Juniac.

“This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise,” he added.

The world’s top two economies have been locked in a trade war since last year, swapping tit-for-tat duties on hundreds of billions of dollars worth of goods and sending markets into a tailspin. The fallout has reached far beyond their shores, with manufacturing in many export-dependent Asian economies taking a hit.

Brian Pearce, chief economist at the IATA, forecast “zero growth at best” for air cargo traffic this year, noting the impact of the trade tariffs imposed in the first half of 2018.

The Asia-Pacific region, which accounts for around 40% of global air cargo traffic, was “clearly under pressure”, he added.

“Cargo is such an important feature that the weakness in trade and the risk surrounding trade will mean profitability will be weaker in this region,” Pearce said.

He painted a “mixed picture” for the region, noting that Asian countries – notably India and China – will lead a “reasonable” 5% global growth in the passenger business.

Pearce did not rule out a possible industry recession but pointed to the rise in air travel demand and said: “At the moment it doesn’t look like we are going to have one in 2019.”

This year’s meeting of the IATA, which represents some 290 airlines comprising 82% of global air traffic, comes after two crashes in October and March that left hundreds of people dead.

Both accidents involved Boeing’s 737 MAX 8 jetliners, turning the world’s largest aircraft maker into a liability that put the industry’s “reputation in the spotlight”, de Juniac said.

Pearce, the IATA chief economist, played down the economic impact of the US jetliner’s grounding on the industry, noting the 737 MAX 8 accounted for “less than 2%” of the global fleet.

“So it’s actually fairly minor,” he said. “It’d be more important to some airlines… but it hasn’t been a driving factor.”

Meanwhile, airlines urged regulators to coordinate on software changes to the Boeing 737 MAX in a bid to avoid damaging splits over safety seen when the aircraft was grounded in March.

IATA said trust in the certification system had been damaged by a wave of separate decisions to ground the jet, with the US last to act.

Airlines are worried further differences between regulators over safety could confuse passengers and cause disruption.

“Any rift between regulators is not in anyone’s interest,” de Juniac said.

Boeing’s best-selling jet was grounded after two crashes, in Indonesia and Ethiopia, over five months killed a total of 346 people.

The US ederal Aviation Administration initially resisted the decisions led by China, but later followed suit.

Airline officials say any new bout of staggered decisions could cause problems in operations and code-sharing.

“Obviously for us to operate the MAX, the approval from the Singapore authorities is not enough. We have to operate somewhere … Indonesia and China are two important markets for us,” Singapore Airlines CEO Goh Choon Phong told Reuters.

But the European Union’s top transport official said bloc’s regulator, the European Aviation Safety Agency (EASA), reserved the right to carry out its own separate review at its own pace.

“Certainly EASA will take a very close look at the results (of proposed design changes) and then make a decision and that message was very clearly passed,” Transport Commissioner Violeta Bulc told Reuters at the Seoul event.

“We always work together with other regulators and we certainly will take joint moves, but EASA will reserve the right to take an individual look at the results and then of course engage with the rest of the regulators.”

Asked how long it would take to end the crisis, she said, “I hope as soon as possible, because we do need to restore order and trust and move on.”

Fama targets RM1b sales from farmers’ markets this year

TAPAH, June 2 — The Federal Agricultural Marketing Authority (Fama) aims to achieve RM1 billion in sales this year which will be generated through the farmers’ markets nationwide. Its deputy director-general (Entrepreneur Development) Basri…

China and US clash again on trade and regional security

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Airlines want joint lifting of 737 MAX ban, but EU cautious

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China says US can't use pressure to force trade deal

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Global airlines slash profit forecast 21pc on protectionism fears

SEOUL, June 2 — Global airlines slashed a key industry profit forecast by 21 per cent today amid concerns over an expanding trade war and higher oil prices. The International Air Transport Association, which represents about 290 carriers or more…

New India government suffers double economy hit

NEW DELHI, June 2 — Prime Minister Narendra Modi's new government suffered a double economic blow of slowing growth and rising unemployment as it took office Friday. Modi named Nirmala Sitharaman as his new finance minister in a drastically…