Malaysian Shoppers Go Online | Article – HSBC VisionGo

E-commerce Overview of Malaysia

Startups  ·    ·  6 mins read

When Facebook is not just a face book anymore! When brick-and-mortar stores have now transformed to browse-and-click with the use of actual or virtual keyboard, and where e-shopping is as easy as with just a few clicks at the comforts of your own home – Hello! It’s online shopping!

 

Understanding Electronic Commerce (E-commerce)

E-commerce is ‘the buying and selling of goods and services over the internet’, typically with various business models such as Business to Business (B2B), Business to Consumer (B2C), Consumer to Consumer (C2C), and Consumer to Business (C2B). As the Internet is borderless, online platforms help these businesses go regional or global to establish a wider market presence with lower operating costs, resulting in products often being cheaper and enabling greater flexibility for customers as well as more choices and selections to offer than in the physical store alone. 

With the rise of e-commerce, the retail landscape needs to change and adapt to ever-changing technological developments as online presence gives greater results for sellers to understand the change in shopping patterns, customers’ expectations and the industry’s competitiveness.  

In addition to brick-and-mortar stores, mega-companies have also turned to the omnichannel business model, merging online and offline channels with the advantage of providing customers a more satisfying shopping experience, often with greater choices and selections, flexibility, and convenience. As such, there has been an increasing number of browse-and-click brand-name retail stores, namely Giant, Harvey Norman, Decathlon and DIY in Malaysia, or Target, Walmart, Best Buy and Nordstorm in the US.

As the online business industry becomes more competitive, consumers reap the benefits of competitiveness as they head for their screens over physical stores, with the advantage that e-commerce never sleeps.

 

E-commerce Peaks in Malaysia

In Malaysia, with a population of around 32.6 million, about 91 percent of Malaysians are active internet users with a high rate of mobile phone users. By 2025, the figure is expected to grow to 97.5 percent, thus making Malaysia the fastest growing e-commerce market in the Southeast Asia region despite the global COVID-19 pandemic. 

The customary way of conducting face-to-face business (B2B or B2C) is fast becoming a thing of the past. Many businesses increasingly use digital technologies to embark into the world of e-commerce to stay afloat since being hit hard by the pandemic lockdown. Consequently, this global interruption has similarly prompted consumers to cultivate the new norm of shopping online in their daily routine, as people are spending more time at home anticipating that the global pandemic is likely to stay. 

Although e-commerce has been around for many years, the recent rise of e-commerce users has ultimately shaped the old-fashioned way of conducting businesses locally and abroad. As a result, many companies are compelled to adopt e-commerce in a bid to reach a wider audience and implement strategies to appease the appetite of desperate consumers who are affected by the recent Movement Control Order (MCO). E-commerce encourages more opportunities for businesses to connect and reach new heights while the country's fast-growing economy and advanced infrastructure for digital technologies have become the trajectory of e-commerce on an even steeper upward curve, making e-commerce unlikely to revert to its pre-pandemic era but forward to post-pandemic.

 

Online Shopping Trends in Malaysia

The leading online shopping platforms in Malaysia are namely Lazada, Lelong, Zalora, 11street and Superbuy amongst others, but Shopee is currently recognised as the most clicked e-commerce site in the country, beating Lazada and PG Mall according to research published by the Statista Research Department in September 2020.

Whilst most traditional businesses suffered badly and faced significant losses of income due to the pandemic, online shopping is absolutely on the opposite side of the spectrum.

According to Shopee, 2020 was their breakthrough year as it benefitted from the MCO in Malaysia. Consumers’ shopping habit changed and they often much preferred online-first option. Demand for branded and premium purchases has also multiplied by over 300 times since 2015. The adverse effect of the strict MCO has made consumers rely heavily on online shopping platforms for essential necessities as it drives up traffic and volume in business and sales. In addition, the platform has also seen an increasing number of Micro, Small and Medium Enterprises (MSMEs) of other local brands and sellers taking opportunities to embark on digitalisation in the effort to capture the steady and strong growth of online consumers despite tougher times. According to digital payment provider iPay88, e-commerce fraud cases dropped to as low as 0.02 percent in 2018 and became negligible. The continuous rise in e-commerce may well reflect the level of consumers' confidence.

Shopee’s recent survey reveals that 35.4% of people have turned to e-commerce as their additional second-and-third income sources despite being fully employed. Of the 11,850 sellers surveyed, 50% are new entrepreneurs enabled by e-commerce who operate 100% online businesses. The gross merchandise value for the third quarter of 2020 rose to RM 37.7 billion from RM 18.7 for the same quarter last year, thus making online orders increase by 130.7% from 321.4 million to 741.6 million for the quarter. According to industry data, the Malaysian market still has massive growth potential in e-commerce as it is still in its nascent phase.

Meanwhile, another e-commerce company Lazada Malaysia said that their e-commerce platform has soared exponentially compared to pre-pandemic times. Its platform has seen consistent growth across the whole of 2020 compared to the previous year, with the highest monthly record sales increasing to 120% year-on-year (YOY) and an impressive 80% increase YOY in daily active consumers.

The digital economy of Malaysia shows signs of soaring growth momentum as the number of SME increased by 300%, tapping into the e-commerce boom as a vehicle to leverage upon and diversify revenue channels while keeping abreast with the ever-rising demand for online shoppers particularly when lockdown is continuously in force. Lazada joins forces with local micro and SMEs to break through barriers with the continuing stimulus plans and initiatives supported by the government.

  

Stimulus Initiatives for E-commerce

In June 2020, the Malaysian Digital Economy Corporation (MDEC) forecast a 20% growth in the share of e-commerce in the digital economy sector, thus contributing to the country’s gross domestic product as high as RM 170 billion for the year 2020. Such growth likely resulted from the active intervention of various ecosystem partners through ongoing initiatives such as PENJANA (Pelan Jana Semula Ekonomi Negara) or the National Economic Recovery Plan by adopting an inclusive and holistic approach to Malaysia’s economic recovery, notably through supporting the ‘Shop Malaysia Online’ campaign, mom-and-pop shops as well as MSMEs e-commerce campaigns across the country. For starters, provision of loans, subsidies and support are accessible, more training workshops are made available and numerous e-commerce platforms and digital marketing have been launched to help smaller businesses. These efforts sustained and accelerated the digitalisation of SMEs and many online sellers have become successful in finding their niche in e-commerce with the products that are already held successful in other countries, notably China.

These are indeed promising developments, particularly in Southeast Asia, where the internet economy is predicted to reach US$300 billion by 2025 – a forecast by a report by Google, Temasek and Bain & Co in 2019.

 

The Future of E-commerce in Southeast Asia

Moving forward, according to GlobalData’s E-Commerce Analytics, Malaysia’s e-commerce market reached 24.7% growth in the year 2020 and is expected to attain RM 51.6 billion (USD 12.6 billion) by 2024, with an increase in the Compound Annual Growth Rate of 14.3% between 2020 and 2024.

Globally, COVID-19 has changed the e-commerce landscape. Despite the economic gloom it brings, there is a silver lining to this. E-commerce has emerged as one of the biggest benefactors of global lockdown. Evidently, the pandemic warranted the closure of physical stores due to lockdown and social distancing measures in an unprecedented way, resulting in many online businesses racing to adapt to new challenges and cope with online consumers' appetite and demands as they gradually switch from offline to online purchases. 

Although Southeast Asians are limited in their daily movements, one thing is for sure: people are forced to adopt and adapt to e-learning and e-commerce. This, in turn, creates winning opportunities for brands, even local ones, to reach historical heights with the influx of new consumers.  In Singapore, an increase of 24% of online customers are new during Circuit Breaker, and 74% of them will continue to shop online post-lockdown.

Online shopping sites such as Lazada, Shopee and Sendo reported that their business revenue has soared since COVID-19. It was also reported that Vietnam has a steady increase of over 13%, followed by Malaysia with over 32% and Thailand saw a whopping increase of 63% over the same time last year. These numbers accentuate the importance to invest in optimising digital presence as investors are looking for sustainable and profitable growth despite COVID-19 that drives e-commerce to continuously rising.

Zalora Group experienced an extraordinary and unprecedented demand for new first-time customers, which will give significant long-term value to the brand on its online stores. 

It is not surprising that online shopping has gone beyond essential goods amidst lockdown, but it also brings business to other areas of needs: smart home devices to enhance at-home entertainment, home cooking appliances, and crossing over to supplements. Consumers are spoilt with more choices and wider selections found on online shopping sites, making businesses more competitive against each other.  

This unprecedented, novel trend of e-commerce became an essential service that gives rise to opportunities to augment and enhance online shopping experiences. It sets a new benchmark of quality and service while ever pushing new boundaries of technology and innovation, catalysing e-commerce development in Malaysia. Certainly, e-commerce and the digital economy are the ways forward for Malaysia as well as Southeast Asia at large.

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