POV from Silicon Valley: Location Matters – Particularly with Cross Border eCommerce

As consumers continue to expand the use of electronic commerce channels as their preferred method of shopping, the traditional retail industry “location matters” adage seems fated to obsolescence. Clearly, the location of a physical retail location is becoming less important than it was as recently as five years ago – the retail location is often in the cloud, accessible from wherever the consumer and his or her smartphone happens to be.

“Location matters” still rings true despite the evolution of commerce from physical to electronic, but its meaning has also evolved.  We all understand the concept of instant gratification and the feeling of frustration that can arise from waiting for a purchased item to be delivered. Jack Ma, founder and Executive Chairman of Alibaba, the world’s largest retailer has set the success requirement for their Electronic World Trade Platform to delivery within 72 hours of purchase to anywhere in the world, 24 hours within a country. Being able to consistently meet this requirement requires a highly sophisticated set of inventory management and logistics systems to be sure, but those things alone will not guarantee success. As it turns out, the shipping point’s location matters to a great extent in timely and efficient delivery – particularly when cross-border shipments are involved.

In an e-commerce world where this location matters, Malaysia enjoys many advantages, just as it has since the beginnings of international commerce centuries ago.  Strategically located on the Strait of Melaka, Malaysia is the natural gateway to southeast Asia, within easy reach of many of the world’s most dynamic economies. The ASEAN region is home to 630 million consumers and collectively the world’s sixth largest economy at over US$2.4 trillion annually. However, it’s not only the physical location that matters. What Malaysia and its partner Alibaba have put in place in that location are what make it one of the world’s most advanced e-commerce hubs.

Reliable and efficient shipping operates on a hub and spoke system, with few hubs connecting out to many spokes in a region.  The hubs are the most vital parts of the system, where synchronization of warehousing, packaging, transportation, and other logistical aspects of fulfilling an e-commerce transaction such as customs clearances or dealing with returned merchandise.  Malaysia’s recently launched Digital Free Trade Zone, which has within it the first international hub of Alibaba’s Electronic World Trade Platform, is among the e-commerce industry’s most advanced hubs worldwide.

Why did Jack Ma and Alibaba choose Malaysia for its first deployment of its Electronic World Trade Platform? Location was clearly one of the reasons. Our geopolitical stability and deeply ingrained trading culture were reasons.  The others relate to a powerful shared vision and the leadership commitment to execute an aggressive development plan. Making the Digital Free Trade Zone a reality involved the Prime Minister and other senior members of the government setting directives that cut across 26 different agencies and ministries. This top-down leadership, plus the sector-specific knowledge of MDEC and others driving the growth of the nation’s digital economy were what made it possible to transform vision into reality in under one year. Datuk Yasmin summed it up this way: “It was many things, but most importantly, he and the Alibaba team saw that we had the vision for it and the ambition to see it through.”

Jack Ma said, “the first-e-hub under the Electronic World Trade Platform outside of China will go a long way towards making global trade more inclusive and provide much-needed support to a hugely important constituent:  SME’s and the younger generation.” Clearly, the significance of the partnership with Alibaba, and the capabilities it has brought to market have industry, socio-economic, and other far-reaching implications. Datuk Yasmin expressed the following in conclusion:  “My dream is that we will rediscover and reposition the glory days of the Straits of Melaka during the silk and spice trade.  Melaka was right in the center of the universe then, and I feel it can be that in the e-commerce universe.”

Datuk Dan E Khoo is the President of MDEC Americas Inc; a Silicon Valley organization established to drive the global expansion of Malaysia’s digital economy.

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