Malaysia’s E-commerce Industry: Everything You Need to Know

Overview of Malaysia’s E-commerce Market

The Malaysian e-commerce market has seen exponential growth in the last few years. It is one of the fastest-growing economies in the Southeast Asian region, with a projected revenue of 10.19 billion USD in 2023. Since the country has many active internet and social media users, the chances of growth are also expanding. 

The e-commerce Malaysia market is slowly overtaking the traditional markets as well, especially with the growing interest of teenagers in online shopping. The sudden surge of users is also partially due to the pandemic in 2020, which led to more and more people depending on online marketing. You can find everything you need about e-commerce in Malaysia and its business prospects in this article. 

Background of Malaysia’s E-commerce Market

Let us first dive into the background of e-commerce growth in Malaysia. E-commerce in Malaysia first started becoming popular when the brand eBay launched its website in Malaysia in the year 2004. After that, Zalora, Lazada, and Shopee also launched their websites within a few years. Shopee quickly became the top e-commerce Malaysia website. 

With the rise of infrastructure to support diverse online consumers and a fast-growing economy, Malaysia has quickly become a hotspot for online businesses. The government of Malaysia has also taken some great initiatives to support the growing online market. We will talk in detail about the growth of e-commerce in Malaysia in this blog. 

Malaysian Government Support for the E-commerce Industry

The Malaysian government offers a lot of supportive policies and tax write-offs for businesses that want to expand to Malaysia’s e-commerce market. 

Malaysia Digital Economy Corporation (MDEC)

MDEC is a government agency that looks over the country’s digital economy. It operates under the Ministry of Communications and Digital. Its goal is attracting new investors and companies while helping Malaysian companies establish themselves in the e-commerce market. This government initiative helps not only global and local businesses but also works towards making the population of Malaysia improve their digital skills and improving their lifestyles. 

Tax Incentives for E-commerce Businesses in Malaysia

E-commerce taxation in Malaysia is also there to help new businesses establish themselves within the economy. Global retailers and investors enjoy great tax exemption under Malaysian law depending on a company’s revenue. A 20% tax exemption is offered for 5 years on web development charges. Depending on the industry and business, investors can also enjoy different types of tax exemptions offered by the government of Malaysia. 

Malaysia E-commerce Market Size

In the last few years, every human experience has changed drastically due to increased internet users, and shopping is no different. Unlike brick-and-mortar stores, the online shopping market is an ecosystem of its own and has only grown in size. The convenience of this method has enticed customers, and the Malaysia e-commerce market size has increased a lot since its beginning. 

The projected market volume for the e-commerce Malaysia market in 2023 is $1487 billion. Even though the restrictions on brick-and-mortar stores have been lifted since the pandemic has subsided, the population of Malaysia still prefers to shop online. 26.7% of all country credit and debit card spendings are online purchases. 

Malaysia E-commerce Market Analysis

There are many reasons why Malaysia is one of the fastest-growing e-commerce markets globally. The country’s e-commerce market is forecasted to grow at a rate of CAGR 9.8% from 2022-27. Millions of internet users in Malaysia drive the country’s e-commerce economy. In 2022, there were 32.07 million active internet users in Malaysia. By 2028, the number will reach 35.33 million, which presents businesses with the opportunity to expand their operations online and cater to the needs of people. 

There are also many government initiatives to support not only local businesses that want to sell online but also foreign investors wishing to tap into the growing market of e-commerce in Malaysia. 

But of course, the e-commerce market comes with its challenges and risks. With the increased online traffic, there has also been a drastic increase in e-commerce fraud and other cyber crimes. The government of Malaysia is trying to fight these increasing criminal activities to create a safe environment for users and businesses. 

Malaysia E-commerce Industry Segmentation

The Malaysian e-commerce industry is diverse, with products varying from electronics, fashion, and furniture, to food and personal care items. If we segment e-commerce in Malaysia by market share, the leading industry would be fashion, accounting for about 31% of the Malaysian e-commerce market. 

The fashion industry makes up for the lion’s share of Malaysia’s online market, but others are not far behind. Electronics and media make up about 28% of the market in shares, followed by hobbies, toys, and DIY (19%), home appliances and furniture (13%), and food and personal care (10%). 

Malaysia E-commerce Market Leaders

A few large online retailers lead the e-commerce market in Malaysia. Several small businesses sell online as well, but most of the e-commerce market is dominated by a few big giants of online shopping websites. 

According to statistics, the most popular e-commerce platform in Malaysia is shopee.com.my. Shopee is one of the leading online retailers in many Southeast Asian countries. Other than Shopee, the leading e-commerce retailers in Malaysia are Lazada, Mudah, PGMall, and Amazon. 

Malaysian Consumers and Online Shopping Habits

Quite a few recent trends have been developed, impacting e-commerce in Malaysia.

Internet penetration in Malaysia

The internet penetration rate of Malaysia is one of the highest in Southeast Asia. In 2023, 96.8% of all Malaysian citizens are active Internet users. This has led to Malaysia’s online market becoming more affluent as people from all over the country prefer the comfort of shopping from their homes. 

Social media users in Malaysia and their influence on shopping habits

Social media greatly impact the online spending habits of people. With promotional ads on social media, consumers tend to buy products that showcase on their feeds. 

Almost 99.8% of all Malaysian adults use some form of social media, which is still on the rise. This has led to an increase in online shoppers in the country. 

Number of online shoppers in Malaysia compared to brick-and-mortar stores

Even though the physical shops reopened after the pandemic, most Malaysians preferred shopping online. Many consumers who began shopping online during the pandemic still do it because of the added convenience of doorstep delivery and digital payment options. 

The annual growth rate of online shopping in Malaysia

The state of the e-commerce market in Malaysia is better than ever before. Every year, millions of new people join the online shopping trend, and it has become the most popular choice for young people. The CAGR of e-commerce in Malaysia is expected to be 13.6% from 2023-2027, making it one of the most affluent e-commerce markets. 

The attractiveness of the Malaysian market to international retailers and brands

The Malaysian market offers lucrative business opportunities to international brands and retailers. Foreign investment is the driving force behind most of the popular online shopping sites in the country. With great support from the government and a growing market where demand is growing rapidly, it is one of the best times for foreign retailers to invest in the e-commerce market of Malaysia. 

Cross Border E-commerce Opportunities in Malaysia

There are a lot of e-commerce trends and opportunities in Malaysia for new businesses. With a multicultural population and a growing economy, Malaysia is a great country to expand your online business. But there are a few pros and cons of expanding your business in Malaysia, which we will talk about. 

Advantages for companies selling products cross-border into the Malaysian market

Here are some of the advantages of expanding your online business in Malaysia: 

1. Market size: The main advantage of expanding a business in Malaysia is its population. The country boasts a 32.7 million population, most of whom have disposable income. Malaysia has no great cultural barriers, as people there live in harmony. It has a massive market with great growth potential. New businesses that want to expand there will also find lucrative opportunities. 
2. Infrastructure: Malaysia also has great infrastructure and convenient logistical options for businesses. The logistics cost is low there, which means increased profit for businesses. 
3. Government policies: The government of Malaysia offers great support and opportunities for global businesses looking to expand in the country. Many tax reductions and other open policies can ease establishing a business in the country. 

Challenges companies may face when setting up cross-border e-commerce platforms in Malaysia

There are also some challenges companies may have to face while trying to expand in Malaysia’s e-commerce market: 

1. Warehousing and transportation: Warehouse operations and management can be quite difficult for new businesses in Malaysia. Since Malaysian consumers expect same-day delivery for most products, it can be hard for new businesses to keep up with customer demand without proper warehouse management and transportation options. Logistics costs are also high in Malaysia, which can harm small businesses. 
2. Cybersecurity issues: Cybersecurity threats and fraud are also big problems for e-commerce companies in Malaysia. If the customer data is safe, it will be easy for consumers to trust the company again. 

Different Types of Online Stores Operating in the Malaysian E-commerce Industry

Even though fashion is the most popular industry in the Malaysian e-commerce market, a variety of industries are successfully operating online. Electronics, toys and DIY, beauty and personal care, furniture, food and beverages, and media are other industries operating in the country. Among these, the electronics industry brings the most revenue through sales. 

What are the Current Issues of E-commerce in Malaysia?

There are many opportunities for new online businesses to expand into Malaysia and tap into the potential customer base. But the task has challenges, as you need to be aware of a few e-commerce issues in Malaysia. Many retailers still need help with inventory management and production capacity. 

Businesses also need help with cybersecurity threats, data breaches, lack of marketing skills, etc. It is not easy for businesses to suddenly adapt to the online market as it is already saturated with large companies. But with the right tools and skills, even a new business can enter the Malaysian e-commerce market. 

Online Shopping Trends in Malaysia

As online shopping is becoming more popular amongst Malaysian citizens, a few trends can be observed among consumers. 

• Growing economy 

Malaysia’s economy is booming right now. The GDP of Malaysia is predicted to reach a height of $634.98 billion in 2028. A growing economy makes more consumers willing to buy things from online marketplaces. 

• Same-day delivery 

A lot of consumers in Malaysia shop online because of its convenience. With same-day delivery, the products they ordered can reach them within 24 hours. Companies that offer same-day delivery to customers are more likely to succeed in Malaysia e-commerce market. 

• Digital payment methods 

It is also apparent that many internet users in Malaysia, especially the younger generation, prefer digital payment methods. Most e-commerce companies offer online payment options which are fast and secure. 

• Quality of products

Price is an important factor in the e-commerce industry of Malaysia. But, consumers are more interested in high-quality products over lowered prices. 

• Flexible consumers 

Malaysian consumers are also flexible while trying out new items. They will be more interested in compelling and new products. 

• Shopping on phone 

Most e-commerce customers in Malaysia use their mobile devices to shop online. Optimizing apps and websites for phones is crucial for a business to succeed in the country. 

How Fast Is E-commerce Growing in Malaysia?

As we mentioned earlier, Malaysia is one of the fastest-growing economies in Southeast Asia. These few examples can help you understand how the rapid growth of the Malaysian e-commerce market sped up the process. 

COVID accelerated e-commerce growth

The COVID-19 pandemic was one of the main reasons many people worldwide became dependent on online shopping. With most brick-and-mortar stores closing down, many people in Malaysia had no option but to turn to online shopping websites. But even after the pandemic receded and the stores opened again, many people still prefer shopping online for added convenience and comfort. This has led to a faster e-commerce landscape growth contributing in the following ways:

• Online consumer goods spending surged by 40.4%
• 47.7% of Malaysians made an online purchase in the last year
• Online spending on electronics grew by 36.5%
• Online spending on fashion hiked by 49.5%
• Online furniture spending grew by 32.8%
• Online spending on toys, hobbies, and DIY grew by 50.3%
• Online spending on food grew by 78%

How to Succeed in the Malaysian E-commerce Market?

Malaysia has a booming economy offering great opportunities to global brands who want to expand. If you are a business owner with the mind to expand in the Malaysian e-commerce market successfully, there are a few key ways to succeed that you must remember. 

• Offering a wide variety of products on your website is an assured way of attracting more customers to your business. 
• Smooth logistical and delivery operations are also important for a successful business. 
• Offering cash, card, and digital payment options will attract more customers of different age groups to your website. 
• Know the local rules and regulations and study the Malaysian e-commerce market thoroughly and carefully before integrating your business there. 

Conclusion

The impact of e-commerce in Malaysia has been monumental. Many businesses seek an opportunity to expand their operations in the country’s e-commerce market. The government of Malaysia also offers great policies and tax exemptions to new investors. Being an affluent market surrounded by other untapped markets, the country offers a great path to expand into neighboring countries. Overall, Malaysia’s e-commerce market is one of the fastest-growing ones in Southeast Asia and offers great opportunities. Learn everything about the market and the local laws before you try to expand or invest in it. 

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