Malaysia at the cusp of e-commerce boom

PETALING JAYA: E-commerce players in Malaysia are gearing up for a boom in the industry as online shopping, as well as the overall digital economy, accelerates by leaps and bounds.

E-commerce has been recognised as a critical enabler to accelerate revenue growth for the Malaysian economy, under the Digital Malaysia Initiative.

Malaysia Digital Economy Corporation director of e-commerce enablement Wee Huay Neo said internet penetration in Malaysia stands at 67%, while e-commerce contributes 5.8% to the nation’s gross domestic product, just 0.6% below the target set for 2020.

“Malaysia’s e-commerce market will continue to be highly attractive with plenty of room to grow. The increasing consumer spending, the growing number of internet users and the greater acceptance of mobile e-commerce are the main drives,” she told SunBiz.

E-commerce players also attributed the growth in the digital economy to Malaysia’s developed payment and logistics systems, telecommunications and broadband, user-friendly shopping apps, proliferation of smartphones and promotion by merchants.

Pos Malaysia Bhd group CEO Datuk Mohd Shukrie Mohd Salleh said the growth in e-commerce boosted its courier business, which is expected to contribute half of the group’s revenue in the financial year ending March 31, 2017.

“We could see that our revenue was almost going down at one point in time but somehow the growth of e-commerce propelled our courier business to grow. Our fortune to a large extend depends on e-commerce,” Shukrie told SunBiz.

He said the e-commerce boom is expected in Malaysia this year, after the national postal organisation recorded its highest growth for courier arm Pos Laju in the past one year.

“That trend will continue this year. If we’re not ready and have not positioned ourselves to be ready, we will miss the boat. 2017 is the most critical year when it comes to e-commerce,” Shukrie said.

Online payment solutions provider iPay88 Sdn Bhd expects to double its online transactions and sales value in 2017, from 38.2 million and RM3 billion respectively in 2016.

“2016 was the start (of the e-commerce boom in Malaysia). Now, with smartphones, our digital economy is taking off,” said iPay88 executive director Chan Kok Long.

Malaysia is one of the key markets for Southeast Asia’s largest e-commerce site Lazada and the country has shown the fastest growth within countries that Lazada operates in for the last six months, posting over 100% jump year-on-year in gross merchandise value, said Lazada Malaysia CEO Hans-Peter Ressel.

“In a market like Malaysia, with its high internet and smartphone penetration, these are the right fundamentals and pillars to make it (e-commerce) boom even further. We’re now at a nice environment that’s flourishing.

“All the enablers for successful e-commerce operations are in checked for Malaysia. It’s a market where we can roll out new initiatives because it’s a sophisticated market,” Ressel said.

Malaysia is aided by the government in the e-commerce sphere, via MDEC, Malaysian Global Innovation & Creativity Centre, Malaysia External Trade Development Corporation, Finance Ministry and SME Corp. Alibaba founder Jack Ma is now an adviser to the government on digital economy. Fintech continues to encourage the growth of e-commerce.

Ressel noted that there is nothing that could shake up the demand in online retailing, amid the Goods and Services Tax and the weakening of the ringgit.

Chan opined that online shopping is literally window shopping, and the easiest kind. People like to see available choices and compare opinions, they love to share what they buy and get feedback from friends and through the cyberspace.

However, challenges in the e-commerce space include infrastructure, laws and regulations, cross-border payments and logistics.
Chan pointed out that in cross-border payments, withholding taxes range from 20%-25% depending on the country.

“We are looking forward to the Asean Economic Community to overcome this cross-border issue. The second challenge is the ability of new start-ups to market their services. These new start-ups depend on funding, which is always limited,” he added.

Ressel said logistics and payments are two big barriers in e-commerce.

“For Lazada ,with our own warehouse, fleet and customer service, we try to control a big part of the chain to ensure great customer experience,” said Ressel.

Shukrie said e-commerce players must be ready to meet the demand of the marketplace. “For that to happen, all players will need to upgrade (their) infrastructure.”

Last month, the National ICT Association of Malaysia formed an e-commerce chapter aimed at creating a vibrant e-commerce ecosystem in Malaysia that is globally competitive.

By implementing six strategic thrusts identified under the National E-commerce Strategic Roadmap, Malaysia is expected to double e-commerce growth for GDP by 2020 from the business-as-usual 10.8% to 20.8% (estimated GDP value of over RM170 billion).

“With these six thrust areas we believe the growth of e-commerce in Malaysia will continue to flourish in 2017.,” said Wee.