In a short span of 10 years, e-commerce as an industry has boomed within Southeast Asia. For a country like Malaysia, it has hit what many call an inflection point that can mean unprecedented growth in e-commerce, and many players are starting to take notice.
Like its neighbouring counterparts, online shopping has made international brands accessible to more Malaysians, which they love. Additionally, Malaysia’s GDP per capita is the third highest among ASEAN nations. Because of that, this Southeast Asian ‘Tiger Cub’ economy is a popular choice for e-commerce merchants to expand into in order to gain a market share.
But how has this all happened in such a short span of time? What are the other considerations should you have when expanding into Malaysia for e-commerce?
K.S. Wei and Richard Tan, the founders of Interbase Resources Sdn. Bhd., registered for a domain in 2007. They already had a business plan in place: a C2C online marketplace much like eBay Malaysia, which opened 3 years prior. These C2C platforms connect customers to trade with each other in an online environment, and eBay Malaysia was about to meet its match. That website, Lelong.com.my, has since been able to attract 9.56 million online visitors per month at the start of 2018 and is considered Malaysia’s pioneering e-commerce platform.
Lelong enjoyed its dominance in Malaysia’s e-commerce space for a while even as other online shops followed in the next few years. FashionValet.com was launched by Vivy Yusof and her then partner, Fadza Anwar in 2010, and peer to peer (P2P) platform Mudah.my followed in 2011.
It wasn’t until 2012 when major e-commerce websites like Lazada and Zalora had launched. These players then introduced the idea of B2C online marketplaces to Malaysia, which opened up new doors for aspiring e-commerce merchants. Now, merchants can operate similarly to a retail store instead of selling items individually on these platforms.
Nowadays, Malaysia’s e-commerce websites enjoy more than 50 million monthly web visits on average, and sites like Lazada and Shopee continue to top the charts for monthly web visits for e-commerce.
In 2019, Malaysia’s e-commerce market is expected to amount to US$ 3.7 billion, and in 2023, it is projected to hit US$ 5.7 billion. This country’s e-commerce growth is growing exponentially, and with it being a recent wave with an expected compounded annual growth rate of 11.4%, it means you could still ride on it and gain your market share of Malaysian e-commerce too.
Each different e-commerce website that has since opened in Malaysia can serve a specific niche. Depending on what types of products you are selling, it may make sense to list on one e-commerce platform, but not another. For instance, it may make more sense to list fashion products on Zalora and Zilingo instead of Lelong.
By listing on popular Malaysian marketplaces that fit what your products are offering, you increase the chances of capturing a larger segment of the Malaysian customer base that is right for your offerings.
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According to various studies, there are some factors that are driving the exponential growth in Malaysian e-commerce. Yet, the country still faces some roadblocks that detract from the e-commerce experience for Malaysian e-commerce merchants and consumers. These roadblocks, however, can still be addressed by e-commerce merchants and shipping partners alike.
Meet Suhaimi. Together with his wife, Hasnaa, they make about RM 61,000 (US$ 15,000) a year, like their other middle-income family peers with RM 40,700 (US$ 10000) to RM 101,000 (US$ 25000). Suhaimi is browsing online for a few toys to gift to his kids for doing well in school and came across a few listings for similar items.
This middle-income group is expected to grow by 6.9% per annum, and access to the internet becoming more commonplace for more Malaysians like Suhaimi. The internet user penetration is at 79% in 2018, that means at least 25 million Malaysians are online at any given moment. Additionally, digitally savvy Malaysians love to shop online because it gives them convenience and saves them time. For Suhaimi, shopping online allows him to compare the prices between toys and look for the best deals at any time.
E-commerce also makes imported goods more accessible to Malaysians. Platforms like Lazada and Shopee, Malaysia’s #1 and #2 most popular platforms respectively, allow Malaysians to buy plenty of items overseas at frequently good discounts during promotional periods. Platforms like Alibaba’s Taobao are also frequently used by Malaysians when looking for products from China. Additionally, Muslim millenials in Malaysia like to shop for Japanese brands because Japanese brands can cater to Muslim values.
After looking through numerous listings online, Suhaimi decides to hold off on purchasing for now, and makes plans to browse in a mall near his office during the weeknight to see if there’s something similar.
One reason why Suhaimi has decided to hold off from buying online at the e-commerce platform directly was because he is wary of fake listings. For one, he would browse carefully and would be suspicious of listings that use generic product pictures instead of real photos.
To ensure that the listings aren’t fake, he relies on customer reviews to see if they have indeed posted a photo of how the product looked like. Like his Malaysian counterparts, he is afraid of fraud and the inability to return faulty items. It seems that he found a few user reviews who posted photos of the toy’s defects, and decides to skip buying from the platform until he is able to feel the product for himself. Thus, he decides to try his luck at a toy shop in the mall, perhaps the owner has imported some toys similar to the ones he found online.
There are many ways to win the trust of buyers like Suhaimi, and we cover them in an article on expanding your brand overseas.
With established B2C e-commerce platforms continuing to perform well in Malaysia, e-commerce merchants can benefit from the ease of using popular online platforms to sell their products.
Furthermore, the Malaysian Ministry of International Trade and Industry (MITI) has released a strategic roadmap to double Malaysia’s e-commerce growth by 2020. The roadmap focuses on 6 thrust areas which will not only accelerate the adoption of e-commerce among Malaysians, but also to facilitate cross-border e-commerce. You can find more about the MITI roadmap’s 6 thrust areas, which includes lifting non-tariff barriers on cross-border e-commerce and improving consumer protection, on their website. This is a good indication that the Malaysian government is keen on expanding the country’s e-commerce growth.
Additionally, e-commerce merchants can benefit from the ASEAN E-commerce Trade Agreement, which allows merchants to enjoy less red tape, faster transactions, and improved logistics infrastructure between trading countries.
However, uncertainty still looms across the Southeast Asian country. Malaysia’s newly elected government is still in talks over the East Coast Rail Link (ECRL) project after several months of negotiations. Initially, the cancellation of the ECRL was in part due to the government’s interest in reducing national debt. In 2018, the national debt was at US$ 250 billion. Mahathir, the current Prime Minister, had hoped to reduce this debt by cancelling projects he deemed unnecessary.
Traffic congestion is still an issue for Malaysian logistics among other bottlenecks. Putting infrastructural projects like the ECRL on hold could mean that some drawbacks in logistics will be left unaddressed. Because of these reasons, fulfilling e-commerce orders during shipping is still a challenge.
Fortunately, some of the roadblocks in Malaysian e-commerce can be addressed directly by e-commerce merchants.
To address Malaysian’s fear of fraud, online merchants can offer cash-on-delivery (COD) via the e-commerce platform or a shipping partner who can handle COD. According to Nielsen, 34% of 45-54-year-old shoppers preferred COD even when shopping online to prevent credit card or online payment fraud from happening. You could also have a return policy in order to facilitate the return of faulty items and keep your consumer’s trust.
On the other hand, having an Online to Offline (O2O) strategy can work for larger e-commerce stores. Tactics can range from offering free samples to setting up a product reservation system for customers to try it at a physical storefront.
E-commerce merchants should also look towards getting a trustworthy, tech-enabled shipping partner to ensure a smooth transfer of data. These types of logistics service partners are able to transfer data smoothly either through using cloud technology and work on optimising their operations towards fulfilling e-commerce orders. That way, they can minimise the chances of parcels getting stuck during the delivery process. Some logistics partners also provide live tracking using this technology which can give peace of mind to both merchants and customers.
While infrastructural issues are outside of the e-commerce merchant’s control, the majority of online e-commerce purchases, fortunately, take place in the state of Selangor at 20%. With developed road networks and most airports and ports located within Klang Valley, it enables international merchants to fulfil e-commerce orders a lot faster within that state.
With an increase in digital penetration in the country, a rising middle class that is digitally savvy, and continued growth as seen with Malaysia’s major e-commerce platforms, the country is sure to be a hotbed of e-commerce activity. Capitalise on this by listing in the right places and engaging in a reliable shipping partner with an extended local presence. That way, you’ll be able to make your mark in the country’s e-commerce industry.
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