There are 252.4 million internet users located around Southeast Asia – and Malaysia has already emerged as the country with the third highest percentage of Internet users (67 per cent) after Singapore and Brunei.
The promising internet penetration result indicates Malaysia’s enormous potential for eCommerce market growth. Leveraging on the rise of internet usage, 2015 has been a fruitful year for all online businesses and eCommerce as Malaysia recorded one of the highest online transactions per capita in Southeast Asia.
Nevertheless, this only represents the tip of an iceberg – Malaysia’s eCommerce market accounts for just two per cent of the total retail market and countless opportunities still remain untouched if we look at what has been accomplished in other advanced eCommerce markets such as Korea, where online now accounts for about 15 per cent of total retail sales.
Over the past five years (2010-2014), Malaysia’s eCommerce market size has increased by 31 per cent on CAGR basis. Viewed from a logical standpoint, it should follow a similar growth rate and achieve US$3.1 billion by 2018. As for 2016, expect to see mobility, better internet connectivity and logistics and security to be the three key drivers to drive the local eCommerce development.
The ‘mobility’ trend will continue to grow
Mobile penetration in Malaysia reached 136 per cent in 2015, and the growth of connected devices has paved the way for a positive increase in the eCommerce sector with 47 per cent of Malaysians using their smartphones to shop online.
Furthermore, Malaysia ranks third in the rate of growth of mobile shopping in Asia (over 20 per cent; from 25.4 per cent in 2012 to 45.6 per cent in 2014) according to a Mobile Shopping Survey. Given these results, it is not surprising to learn that more than 50 per cent of traffic to 11street is generated on mobile devices.
Internet penetration and improved logistics will further enhance local eCommerce activities
The Malaysian government has allocated RM1.2 billion to the Malaysian Communications and Multimedia Commission (MCMC) to offer high-speed broadband to rural areas starting next year. This marks a crucial element to boost the eCommerce development in Malaysia.
Driven by the progressive eCommerce landscape, the logistics industry, especially the courier segment, has experienced exponential growth over the past year. For instance, courier services contributed 60 per cent of POS Malaysia’s total earnings in 2015, compared with 41 per cent in 2014.
These supportive initiatives will help sellers meet future demands by providing shoppers with a seamless online buying experience with more timely delivery service.
User confidence, especially safe and secure online shopping is a priority for shoppers
Security issues are still a barrier to many shoppers heading online. Malaysia Computer Emergency Response Team (MyCERT), a department within CyberSecurity Malaysia, has reported that the number of online scams in the country is on the rise. A total of 743 fraud cases were received in the first quarter of 2015.
Shoppers are always urged to make transactions with only trusted platforms that offer product return policies, customer reviews on products, seller’s rate or scoreboard, as well as a trustworthy payment system. Online sellers and marketplaces have to bear this in mind and update their security measures from time to time in order to establish shoppers’ confidence.
A budget-conscious year ahead
Malaysians will remain budget-conscious next year, in view of the rising cost of living caused by the implementation of GST and the ringgit’s devaluation.
Cross-border trading growth can be observed from the increasing searches for popular international products on the Internet in Malaysia. However, with the higher exchange rates and international shipping fees, today local shoppers might find it challenging to get their favorite overseas brands or items.
Undeniably, the overall eCommerce market in Malaysia is poised to flourish positively. The next step will be to sustain the market potential and all industry players need to work together to ensure this. Sellers should stay alert to evolving mobile and purchasing trends in the market to give shoppers a satisfactory experience, as this will build upon Malaysia’s vibrancy as a profitable market for eCommerce.
- Hoseok Kim is CEO of 11street, Malaysia. 11street launched in Malaysia in April 2015, and within eight months has expanded its product range to more than 7 million units and achieved top 29 rank at Alexa.