In a short span of 10 years, eCommerce as an industry has boomed within Southeast Asia. For a country like Malaysia, it has hit what many call an inflection point1 that can mean unprecedented growth in eCommerce, 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 nations2. Because of that, this Southeast Asian ‘Tiger Cub3’ economy is a popular choice for eCommerce 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 eCommerce?
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.my4, has since been able to attract 9.56 million online visitors per month5 at the start of 2018 and is considered Malaysia’s pioneering eCommerce platform.
Lelong enjoyed its dominance in Malaysia’s eCoommerce space for a while even as other online shops followed in the next few years. FashionValet.com6 was launched by Vivy Yusof and her then partner, Fadza Anwar in 2010, and peer to peer (P2P) platform Mudah.my7 followed in 2011.
Nowadays, Malaysia’s eCommerce websites enjoy more than 50 million monthly web visits on average9 , and sites like Lazada and Shopee continue to top the charts for monthly web visits for eCommerce.
In 2020, Malaysia’s eCommerce market is expected to amount to US$ 4.3 billion10 , and in 2024, it is projected to hit US$ 5.9 billion. This country’s eCommerce growth is growing exponentially, and with it being a recent wave with an expected compounded annual growth rate of 8.4% between 2020- 2024, it means you could still ride on it and gain your market share of Malaysian eCommerce too.
Each different eCommerce 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 eCommerce 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 exponential growth in Malaysian eCommerce. Yet, the country still faces some roadblocks that detract from the eCommerce experience for Malaysian eCommerce merchants and consumers. These roadblocks, however, can still be addressed by eCommerce 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)11. 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.
Access to the internet is becoming more commonplace for more Malaysians like Suhaimi. The internet user penetration is at 79% in 201812 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 time13. For Suhaimi, shopping online allows him to compare the prices between toys and look for the best deals at any time.
eCommerce also makes imported goods more accessible to Malaysians. Platforms like Shopee and Lazada, Malaysia’s #1 and #25 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 brands14 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 eCommerce 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 fraud15 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 decided 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.
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With established B2C eCommerce platforms continuing to perform well in Malaysia, eCommerce 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)16 has released a strategic roadmap to double Malaysia’s eCommerce growth by 2020. The roadmap focuses on 6 thrust areas which will not only accelerate the adoption of eCommerce among Malaysians, but also facilitate cross-border eCommerce. You can find more about the MITI roadmap’s 6 thrust areas, which includes lifting non-tariff barriers on cross-border eCommerce and improving consumer protection, on their website17. This is a good indication that the Malaysian government is keen on expanding the country’s eCommerce growth.
Additionally,eCommerce merchants can benefit from the ASEAN eCoommerce Trade Agreement, which allows merchants to enjoy less red tape, faster transactions, and improved logistics infrastructure between trading countries.
However, traffic congestion18 is still an issue for Malaysian logistics, among other bottlenecks. Because of this, fulfilling eCoommerce orders, especially in the last mile, can be a challenge.
Fortunately, some of the roadblocks in Malaysian eCommerce can be addressed directly by eCommerce merchants themselves.
To address Malaysian’s fear of fraud, online merchants can offer cash-on-delivery (COD) via the eCommerce platform or a shipping partner who can handle COD. According to Nielsen15, 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 eCommerce stores. Tactics can range from offering free samples to setting up a product reservation system for customers to try it at a physical storefront.
eCommerce 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 eCommerce orders. That way, they can minimise the chances of parcels getting stuck during the eCommerce 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 eCommerce merchant’s control, the majority of online eCommerce purchases, fortunately, take place in the state of Selangor at 20%19. With developed road networks and most airports and ports located within Klang Valley, it enables international merchants to fulfil eCommerce 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 eCommerce platforms, the country is sure to be a hotbed of eCommerce 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 eCommerce industry.
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