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The bad vs good side of e-commerce in Malaysia

August 10, 2016 CK Wong Category : , , , , , , , , , ,

The bad vs good side of e-commerce in Malaysia

Based on our recent understanding and communications with local e-tailers, many of them have 'mixed feelings' on e-commerce outlook in Malaysia. There are always two sides of the same coin.

Hence, we have constructed some of the perspectives here, with both the bad and good side of them. If you are positive enough, you will see opportunities even within the negatives or obstacles.

Market Size

Multi-racial population of Malaysia

Bad: With 30M+ population, Malaysia market is not too big for e-commerce. This is especially obvious for seasoned online merchants who can see the limit of their growth potential, furthermore some of them are only strong in certain ethnic group.

Good: Our market is not too small either, with a good mix of Malays, Chinese, Indians etc. consumers. This is one of the main reasons why foreign online ventures tend to pick Malaysia as the first 'test' market before expanding to neighboring countries in Southeast Asia.

Read also: 10 things you should know before starting your eCommerce venture in Southeast Asia

Government Support

Corporate tax

Bad: Not only limited to e-tailers, many businesses struggle or perform lesser since the GST rollout in 2015. This is on top of the relatively high company tax of 25% in Malaysia. Only Philippines from the 'big 6' of Southeast Asia enforces higher tax (30%) than Malaysia, while Indonesia (25%) is on par, Thailand (20%), Vietnam (20%), and Singapore (17%) all implement lower corporate tax than Malaysia.

Good: Besides MaGIC on the start-up ecosystem, MDEC (recently rebranded to Malaysia Digital Economy Corporation) support towards e-commerce ecosystem has directly benefited the online merchants and industry players. One of MDEC's high profile projects is obviously #MYCYBERSALE, the nationwide online sale campaign being held yearly since year 2014.

Read also: 10 tips for merchants to make the most of #MYCYBERSALE

Maturing eMarketplace

eMarketplace model

Bad: With the attack of foreign-owned (or with majority control) e-marketplaces spearheaded by Lazada since year 2012, it is difficult to see the next big local e-commerce setup since the home-grown Lelong. Besides, say if you want to build a cashback platform, ShopBack with vast resources stands right in your way.

Good: Having said that, there are still opportunities for e-commerce operators who focus on certain verticals, like Hermo on health & beauty, and so on. There are also some online merchants who made it big via e-marketplaces, and for the rest this could serve as a good learning (or failing) platform. Of course, with huge marketing fund educating and encouraging consumers to buy online, e-marketplaces play a very important role to our online shopping growth here.

Read also: Top 10 online shopping sites in Malaysia

Global Competition

Cross-border e-commerce

Bad: Related to above, e-marketplace is also a platform that facilitates the influx of traders who buy (usually import) and sell. It is so easy to start selling online via e-marketplace hence the barrier of entry is lowered. Therefore, there is more (price) competition plus the imports a.k.a. cross-borders by foreign sellers are coming in too. The margin of pure traders without own brand or products is getting thinner, and many of them are feeling insecure now.

Good: Not many can (or it is feasible to) build their own brand of products, and not all products are exportable, especially true when Malaysia is not known as a country which produce a lot. However, there are still some verticals where Malaysia do actually produce (besides belacan), and Malaysians do have advantage selling to (and servicing) English-speaking countries compared to say, China sellers. What about Middle East too?

Read also: What is the hottest export category on eBay for Malaysian sellers? 

Chinaman Mentality

Chinaman mentality - cost cutting

Bad: It is a fact that many online businesses here are owned and operated by Chinese, yes, even some of the Muslimah fashion. If we go back to the history, many traditional businesses here are Chinese-run, and whether you like it or not, with 'Chinaman mindset'. Traditional ones are very cautious to go aggressively online, and those online ones are running it without the 'scale big' mindset. For example, costing is controlled rigidly, without realizing the opportunity cost and trying something out of the comfort zone.

Good: Having said that, this is how 'Chinamen' make their business profitable vs say certain glamorized start-ups (to be fair perhaps some of them are in with different ball game). Cost-control, running a profitable business is crucial for any kind of business, not just the online ones. If you are looking at the longevity of your business (instead of exit), the good qualities of 'Chinaman business' here are your role model.

Read also: 6 mindsets to avoid for new e-commerce startup

Courier Service

Bad parcel handling

Bad: Not just limited to e-commerce, the majority of service-based business here need to improve in general, think Japan (high benchmark it is). There are still many frustrations with courier companies on their handling of products (not handled with care, even with the 'fragile' label on), and service by courier companies varies by the branch you are dealing with.

Good: Besides the hiccups above, we have to admit that the general courier services here have improved over the years. Of course, it is a must for courier services to improve. Just look at Poslaju, of which set to become Pos Malaysia's main revenue generator come year 2018 due to e-commerce boom.

Read also: 4 real-life tips for online sellers to improve your customer experience (and million dollar sales)


What say you?