Fixing the race to the bottom

THE Communications Ministry has just announced that the government is assessing a base price for courier services.

The Malaysian Communications and Multimedia Commission (MCMC) will undertake cost audits and industry-wide price assessments, says Communications Minister Fahmi Fadzil.

It is probably the most serious move in years to address the severe distortions plaguing the last-mile logistics ecosystem.

Yet, the reception on the ground has not been one of excitement. If anything, the sentiment is best described as cautious realism.

One industry veteran remarks, “I feel the floor price talk has been around a long time. I won’t believe it until it happens.

“Of course it’s better for the industry, but the foreign players have dominated the market with cut-throat prices.

“The question is: how is the government going to manage a fair share of the market to domestic players as they have been crowded out,” he laments.

That sense of fatigue reflects a decade of fierce competition driven primarily by the entry of deep-pocketed foreign operators.

The transformation began around the mid-2010s, when venture-capital-backed logistics players, especially those linked to China’s burgeoning eCommerce infrastructure, entered Malaysia with a clear playbook.

They scale aggressively, drop prices, dominate market share, and build operational muscle at a pace locals cannot match.

J&T Express became the poster child of this aggressive strategy.

Within a short time, the company established hundreds of branches, operated extended hours far beyond the norm, and deployed fleets of trucks ensuring continuous 24-hour movement.

Its service structure – late-night operations, rapid expansion, accelerated fulfilment timelines – was welcomed by consumers, but feared by competitors.

GDex Bhd’s managing director/group chief executive officer Teong Teck Lean had then described it bluntly: “The industry cannot sustain new players with deep pockets killing incumbents.

“The business practice has been broken with downward pressure on rates. This is not healthy for the industry.”

By late 2019, the MCMC had licensed more than 100 delivery companies. Competition became so intense that industry-wide revenue for many major players plunged by as much as 40% to 60% in 2020, despite surging eCommerce volumes during the pandemic.

The sector had reached a paradoxical state: record parcels, record losses.

Pos Malaysia Bhd – the national postal operator and sole universal service provider – experienced this erosion most dramatically.

It suffered consecutive quarters of losses, weighed down by legacy costs and an inability to match the pricing practices of newer entrants.

By 2024, Pos Malaysia’s net loss had widened further, prompting growing fears among investors of a potential slide toward Practice Note 17 status.

Even as Pos Malaysia continued to cut costs, streamline operations, and digitise aggressively, its leadership repeatedly pointed to the same structural issue: the market is fundamentally broken.

Its CEO Charles Brewer has been vocal in calling out what he describes as a “race to the bottom,” arguing that ultra-low pricing has crippled the industry’s ability to invest in next-generation logistics technology, electrified fleets, or even a stable workforce.

“The sector has been constrained by unsustainable and anti-competitive pricing. When we move beyond pure price ­competition, the entire ecosystem can finally invest in differentiation,” Brewer told StarBiz 7 then.

His collaboration with MCMC and the Malaysian Competition Commission (MyCC), particularly regarding reforms to the Postal Services Act and action on anti-competitive “masking” practices by eCommerce platforms, marks one of the most significant regulatory pushes in the industry’s recent history.

The government appears increasingly aligned with this view.

MCMC has suspended new courier licences since 2020, signalling that the market is oversaturated.

The MyCC has intensified ­scrutiny into the way eCommerce platforms channel delivery volumes to their in-house players while obscuring alternatives.

But even as the government shows intent, the central question remains: will a floor price meaningfully shift the landscape?

A minimum price could curb predatory undercutting – the practice that allowed foreign-backed players to grab an astonishing 73.5% of the market, through J&T Express and Shopee Express alone.

By establishing a revenue baseline, the floor could enable domestic players to reinvest in technology, delivery infrastructure and workforce training.

Ideally, it would also sustain service quality rather than push operators to cut corners.

Implementation is key

However, the friction lies in implementation.

Any effective floor price must be high enough to discourage unsustainable discounting, yet not so high that it raises the cost of living or creates political backlash.

Consumers have grown accustomed to RM4 to RM5 delivery fees, or even free shipping, fuelled by platform subsidies.

If floor pricing makes those subsidies harder to sustain, online shopping costs could rise, affecting millions of Malaysians and thousands of SMEs.

There is also the question of whether pricing alone can address deeper structural disparities.

Foreign-backed players command extensive cash reserves, technological advantages and integration with dominant eCommerce platforms.

Even with higher prices, the imbalance in scale and data access remains.

Small and mid-sized Malaysian couriers may continue to struggle for volume unless masking practices are addressed and platform neutrality is enforced.

That said, the industry appears closer than ever to meaningful reform.

Unlike past discussions, which often stalled at the advisory guideline stage, the current momentum is driven by urgency rather than convenience.

Pos Malaysia’s fragile finances, the market’s extreme concentration, and the growing recognition that the country’s digital economy depends on a stable, fair logistics backbone make inaction increasingly untenable.

If a price floor is ultimately implemented, it would not be a silver bullet, but it could mark a crucial turning point.

For domestic players long squeezed out of the market, it would provide a long-needed reset.

For consumers, it may signal a shift from cheaper-at-all-costs to reliability and sustainability.

For the industry as a whole, it could be the first step in moving away from volatility and towards long-term innovation and resilience.

Given the stakes at hand, this may be the closest the industry has come in years to breaking free from a decade-long spiral and to rebuilding a healthier, more balanced last-mile ecosystem.