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E-commerce – the Malaysian “New Normal” for Shoppers

October 1, 2020

Next to Singapore, Malaysia is one of the largest e-commerce markets in Southeast Asia, having rapidly grown in recent years. With the pandemic challenging local markets all over the globe, e-commerce has only gained in popularity, its growth accelerating even further. 

In this article, we’re looking at:

  • the factors that contribute to e-commerce growth in Malaysia
  • how Malaysian e-commerce responded to the COVID-19 pandemic
  • predictions for the future e-commerce growth

The COVID-19 pandemic has seen e-commerce in Malaysia surge

In the first few months of 2020, the e-commerce sector in Malaysia saw a 149% increase in online sales. And that’s while overall expenditure per household dropped by 55% including in online stores.

SoyaCincau, a popular Malaysian tech site, reported that nearly half of consumers in Malaysia had shopped online more because of the pandemic. 64% of the Malaysians who took part in their survey said that they would continue to shop online at the same rate – even when social distancing was no longer necessary. 

54% were planning to stick to home delivery, and 45% said they would continue working from home.

What’s more, another survey showed that 76% of Malaysians were willing to pay a 5% premium on online purchases for three main reasons:

  • convenience, 
  • value 
  • benefits.

The main reasons for the uptick in e-commerce shopping in Malaysia, on the other hand, were social distancing and minimising the time spent outside.

And countless other surveys and research studies only confirm the upward trend.

But the pandemic only boosted what was already a rapidly growing market

E-commerce was growing in Malaysia even before the pandemic hit. But the government restrictions in combination with the changes in consumer behaviour have accelerated what would’ve otherwise probably taken a much longer time. 

Multiple other factors have also been contributing to the expansion of the Malaysian e-commerce market.

  • Smartphone penetration has been rising – reaching a whopping 140%. Combined with high internet penetration of over 80%, it’s led to the quick adoption of mobile commerce, with a mobile-first audience mostly buying through mobile apps. 
  • Malaysia has a relatively young population – the average age in 2020 is 30.3 years. With almost 45% of the population below 24 years old, Malaysia presents itself as a tech-savvy generation of online buyers.
  • E-commerce has traditionally been driven by busy annual shopping holidays: Malaysia Super Sale (March 1-31), Malaysia Mega Sale Carnival (June 15-Aug 31), and Malaysia Year-End Sale (Nov 1-Dec 31), with discounts as high as 90%. Singles Day on 11 November is also gaining popularity (and online store traffic).
  • Just as in other Southeast Asian countries, social commerce has been growing in popularity, with Facebook, WhatsApp, WeChat, Instagram, and Twitter all frequently used tools in reaching online buyers. Malaysia is estimated to be the world’s fourth-largest markets for social commerce, with 87% of consumers having made a purchase through apps like Facebook Messenger or WhatsApp. 
  • Online payments through banks and third-party digital wallets are both convenient and widely accepted, making them an easily available choice for Malaysian shoppers. A Mastercard 2020 study has shown Malaysia leading the way in Southeast Asia in the use of mobile and digital wallets at 40% (followed by the Philippines at 36%, and Thailand at 27%). 
  • The use of cash has been declining, despite the popularity of the cash-on-delivery payment method, still used in some e-commerce transactions. Especially during the pandemic, cash has been gradually losing to digital wallets and bank transfers – the two most popular online payment methods. In April 2020 alone, Malaysians were making 18% more cashless payments, including mobile and QR payments compared to 16% in the Philippines and 15% in both Singapore and Thailand. 
  • Malaysia has also traditionally seen low e-commerce fraud rates, causing online payments to be considered a secure and reliable payment method.

 

How will the Malaysian e-commerce market shape looking forward

Let’s face it – e-commerce is the new normal and will continue to grow, with Malaysians eagerly using digital payment methods for their everyday shopping activities. 

The region already experienced e-commerce growth due to the outbreak of SARS twenty years ago, although COVID-19 – being a global pandemic – has more far-reaching consequences for local economies. 

One of the similarities is forcing the digitalisation of small and medium businesses. Like the example of the shopMYairports service – Malaysia’s first e-commerce platform for airport retailers, one of the severely affected branches of industry in the COVID-19 pandemic.

The Malaysia Digital Economy Corporation expects a 20% growth in e-commerce contribution to the digital economy this year – one of the results of the Movement Control Order that’s been enforced to stop the spread of COVID-19. In times when economies are suffering, e-commerce is seen as a large contributor to the GDP, projected to reach RM170 billion (US$40 billion) in Malaysia.

But apart from the pandemic, other factors will also contribute to further e-commerce growth. These include faster and more reliable internet connections while preparing for the launch of 5G networks in 2022, and AI-driven technology helping understand consumer behaviour and buying patterns. 

What all this means for merchants

With over 70% of Malaysians planning on moving away from cash altogether, they’re experiencing the country heading towards a cashless society, with a large portion now buying online.

Both domestic and international businesses wanting to serve Malaysian customers need to adjust to their new habits. And that includes offering their preferred digital payment methods, like e-wallets. 

And for the ones that had resisted going online before the pandemic, adoption of e-commerce platforms and creating digital supply chains is now crucial to be able to serve their customers at their doorstep – which is where they’re now more willing to accept their orders instead of in the shopping malls and brick-and-mortar stores. 

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