E-commerce sales in Malaysia have continued to experience strong growth, with double-digit sales increases seen through the past decade. This growth has carried over into 2022, although the rate of increase has slowed slightly compared to the previous year. Prior to the COVID-19 pandemic, e-commerce was already seeing robust growth in Malaysia. However, the pandemic has led to an even greater increase in sales, with growth rates slowing only slightly in 2022 and 2021 despite the higher base from which sales in the category are now starting.
The COVID-19 pandemic and the resulting social distancing regulations have been the main drivers of the high consumer interest in e-commerce. In 2021, non-essential retail outlets, including non-grocery specialists, were forced to close for several weeks due to quarantine measures in response to the Delta wave of the pandemic. Even after reopening, these stores were restricted in their ability to operate at full capacity. Many consumers have also been hesitant to shop in crowded stores out of fear of contracting the virus. Given these circumstances, it is not surprising that e-commerce has seen very strong sales growth in 2021.
In 2022, the e-commerce growth has slowed further as many customers are returning to the physical stores as the movement restrictions were further relaxed from April 2022. Also, the lifting of border restrictions drive some consumers starting to go abroad again, with this taking sales of some products out of the country.
One factor that has historically hindered the growth of e-commerce in Malaysia is the low level of trust that many consumers had in online payment systems and digital payments in general. However, as digital payments have become more prevalent and the use of cash has declined, these barriers to the wider adoption of e-commerce have become less significant. In particular, the popularity of e-wallets such as ShopeePay and Touch N Go E-wallet has significantly increased in recent years, making it easier for e-commerce platforms to attract and retain customers. One survey from PayNet, a national payments network, also found both the adoption rate and usage rate have increased dramatically.
While the growth of e-commerce will stabilize further as fears surrounding COVID-19 start to lessen, the increased reliance for online shopping will enable many different online businesses and innovation in the coming years. For example, younger consumers, who have grown accustomed to online shopping, are expected to continue to fuel online sales in the foreseeable future. This presents businesses and brands with unique opportunities to enhance their digital offerings, ensuring a smooth and integrated shopping experience for their customers. Advanced technologies like augmented reality (AR), artificial intelligence (AI), and data analytics will probably be further utilized to elevate the shopping experience and cater more precisely to the individual needs of consumers.
There’s an increasing appetite for more interactive and engaging online shopping experiences, driving the growing popularity of formats like live streaming. This not only offers entertainment but also an innovative avenue for shopping. In the next five years, online shoppers are likely to seek items such as fashion, groceries, toys, games, and consumer electronics the most. However, products like home appliances, where consumers often desire hands-on advice or physical examination, are expected to see less demand in the e-commerce space.
The Rise in Proximity Retailing: Since the COVID-19 pandemic, there has been a significant increase in demand for convenience stores and other proximity retailing formats in Malaysia. This is due to people avoiding crowded stores and wanting to stay at home, leading to competition for hypermarkets from these smaller retail formats located closer to consumers’ homes and workplaces. As a result, some hypermarket chains have closed stores and Giant has rebranded and introduced smaller concept stores in an effort to compete with the rise of convenience stores.
Social Commerce Prevails: Social commerce, has become a common sales channel in Malaysia for small vendors. Facebook is the most popular platform for this type of online commerce, followed by WeChat and Pinterest. The growth of social commerce in Malaysia was driven by the high penetration of smartphones and the increasing use of social media and digital channels before the COVID-19 pandemic. The most popular categories for s-commerce include beauty and personal care, apparel and footwear, and toys and games. Instagram stores, known as Instashops, have particularly seen strong growth in Malaysia, particularly among Muslim fashion apparel and footwear retailers.
The Cross Border Effect: Prior to the COVID-19 pandemic, cross-border e-commerce became a common business model in Malaysia’s retail industry and the number of players in this sector has continued to increase in 2021. Jetspree and Yellow Porter have been at the forefront of this trend, offering services that connect online shoppers in Malaysia with travelers who can purchase products from their countries of origin and deliver them to the shopper, or provide affordable end-to-end international shipping and last mile delivery services for items purchased from e-commerce or physical stores abroad.
In Malaysia, There are about 21.3% of people use credit cards, and 73.8% of people use debit cards. While there are 33.9% of people purchase on the internet, there is only 32.6% of people with online banking accounts.
For E-Commerce Customers in MalaysiaWhat are the major driving factors to purchasing online?
There is 14.43 million consumer goods e-commerce users in Malaysia, and they spend total of around 8.17 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 566 USD. Also, in those e-commerce users, about 55.9% of them purchase through their mobile phone.