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E-commerce in Malaysia: An Expert Expansion Guide

E-commerce in Malaysia: An Expert Expansion Guide

Over the last decade, the e-commerce market has boomed across Asia.

When expanding e-commerce operations into new markets, businesses must carefully consider a number of factors in order to choose the most suitable location.

Malaysia is an increasingly popular choice for e-commerce expansion due to its strong infrastructure, favourable tax regime, and skilled workforce.

It has a population of over 30 million, a rapidly growing middle class, and a government that is supportive of e-commerce growth. These factors represent an untapped opportunity for businesses of all sizes.

In this guide, we will discuss the key considerations for expanding your business to Malaysia, from logistics and payment processing to marketing and customer support.

Let’s get started!

Why Should You Expand Your E-commerce Business to Malaysia?

The combination of various factors has made Malaysia an attractive destination in Southeast Asia for e-commerce firms.

For example, the onset of COVID-19 in 2020 has sped up the growth of online shopping. Consumers continue to shop online, which makes operating an online business highly lucrative.

Here are more reasons:

Malaysia is a Huge Market

With a population of over 30 million, Malaysia represents a huge opportunity for businesses of all sizes.

The country is also rapidly growing, with a burgeoning middle-class that is increasingly spending more online.

The International Trade Administration has revealed that Malaysia enjoys a high e-commerce adoption rate.

In fact, the Malaysian e-commerce market is growing rapidly. It has a current value of around US$7 billion that is projected to reach US$38 billion by 2025. This makes it an attractive destination for businesses looking to expand their e-commerce operations.

This is backed by a substantial population of active internet users and a high mobile penetration rate.

Expanding your e-commerce business to Malaysia can also be a great opportunity to tap into the growing Southeast Asian market.

Robust Infrastructure

The country also has strong infrastructure, including a well-developed transport network and reliable telecommunications. This ensures that businesses can operate smoothly and efficiently.

Tax Benefits

In addition, Malaysia’s tax regime is favourable for e-commerce businesses. It has a tax rate of just 5% on e-commerce turnover.

This makes it an appealing option for businesses looking to minimise their tax liability.

Skilled Workforce

Finally, Malaysia has a skilled and educated workforce that is able to support e-commerce businesses. This is an important consideration when expanding e-commerce operations into new markets.

A Supportive Government

The priority on promoting eCommerce is also contributing to the growth surge.

During the pandemic, internet traffic in the country rose by over 30%. The Malaysian government has recognised this, along with the rise of e-commerce.

It is very supportive of businesses and has been working hard to create an environment that is conducive to business growth.

This includes initiatives like:

  • The creation of digital campaigns like “BuyMalaysia” and #SayaDigital to actively promote the adoption of e-commerce
  • The setting up of the National E-commerce Council made of different ministries and agencies to lead the implementation of its National eCommerce Strategic Roadmap 2.0’s (NeSR2.0)
  • The launch of Digital Free Trade Zones to encourage cross-border e-commerce and enhance international market access for micro, small and medium enterprises (MSMEs)
  • The strategic partnership with the private sector to incentivise the adoption of digital services and offer grants and aid to smaller companies

What Are Some Challenges of E-commerce Expansion to Malaysia?

Expanding your B2C e-commerce business to Malaysia comes with its own set of challenges. They may deter some potential business owners.

Logistics and Delivery

One of the biggest challenges businesses face when expanding to Malaysia is logistics and delivery.

This is because there is no single, centralised fulfillment center in Malaysia, which can make it difficult to get products to customers in a timely and efficient manner.

Payment Processing

Another key challenge businesses face when expanding their e-commerce operations to Malaysia is payment processing.

This is because not all payment methods are accepted in Malaysia.

How Can Companies Overcome the Barriers to Expansion in Malaysia?

The challenges we have discussed so far – logistics and delivery, payment processing, and customer support – are important to consider when expanding your ecommerce business to Malaysia.

Here are some tips on how to overcome these challenges:

  • Businesses need to have a customer support team in place that is familiar with the Malaysian market and can provide excellent customer service
  • Businesses need to find a payment processor that supports the payment methods used in Malaysia
  • Businesses need to have a customer support team in place that is familiar with the Malaysian market and can provide excellent customer service

What Are Some Problems Faced By E-commerce Businesses in Malaysia?

Before you expand your business to Malaysia, there are certain issues that you should take note, including:

Online Fraud Deterring Potential Customers

E-commerce fraud cases have risen from 3,318 cases in 2018 totalling RM22.39 million to 8,162 cases in 2021 totalling RM57.73 million in losses.

This represents a steep increase in fraudulent experiences that has led to reduced buyers’ trust and hindered the market’s growth.

Fraud cases may also include online payment fraud, and companies need to think of ways to reassure potential buyers that their purchases are safe and legitimate.

Low Credit Card Penetration Rate

Although credit card usage in Malaysia is expected to grow to 39% by 2023, it is still a relatively low figure that limits the online payment options for consumers.

Bank transfers, the driver of the Malaysian e-commerce sector,  remains the most popular payment method at 44%, and is expected to stay at a stable rate.

To address this, e-commerce businesses need to offer a wide range of payment options, including local bank transfers, e-wallets, and cash on delivery.

How Competitive is the E-commerce Landscape in Malaysia?

Malaysia’s e-commerce marketplace industry faces a medium level of rivalry.

This is due to the existence of several big players in the e-commerce platform space. For example, the biggest share of the market goes to Shopee (B2C/C2C), followed by Lazada (B2C/C2C), and (B2C).

How Can You Set Up Your E-commerce Business in Malaysia?

After you’ve decided to expand your business operations to Malaysia, how do you get started on the process?

Apart from registering your e-commerce business with the relevant authorities, there are also other areas that you have to consider.

Let’s take a look:

Choose Your Business Model

First, you should decide on the business model if you’re taking a new approach. There are a few types available:

  • Business-to-Consumer (B2C)
  • Consumer-to-Consumer (C2C)
  • Business-to-Business (B2B)
  • Consumer-to-Business (C2B)

However, you can skip this step and go straight to the next part of the process if you already have one in place.

Related Read: E-commerce – Your 7 Step Quick-Start Guide »

Choose Your E-commerce Platform or Marketplace

Remember that there is a difference between an e-commerce platform and a marketplace.

An e-commerce platform is an independent website that you set up for your business to sell your goods or services. An e-commerce marketplace is like Shopee and Zalora, which is a channel for different sellers to sell their items.

If you have more funds and capabilities, we recommend getting your own e-commerce website. Setting up your own website can take a lot of time and effort even with skilled professionals to help because you need to manage these aspects:

  • Bandwidth
  • Integrations
  • SEO features
  • Cybersecurity
  • Mobile-friendliness
  • Analytics

On the other hand, if you’re just testing the waters or if you’re operating a small business, an online marketplace is a fuss-free and low-cost option.

Choose Your Payment Gateway

You need a reliable payment gateway for payments to get through smoothly. Note that world-famous payment providers like PayPal may not be an ideal choice for more remote Malaysian localities.

Instead, they may prefer local payment gateways like senangPay or iPay. You should also remember to check whether the gateway supports foreign currencies as well.

Related Read: Guide to Set Up a Malaysia Company »

What Are Some Tips to Expand Your E-commerce Business to Malaysia?

One of the most important things you can do when expanding to any new market is to do your research.

This includes:

  • Studying the demographics of the Malaysian market
  • Understanding the culture and customs
  • Knowing what products and services are in demand

By doing your research, you can develop a well-informed expansion strategy that is tailored to the Malaysian market.

This will give you a significant advantage over businesses that do not take the time to do their research. Doing your research is especially important when expanding to a new country like Malaysia.

There are many cultural and social differences that you need to be aware of in order to succeed.

FAQs About E-commerce in Malaysia

  • E-commerce is the buying and selling of goods and services, or the transmitting of funds, by electronic means.
  • Shopee leads the e-commerce platform space in Malaysia as of 2021 with the most clicks, followed by Lazada and PG Mall.
  • As of 2020, the e-commerce market value in the country totalled to 30.2 billion ringgit.

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About the Author

InCorp Content Team

InCorp's content team includes talented copywriters from our regional group and globally. We contribute informative, thought leadership, and market-trending articles to guide aspiring business entrepreneurs to a higher level across the Asia-Pacific region.

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