The largest online retailer in the world, Amazon is strengthening and diversifying into other sectors.

What can Malaysia’s online retailers Lazada (owned by Alibaba) and Shopee learn from the retail giant?

Here’s what Amazon can teach our local online retailers:

What did Amazon do?

In the US, brick and mortar malls are dying off slowly. These are located near residential communities with easy access to highways.

Amazon buys and converts them to intermediate facilities that store frequently bought items, which allows faster delivery throughout the US.

Goods are kept in these converted warehouses and once an order is received, a multitude of last mile delivery solutions are employed to fulfil it as fast as possible.

One day delivery has become the most important goal for Amazon. Being able to fulfil a customer’s requirement within 24 hours elevates the whole experience to a new level and brings it closer to traditional retail shopping.

Customers can make grocery orders in the morning before going to work and have them delivered when they’re back in the evening. This appeals to an audience who demand near instant gratification.

What can Malaysian online retailers do?

Malaysia is significantly smaller than the US, yet having warehouses all over the nation enables online retailers to cut delivery time by a large margin.

Even in larger cities, empty spaces in less popular shopping malls can be retooled to allow for such a strategy to take place.

What did Amazon do?

Amazon prides itself in delivering on time. It employs many last mile logistical solutions to achieve that milestone.

Drone delivery is one of them, under the name Prime Air for the US market. Expected to launch by the end of 2019 in select cities, Prime Air boasts the ability to fulfil customer orders within 30 minutes of ordering.

It allows delivery via the most direct route while bypassing difficult terrain and traffic. Imagine the capabilities of a drone versus a truck that has to navigate through bumper to bumper traffic or around a hillside location.

A drone just flies over all obstacles to reach its destination. It is more eco-friendly than traditional delivery methods. The fleet of drones employed are all battery operated to reduce carbon emissions.

There are some caveats though; packages must be light, and fit specific packaging requirements. Amazon must also get the necessary approvals to ensure compliance before operating anywhere in the US.

By controlling the shipment of products from start to end, Amazon ensures that their orders always arrive on time.

Amazon’s guiding principle of developing every aspect of their business in-house and non reliance on third parties results in higher profit margins and customer satisfaction.

What can Malaysian online retailers do?

Malaysian online retailers rely on a mix of third party delivery services and their own courier team, which makes it harder to control the quality of deliveries.

Lazada and Shopee rely on Poslaju, DHL, and J&T Express to handle the bulk of their shipments. From delivery using motorcycle couriers to small trucks, the solutions here are unique to this environment.

A motorcycle courier bypasses traffic and quickly gets to hard to reach places such as rural areas.

This means that the ordering and fulfilment are disengaged from one another. This forces online retailers to provide some sort of guarantee on the speed and quality of delivery. These elements make future transactions less likely, especially if the experience is bad or unpleasant.

If online retailers were in charge of every delivery, quality and efficiency will be more rigorously controlled. For tougher terrains, bicycle couriers or even 4WD vehicles can do the deliveries. When quality and delivery improves, customer confidence increases.

What did Amazon do?

Amazon is pursuing automation on a large scale. Amazon warehouses employ hundreds of robots to move items from point A to point B, augmenting human workers and reducing workplace injury.

This ensures continuous operational times, allowing Amazon to scale easily.

Prime Air will transition from being guided by humans to fully-automated delivery in the future. The same goes for Amazon Scout, a land-based delivery robot that has been in a pilot phase.

Amazon is also utilising self-driving trucks developed by Embark to combat the shortage of truck drivers in the US.

The money Amazon invests in automation and robotics is fuelling astounding growth in the sector, similar to what Tesla did in automotive and battery development.

What can Malaysian online retailers do?

Automation isn’t something local online retailers can jump in immediately. A large pool of educated workforce with specific skill sets is required for the successful development and integration of automation and robotics.

What they can do in the meantime is employ a diverse range of line automation that is already reaching maturity due to their use in the field of manufacturing. Inventory management, packaging and labelling are some of the areas that can use automation.

A lot of work needs to be done. Our roadworks and transportation hubs need to be robust to cater to autonomous vehicles to travel. Huge changes must be made in government policies to ensure no oversight occurs.

Conclusion

There is still a long way to go for our local online retailers to match the might of Amazon, but they are not without the will or spirit to innovate.

What they do have that Amazon doesn’t, is years of experience in the local market. Even with its great wealth and technology, Amazon can’t penetrate the China and Africa markets. The local online retailers there know what the locals love best.

So can Lazada and Shopee continue to stay relevant in the local market? The one able to adapt and ride consumer wants will determine the winner in the end.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.