Malaysia: An Untapped Ecommerce Opportunity?

I have a guest post published at Zippy Cart weeks ago, so here it is for those who have missed it.

It was the first time in history that a Malaysian company made headlines at TechCrunch last December. Friendster, the granddaddy of social networks has been acquired by MOL Global, a Malaysian e-commerce (payment) company.

How much do you know about Malaysia?

Malaysia is a country in Southeast Asia which comprises many ethnic groups, with Malays being the majority followed by Chinese, Indians and others. Our multi-ethnic, multi-cultural background also makes us a unique multi-lingual society. A typical Malaysian is usually literate in 2 -3 languages (or more). English is arguably the common language used on the Internet here as many western sites or services are popular and frequently accessed. Some of us are also accustomed to sites from China, Taiwan, Indonesia or even India.

Malaysia’s facts & figures

Malaysia’s population stands at over 28 million. We have around 30% broadband and 106% mobile penetration as of the end of 2009. According to Internet World Stats, we are number 9 in Asia’s top 10 Internet countries, by having 16.9 million Internet users.

Malaysia e-commerce statistics

Half of Malaysia’s Internet users are buying or transacting online, which equaled more than 8 million in 2009. Most of the numbers are contributed by airline tickets (which we will discuss shortly). Other popular goods sold online include books, general consumer goods, movie tickets, technology gadgets and so on. The most preferred online payment method in this part of the world is credit cards followed by Internet banking.

E-commerce evolution in Malaysia

Malaysia does have its own share of online retailers and e-commerce companies, though on a much smaller scale than the United States or Japan. Some have been around since the Internet hit our shores in the nineties. One of the famous first movers here is Blooming - the online florist, and they are still going strong today.

Another prime example surviving the dot-com bubble burst is Malaysia’s very own online auction site - Lelong. It is still arguably more popular than eBay Malaysia here despite its cluttered look and feel. Interestingly, Lelong has recently attempted an Amazon-ish online shopping site at SuperBuy.

One of the most important e-commerce milestones has to be the online ticketing site by Air Asia, a low cost airline based in Malaysia. Starting operation not long after the September 11 attack, the online site is the primary channel to purchase budget airline tickets (holiday packages are available too). A lot of people here were since braving themselves by entering the credit card numbers online in order to get bargain tickets. I would say that it was the starting point of e-commerce mass adoption here.

In recent years, online buy-sell activities are frequented at major auction and forum sites, and to a certain extent, popular foreign stores. At the same time, thousands of online stores are also mushrooming locally, with fashion and apparel being the most popular segment. Quite a number of them are blogshops too, which I guess is a unique trend happening only in Malaysia and Singapore.

Perhaps partly due to the need of those blogshops to sell more professionally, we have seen a few e-commerce SaaS providers emerging last year in 2009. For example, Neowave (who has been supplying shopping cart software for years) has since offered its e-commerce SaaS branded webShaper at affordable prices to online retailers.

Not to be missed, year 2009 also witnessed the big move by a local e-commerce company - MOL as mentioned earlier. Another piece of exciting news came from PayPal in the same year, who announced that they are now accepting transaction in local currency as well as withdrawals to local banks.

E-commerce challenges in Malaysia

Yes, no doubt we have witnessed exciting developments in the local e-commerce scene, but many will not disagree that we are still far from the maturity level. The general public here simply doesn’t have the online shopping habit yet. It will take a mixture of cheaper, special, choices or loyalty offerings to encourage the habit of transacting online.

To a certain extent, I would say that we are lacking an e-commerce giant, something like Amazon or Rakuten. That could well kick start local e-commerce mass adoption, similar to what Air Asia has done to the online ticketing space. Of course, like any other markets, people here are generally concerned about security. The presence of the big boys (be it foreign or local) can afford pulling in the financial resources to help educate the local public. On the other hand, online retailers should also do their part in gaining trust from their customers.

As for smaller or medium sized online retailers, the biggest challenge would be attracting traffic to their online store without significant marketing funds. Unless you are selling something niche, it is quite difficult to pull traffic organically from the search engines which index product pages from all over the world. Besides huge e-commerce marketplaces, an obvious piece of the puzzle missing here is the price comparison engine, which could be a great channel for products to get found.

What lies ahead?

Coming back to big boys, Rakuten is strongly rumored to be having talks with certain local players, as Malaysia could well be part of their international expansion plan. There were also rumors of a substantial foreign investment on an established local e-commerce company.

Rumors aside, there are already some initiatives or ongoing developments by local companies to venture into (or expand their) e-commerce services. Suddenly, it seems that many want to be part of the e-commerce game plan. Online retailers are also growing by day, from individual sellers to existing brick & mortars. We need to keep an eye on MOL too, as they are the master in micro-transaction infrastructure. Social gaming is expected from Friendster, but what about social shopping?

So, who will be the Amazon of Malaysia? Be it Lelong, Air Asia, MOL, Rakuten, someone or no one, e-commerce’s future here can only be brighter in 2010 and years to come!

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