Taking a look back at Malaysia’s e-commerce history. Source: Shutterstock

The history of e-commerce in Malaysia

THE E-COMMERCE sector is among the fastest growing industries in Malaysia.

Recent estimates by Statista reveal that e-commerce platforms have garnered revenue as much as RM4.2 billion as of 2017. Furthermore, the industry is expected to increase to earn as much as RM9.8 billion by year 2022. This goes to show you how much potential e-commerce is in the region.

Statista also published data that indicates e-commerce has become an integral part of Malaysian lifestyle. In 2017, there were 15.1 million active users in Malaysia which accounts for 47.9 percent of the country’s population.

Unknown to many, the widespread usage of e-commerce platforms only begun in the past 10 years as we saw a big influx of new players paired offering great products.

As such, iPrice Group conducted a study to review how Malaysia’s top e-commerce platforms became a household name to consumers in the past decade, and what we should expect to see in the years to come.

2008 – 2011: The early years

The adoption of e-commerce during these years was spurred by the increased availability of internet services and usage of computers in households and offices.

A study by the Multimedia University Malaysia stated that e-commerce earned a high growth potential due to the rapid rise in the number of computer users and faster internet connections each year.

The rise of computers and internet connection in this period led to increased e-commerce adoption. Source: Shutterstock

C2C platforms such as eBay and Lelong thrived during this era since it gave individuals the ability to sell products in a reliable and in a convenient manner.

Users unfamiliar with payment gateways could easily buy or sell items through cash on delivery (COD) methods. So, instead of inserting their credit card or bank details, buyer and sellers can meet face to face to inspect products and accept payments.

The popularity of C2C platforms also spurred the use of payment gateways and other online payment methods. eBay, which provided Malaysian access to products sold overseas, made it mandatory for users to sign up using PayPal. This encouraged the use of online bank transfer, credit and debit cards in the country.

The late 2000s also saw the rise of online boutiques, selling items from tech to fashion products. Among them is Fashion Valet which formally launched an online platform by popular blogger Vivy Yusof and then-boyfriend Fadzarudin Anuar.

2012 – 2014: The introduction and domination of online marketplaces

The development of e-commerce in the late 2000s set the foundation for new platforms. This foundation was so well-received that they became the country’s most popular online marketplaces today.

In 2012, Malaysia saw the entry of five additional players which includes Lazada, Zalora, Rakuten, Hermo, and 65daigou (rebranded to Ezbuy today).

As each player fought to gain the largest market share, Lazada rose to become Malaysia’s most searched e-commerce by 2014. The e-commerce platform overtook more experienced players such as Lelong and eBay.

Two years after its founding, the startup by Rocket Internet raised about US$814 million in funding which spurred further growth and popularity among Malaysians.

From then on, Lazada remained as the most popular online marketplace on desktop in the country until today.

2015 – 2017: e-commerce now stands at an inflection point

By the end of 2014, the Global e-commerce (B2C) sales exceeded US$1 trillion for the first time with every continent seeing double-digit growth. Yet, e-commerce in Malaysia still hasn’t reached its full potential.

The Malaysian government took notice of this and launched the National e-commerce strategic roadmap in 2016. In a bid to double the e-commerce’s growth by year 2020, its strategy includes a two-fold plan, which is to ‘future-proof’ small and medium enterprises (SMEs) and to arm them with proper online marketing capabilities.

In addition to this, 2015 saw the entry of new players such as GoShop, 11street, and Shopee. Shopee became one of the most prominent players in a very short time span.

Within two years, they quickly rose to become Lazada’s closest competitor and overtook Zalora and Lelong. The rapidly growing e-commerce was funded and founded by SEA (previously known as Garena) and was highly experienced due to their background in online gaming and other internet consumer platforms.

Shopee’s rapid success was partly due to its unique strategy where they prioritize their platform for mobile users. This move was extremely timely since Malaysia’s mobile penetration was at 140 percent in 2014 and is the highest in Southeast Asia at that time.

Shopee’s rise to success can be largely attributed to its focus on mobile. Source: Shutterstock

A separate study showed that 74 percent of online traffic on Commerce platforms were accessed via mobile devices as well. As such, Shopee also became the highest ranked shopping application on iOS and Google Play Stores by end 2017.

However, the battle is not lost. Backed by Chinese e-commerce giant Alibaba, Lazada still has the highest online traffic in desktop.

Alibaba has also invested US$4 billion into Lazada to catch the e-commerce wave in Southeast Asia. This is highly significant for the country because Lazada’s logistics and warehouse hub is located in Malaysia and has provided more than 2,000 jobs.

2018 and beyond: The future economy

E-commerce in Malaysia is expected to see further growth spurred both by businesses and governmental initiatives. Among the growth-catalysts include the Digital Free Trade Zone (DFTZ) initiated by the Malaysian Digital Economy Corporation (MDEC) with the assistance of Alibaba.

Malaysia’s recent government revamp left people uncertain as to whether Alibaba’s e-commerce investment would still go ahead. Source: Shutterstock

However, after the political revamp on May 9th 2018, some feared that the DFTZ would be discontinued. But, a swift action by Jack Ma reassured SMEs and stakeholders that the digital project would continue as planned.

Ma reassured Dr. Mahathir that the Chinese company was eager to help Malaysia with efforts to introduce cutting-edge technology to its schools and help local businesses in areas such as cloud computing.

To date, over 2,000 small and medium enterprises (SME) has signed on to DFTZ’s online platform to help them market their products to China and to other parts of the world.

Google & Temasek states that Malaysia is well positioned to become a US$8.2 billion industry by the year 2025.

With all the needed ecosystems in place, it is now up to e-commerce players, both big, small or rookies to rise to the challenge and realize Malaysia’s full potential in the internet economy.

Expert article, contributed by iPrice Group