Ecommerce in Malaysia: Growth, Trends & Opportunities

Malaysia is on the fast track in the e-commerce race, quickly positioning itself as a powerhouse in Southeast Asia. It’s not just growing; it’s booming, with projections suggesting the market will soar to a whopping US$13.43 billion by 2029, according to Statista. This isn’t just about more people shopping online; it’s about how Malaysians shop. They’re opting for online experiences that offer not only convenience but also a slew of customized payment options that cater to their unique needs.
 
Malaysia’s tryst with e-commerce started in 2004 with the launch of eBay Malaysia. Within a few years, two major players Lazada and Zalora launched their Malaysian operations in 2012, followed by Shopee in 2015. Over time, Shopee has grown tremendously and now attracts approximately 55 million visitors per month, making it the most visited e-commerce platform in the country. Fast forward to 2024, the number of e-commerce market users is expected to amount to 3.6bn users by 2029. The country is now catching up to bring its e-commerce infrastructure, including product availability, payments, delivery, and regulatory requirements, in line with more established online shopping markets.
 

 

Factors Spurring E-Commerce Growth in Malaysia

At 89%, Malaysia has one of the highest internet penetration rates in Southeast Asia. E-commerce growth in Malaysia is primarily driven by a growing number of digitally savvy, middle-class people who are looking for great deals and access to international brands. Here are the other major factors driving e-commerce growth in the region.

• • Malaysian Government’s National eCommerce Strategic Roadmap:
    The Malaysian government is recognizing the rise in e-commerce as a tool of inclusiveness, and has announced support for empowering local micro, small, and medium enterprises (MSMEs). Further, Digital Free Trade Zones have been launched to facilitate cross-border e-commerce and widen the global market for MSMEs. This is predicted to further drive ecommerce in Malaysia.

• • Seamless Delivery Logistics:
    Traditionally e-commerce players in Southeast Asia faced logistical challenges due to the fragmented topology of the region dominated by multiple islands and dense jungles. However, Malaysia is segregated into only two major parts – Peninsular Malaysia and East Malaysia; which makes e-commerce logistics a whole lot more straightforward and cost-effective.

• • The surge in Online Grocery Shopping:
    Similar to other countries in the region, grocery & FMCG e-commerce is rapidly growing in Malaysia. In fact, the average revenue per user (ARPU) in Malaysia’s Grocery Delivery segment is projected to touch US$297.20 in 2023 – among the highest in Southeast Asia.

• • Digitally-savvy consumers:
    Malaysia boasts of an 89% smartphone penetration. More than 29.5 million Malaysians access the internet, which too is more than 89% of the country’s entire population. Malaysia’s mobile commerce growth is outpacing overall e-commerce and is projected to become a US$8.9 billion market by 2023, with a CAGR of 19.7%.

• • The Rise in Social Media:
    The lines between social media and e-commerce are increasingly blurring, thanks to several native shopping initiatives by Facebook & Instagram. Besides, social media serves as a great discovery and post-purchase platform for e-commerce businesses. As of Jan 2023, Malaysia had 26.8 million social media users which accounts for 78% of its total population. This digitally savvy, upwardly mobile segment presents a massive potential customer base for e-commerce businesses.

• • Preference for Digital Payments:
    Bank transfers dominate as the primary e-commerce payment method in Malaysia, accounting for 44 percent of all transactions. Consumers in emerging e-commerce markets typically steer clear of digital payments and tend to rely heavily on Cash-on-Delivery. This has been a roadblock to e-commerce growth in several regions like India, Brazil, Saudi Arabia, etc since COD imposes scalability challenges on e-commerce businesses. Malaysia is an outlier here, with bank transfers and digital payments accounting for a whopping 93% of e-commerce transactions. With at least 50% of the population having used digital wallets for their daily needs in 2022, Malaysia leads Southeast Asia in digital wallet usage.

Key Consumer and E-commerce Trends in Malaysia

The Malaysian e-commerce space shares a lot of similarities with other emerging markets in SEA like Singapore, Indonesia & Thailand. However, there are some interesting cultural and region-specific nuances to watch out for.

• • Transactions Across Borders:
    Cross-border spending is high in Malaysia and accounts for 4 out of 10 of all e-commerce transactions in the country. The major motivators for Malaysians to choose international seller brands are better prices (72%), and access to items not available in the country (49%). The top countries in the list of every Malaysian online shopper include Singapore, Japan, the United States, South Korea, and China – from where a variety of products, right from beauty to electronics, are purchased and paid for via online transactions. The Malaysian government has been proactive with these concerns through digital campaigns like “Buy Malaysia” and #SayaDigital to encourage local demand and empower Malaysians to surge the country towards a digital transition.

• • Mobile-First Audience:
    Consumers in Malaysia have been quick to adapt to mobile commerce and 80% of smartphone users now use their devices to shop online.Mobile e-commerce transactions in the region are expected to reach $5.6 billion by 2021. Within the mobile category, apps are the most preferred e-commerce channel and are used for 64 percent of transactions.

• • Affinity towards discounts:
    A report by Paypal found that Malaysians prefer online shopping primarily to save time and 90% of Malaysians expect their purchase to be delivered within a week. The second biggest factor that attracts consumers to shop online is cheaper prices. This could likely be driven by a rising middle class that faces comparatively high taxes and stagnating wages. This also explains why e-commerce events in Malaysia like 11.11 and 12.12 that offer higher discounts (as high as 90%) drive the highest sales in the Home & Living, Fashion, Health & Beauty, Accessories, and Mother & Baby categories.

• • Ease of Digital Payments:
    Across Malaysia, bank transfers and digital wallets are the most preferred payment method. More than half of Malaysians now have an average of two cashless payment channels at their disposal and they are largely using it at food and beverage outlets, and retail stores. Digital wallets and e-wallets are fast-growing payment methods in Malaysia. The number of active e-wallet registered users has seen an explosive growth, jumping from 8.7 million in 2020 to 13.5 million in 2021, as more people turned to the method for eCommerce payments. On the other hand, it is still advisable to offer cash on delivery (COD) as a payment method, since the 45-54-year-old age group prefers COD when shopping online.

• • Social Commerce:
    The rise in usage of smartphones has also led to a spike in social media commerce, especially through WhatsApp and Facebook. The country is said to be the world’s fourth-largest market for social commerce adopters and a recent survey found that 87 percent of survey respondents had bought something through apps like Facebook, Facebook Messenger or WhatsApp.

• • Competition Between Regional & International Retailers:
    At the beginning of 2022, Malaysia’s most visited e-commerce site was Shoppee with 54.93 million visits, followed by PG Mall with 22.15 million. Even as these two leaders expand their product offerings and services, other regional players, such as Indonesia’s Bukalapak and Chinese players such as Taobao and Ali Express are increasing their presence on the peninsula.

• • Annual Shopping Events:
    Malaysians shop online in preparation for major holidays, especially Chinese New Year and Ramadan. They visit multiple e-commerce platforms weeks ahead of these celebrations to compare products and prices. Shoppers look for gifts to give to their family and friends on Chinese New Year, as well as beauty and fashion products for self-care. Besides this, Malaysia has three major annual national shopping events—Malaysia Super Sale (March 1–31), Malaysia Mega Sale Carnival (June 15–August 31) and Malaysia Year-End Sale (November 1–December 31). International discount shopping events Singles’ Day and Black Friday in November are also rising in popularity.

Malaysia’s E-commerce Space

Malaysia’s top three e-commerce sites by traffic are marketplaces Shopee, Lazada, and PG Mall. The e-commerce space in Malaysia is dominated by self-owned, branded e-commerce websites and big online marketplaces. Here are the top ones :

How to Strategize Your Brand For Malaysian E-commerce 

Given its population size and increasingly affluent middle class, Malaysia is easily one of the most attractive markets for e-commerce in Southeast Asia. Here are some strategies that retailers and brands can use to leverage this opportunity.
 

• • Offer a diverse product range
    Concerns around product diversity have been a constant challenge for Malaysian consumers, and online sellers have the opportunity to satisfy this unmet need. The key to getting the right mix of products is to use AI-powered e-commerce platforms to understand the top products and accessories for each customer segment and dynamically personalize product pages for specific segments.

• • Provide a wide range of payment options
    While bank transfers are the most preferred payment option, retailers should also include e-wallets, credit cards, and COD to serve a wider audience. Merchants should reassure customers that they have all the resources to avoid problems like outdated payment methods, unreliable delivery, and incidences of fraud.

• • Offer superior fulfillment experience
    Majority of the E-Commerce Shipments take more than 2 days to get delivered in Malaysia except for the regions such as Klang Valley. Not many retailers are offering same-day deliveries yet, even though online shoppers expect it. And customers are willing to pay extra price for quicker deliveries. Allow customers to track deliveries in real-time, so they don’t have to guess the delivery dates. The key to offering a great shipping experience is to have a centralized inventory across your stores, warehouses, and other fulfillment centers.

• Understand local nuances
  There are certain cultural nuances that are specific to Malaysia. It’s important to know what Malaysians like to buy, and when. Understand the customs, traditions, and holidays that influence their shopping behavior, and increase conversions by personalizing marketing engagement and conversions with customers using the power of customer segmentation.

Harness The Power Of Ecommerce In Malaysia With Capillary

Malaysia’s e-commerce scene, while still budding compared to giants like China and Japan, is making significant waves across Southeast Asia. It’s the cross-border transactions that really set Malaysia apart—showcasing not just a market of size, but of immense potential, especially considering its vibrant youth population. This youthful energy is not just a promise of future growth but also a playground for innovation and engagement. 

As homegrown brands start stepping up, offering not only competitive prices but also unmatched customer experiences and quality products, they have a real chance to capture the hearts of local consumers. Here’s where Capillary comes into play. Our robust Loyalty product suite facilitates Malaysian e-commerce businesses to exceed customer expectations with personalized engagements and retention strategies that keep them coming back for more. Talk to our Loyalty Experts to explore how.
 

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Manan Kashyap is a technology writer and social media consultant who loves to play the flute. After his MBA, Manan worked with Bajaj for five years after which he pursued his journey as a freelance writer with a focus on B2B SaaS.