Alibaba hub spells trouble for malls

hookeping-alibabaPETALING JAYA: A veteran economist foresees trouble for traditional retailers when the Alibaba Group sets up its logistics hub in Malaysia.

Speaking to FMT, Hoo Ke Ping said the hub, which is expected to be operational at the end of 2019, would threaten the survival of shopping malls and small-time traders.

He noted that traditional retailers were already facing competition from their online counterparts, but he said the hub would pose a more significant challenge.

He described Lazada, the Alibaba-owned online retailer, as among the most competitive with its pricing and said it would be a challenge for mall-based retailers to match it because they could not avoid overheads like rent, utilities and wages.

Hoo also said there was an oversupply of shopping malls, with many struggling to find occupants for their retail spaces.

Last month, a news report quoted Savills Malaysia managing director Allan Soo as saying the retail market could take up to four years to improve due to the oversupply in retail spaces.

The Klang Valley alone has 160 malls and hypermarkets, including seven megamalls. Seven more megamalls are in the pipeline.

Hoo also noted that Pos Malaysia, which currently handles parcel deliveries for Alibaba, was building up its capabilities to tap into the e-commerce market.

In a press interview in February, Pos Malaysia CEO Mohd Shukrie Mohd Salleh said the group was in the process of beefing up its capabilities and infrastructure so it could provide a full range of eFulfilment services required by the industry.

The term “eFulfilment” describes the people, processes and technology used in delivering an online order to a customer.

Hoo said Alibaba’s Malaysian logistics hub would accelerate the shift towards e-commerce.

Recently, Reuters reported that the hub will function as a centralised customs clearance, warehousing and fulfilment facility for Malaysia and neighbouring countries and would speed up clearance for imports and exports.

“This means it will be easier for people to sell and move their goods within the country,” Hoo said. “So the prospects for shopping malls and even small retailers in rural areas don’t look so good.”

He noted that the situation was not unique to Malaysia.

“The same thing is happening in the United States as more businesses switch from brick and mortar stores to the online market,” he said, citing the likes of women’s clothing chains The Limited and Bebe.

According to a Business Insider report, The Limited shut down all of its 250 stores, laid off 4,000 workers and moved its business online. Bloomberg reported last month that Bebe was planning to take a similar route.

In a report last year, quoted an official of the Chinese Academy of Social Sciences as saying that one third of malls in China were expected to close within five years.