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Time to go digital, SMEs told

It may be difficult but it will be worth it, struggling businesses told.

Amanda Suriya
3 minute read
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A man walks past a row of shops in Sandakan, all closed in the wake of the conditional movement control order imposed earlier this month following a spike in Covid-19 cases. Photo: Bernama
A man walks past a row of shops in Sandakan, all closed in the wake of the conditional movement control order imposed earlier this month following a spike in Covid-19 cases. Photo: Bernama

While Malaysians have been quick to embrace technology and all things digital from internet banking to online grocery shopping in the wake of the Covid-19 pandemic, moving entire businesses in the same direction is proving to be more difficult, even for small-scale entities like SMEs.

Office life has gone remote with #WorkFromHome now part of the new norm, yet the shift has only highlighted how some SMEs were ill-equipped for the plunge from the physical to the virtual. Close to 70% of SMEs reported a 50% drop in business during the first movement control order (MCO).

Some had existing digital channels in place to support their brick-and-mortar presence.

But not all were able to pivot as quickly as they needed to, especially given the sporadic nature of subsequent MCOs.

For some, this was due to a lack of funds. Unlike larger corporations which often have financial buffers in place, many SMEs have cash flow reserves that will not see them past three months.

Others such as furniture shops, barbers, and spas depend on in-store customers.

Whatever the reason, the onset of the pandemic has shown all too clearly the difference that going digital makes for SMEs.

“Consumer behaviour is impacting local businesses as people opt for simpler and faster processes via e-commerce,” Azlan Zainal Abidin, the chief enterprise business officer at a mobile telecommunications conglomerate, told MalaysiaNow.

“At this juncture, going digital isn’t just about growth anymore – it’s also about survivability and the sustainability of the business.”

Small but powerful

At 98.5%, SMEs form the bulk of business establishments in the country, according to Emir Research research analyst Sofea Azahar.

“SMEs contribute 38.3% to the national GDP,” she added.

The onset of the pandemic has shown all too clearly the difference that going digital makes for SMEs.

“The survivability of these businesses is crucial to economic recovery, in order to maintain the expansion shown in previous years.”

This is something the government has been mindful of since the pandemic hit Malaysian shores early this year. In the months following the first lockdown which saw nearly all business activity suspended to curb the spread of Covid-19, billions were channelled under the Penjana economic rescue package to help SMEs recover.

With financial support in place, Azlan and Sofea said, SMEs would benefit from adopting tools such as cloud-based electronic point-of-sale systems or digital marketing solutions, especially as restrictions on movements continue in areas across the country.

“As long as businesses fully utilise these incentives that are driven by technology, alternatives for SMEs’ survival remain present,” Sofea told MalaysiaNow.

But such a journey is easier said than done.

Among the obstacles to going digital is a lack of what Sofea refers to as “digital-savvy talents”.

She also spoke of a lack of motivation for companies to automate their business processes.

But there are other factors beyond a company’s control such as digital infrastructure gaps between states and a difference in awareness about embracing the digital economy.

Crossing these hurdles may be difficult, especially given that the country’s skilled workforce accounts for just 27.5% with semi-skilled workers comprising the bulk at 60.1%.

However, it is not impossible.

“To fully embrace digitalisation, these indicators call for the upskilling and reskilling of talents through education,” Sofea said, noting a drop in the number of students choosing science, technology, engineering and mathematics subjects in schools.

Will it be worth it? She says yes, and not just for SMEs.

“Leveraging technology will create opportunities for Malaysians in general,” she said – as long as they are equipped with the skill sets needed to ensure a smooth digital transition.

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