E-commerce in the country is growing exponentially, with the consumer-focused e-commerce retail (e-tail) businesses as its growth motor. Based on our report, Malaysia's E-Tail Market: The Nurturing Nest for Regional Growth Stories, the rapid development brings e-tail industry to become more important part for Malaysians, not only used for finding best offers or browsing for new products, but also filling their daily needs, such as groceries, health products, and other household appliances.
This evolvement shows how Malaysia is currently in a value-stage where growth is not so much led by increase of users, but the growth of value per user to increased category penetration. The growth of e-tail sales by new product groups being added to the average online shoppers portfolio will be the driver of growth for Malaysian e-tail, as it is entering a next stage of e-commerce development: From penetration stage, where growth is driven by increasing number of users, to value growth stage, where growth is driven by increasing range of goods purchased online.
Current market trends
According to our report, Malaysia's e-commerce market is expected to reach US$ 1,770 million in 2019 and further projected to hit US$ 2,590 million by 2021. The market shows 24% rate of growth CAGR for several product categories in the period 2016-2021, including food and personal care, fashion and accessories, toys, hobby, and DIY, electronics and media, as well as households, furnitures, and appliances. Households, furnitures, and appliances are projected to be the fastest-growing product categories in Malaysian e-commerce market, with the highest predicted growth rate of 43% CAGR from 2016-2021.
Growing middle-income population and the deepening of internet penetration are identified as major factors that drive the e-commerce growth in Malaysia. The middle-income group population in the country is forecasted to grow by 6.9% per annum, as for the access to the internet becoming more common for more Malaysians with the rate of penetration reached 79% in 2018. The presence of e-commerce provides the digitally savvy Malaysians convenience and saves their time while shopping online. This also allows users to compare the prices between goods from different merchants and find the best deals at any time. Furthermore, e-commerce also makes imported goods more accessible to the people. The rising demand for imported and diversified choices of goods gives major players in the market to provide them.
Retail turns to e-Commerce
The rapid growth of e-tail in Malaysia also highlights the shifting trend from brick-and-mortar businesses to e-commerce and digital economy. In order to engage with their target markets, many services-based retail brands in Malaysia are seen to be setting up websites and social media accounts. While some retailers are quick to embrace technology, Malaysia Retail Chain Association (MRCA) president, Datuk Garry Chua, stated that there are those who also adopt wait-and-see approach. The result from MRCA's observation shows that services-based retailers are still slow in moving their business online. Although it is important to establish an online presence to keep the brand relevant to modern consumers, they still see some limits to the kinds of transactions that service-based retailers can conduct online.
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