The Complete Guide to Setting up an Effective Ecommerce Business in Malaysia

Everyone’s shopping online across the world and the Malaysian e-commerce industry is one of the brighter hot spots thanks largely to its galloping smartphone and Internet penetration, the covid pandemic, and a plethora of supporting digital technologies. 

In Southeast Asia, 30 percent of e-commerce transactions are from Malaysia. Amongst the largest markets for e-commerce in the world in 2021, Malaysia stands at the 35th position. Now is the perfect time to start an e-commerce business in Malaysia. 

How do you go about it? Read on… 

Advantage of Malaysia

According to GlobalData’s ecommerce analytics, Malaysia’s e-commerce market is likely to achieve 24.7 percent growth in 2021. The market is projected to touch USD 12.6 billion by 2024, increasing at a CAGR of 14.3 percent between 2020 and 2024.

The Government of Malaysia’s National eCommerce Strategic Roadmap 2.0’s (NeSR2.0) initiative seeks to increase the pace of seller adoption of e-commerce; accelerate eprocurement by businesses; strike down non-tariff barriers; improve on existing economic incentives; deploy strategic investments, and promote national brands. With this roadmap, it is expected that almost 900,000 micro, small and medium entrepreneurs will go online by 2025.

It has also launched a Digital Free Trade Zone (DFTZ) to boost the country’s digital and e-commerce objectives through a two-pronged approach:

1. Creation of the KLIA Aeropolis Logistics Center to transform Malaysia into a regional e-commerce fulfillment hub.
2. Increase exports from Malaysian small and medium industries. 

As per Malaysian Government statistics published in 2021, 80 percent of its population, that is around 27.4 million are active internet users. Concurrently, its smartphone penetration is at a high of 84.2 percent with 39.99 million mobile connections. 

Nearly 50 percent of Malaysians numbering around 16.29 million are active online shoppers, and 82.9 percent of mobile users shop online through smartphones. Online sales in Malaysia peak nationwide during three sales event windows, namely, Malaysia Super Sale (March 1-31); Malaysia Mega Sale Carnival (June 15-Aug 31); and Malaysia Year-End Sale (Nov 1 –Dec 31).

Malaysia's goal of topping Asia in e-commerce is not just a pipedream, as evidenced by its achievement of the fourth position in 2021 in a survey of nine APAC countries on digital platform implementation. The country is also third in the adoption of Industry 4.0 technologies, with 69% of Malaysian SMEs incorporating these technologies into their operations, such as mobile payments, automation software, and big data & analytics.

However, the challenges for the Malaysian e-commerce industry to thrive are many, such as the slow adoption of new digital tools, addressing cybersecurity threats, lack of digital marketing skills, limited production capacity, high logistics costs, and limited knowledge of cross-border e-commerce and regulations.

Where to Sell? Online Marketplaces or Ecommerce Platforms? Understand the Difference

An online marketplace or an e-commerce platform both aim to sell products to customers and are among the two most popular options to start an online business. However, there is a fundamental difference between the two. 

An online marketplace is a website where customers can checkout various sellers, connect with them, and purchase their products. It facilitates shopping from varied sources by showcasing different sellers and enabling transactions. It is a great opportunity for e-commerce beginners to set up a business upfront and quickly at minimum cost and risks. The owner of the online marketplace does not own any inventory. Popular examples globally would be Amazon, eBay, Etsy, Walmart, and Alibaba.

Whereas an e-commerce store or platform is an independent website that a seller builds with the help of e-commerce tools. The globally popular tool entities include Shopify, WooCommerce, Squarespace, BigCommerce, Wix, and Magento. 

The owner of the e-commerce platform handles the infrastructure for the accounting, inventory, and customer service management systems. Usually, well-established brands go for this arrangement if they don’t want to share profits with a marketplace and need custom-made software solutions.  

Popular Online Marketplaces in Malaysia

Shopee

Shopee is the top e-commerce marketplace in Malaysia with zero commission rates and is oriented toward mobile shopping. Established in 2015, its business model is both C2C and B2C. 

Lazada

Launched in 2011, Lazada also charges zero commission rates across all shop categories and has reliable logistic and shipping services. It has a business model of C2C & B2C. 

Zalora

Founded in 2012, Zalora specializes in branded fashion. It charges commissions from the sellers. 

Lelong 

Established in 2007, Lelong running on a B2C model has a vast network of users and provides training to business owners. It charges commissions from the sellers. 

PrestoMall

Earlier called 11Street, PrestoMall began operations in 2014. Working on a C2C & B2C model it charges commissions from the sellers.

Now that you have a fair idea of what the e-commerce industry in Malaysia looks like, we can move on to how to set up an e-commerce business in Malaysia.

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How to launch an Ecommerce Business in Malaysia

While Malaysia may have the potential to meet your ecommerce dreams, you might still want to introspect on Why you want to launch your ecommerce business or ecommerce business website in Malaysia. You can get started by writing down the purpose of your intended business in Malaysia, stating its mission and vision.

Along with that, you can also study the market you want to tap for your products and services, and run a thorough competitor research or analysis.

Once that is done, it is time to move on to the following sequence of actions to activate your objective:

1. Determine the Proper Business Model

Brainstorm on the business model your products or services require. It can be:

• Business to Business (B2B) Model: Ideally service-oriented helping other companies run their operations. 
• Business to Consumer (B2C) Model: Suitable for most e-commerce businesses. 
• Consumer to Business (C2B) Model: Here services from individuals (mostly gig workers) are pitched to clients for bidding. 
• Consumer to Consumer (C2C) Model: This is where consumers exchange products and services, paying a fee to the platform’s owner. 

There are also hybrid models where any two of the above models can be combined.

2. Choosing the Right Ecommerce Platform Partner

An e-commerce platform is essentially a software application that helps online retail businesses, whether B2B or B2C, handle many aspects of their operations like marketing, sales, inventory management, CRM, mobile commerce, and order fulfillment. It helps in your optimal interaction with clients, customers, and employees. Without the right e-commerce platform partner, you can’t effectively compete online. The best platform for your business should ideally have the following set of features and tools:

• Up-time: Your online store should be available 24x7 to customers to shop, thereby mandating a high uptime.
• Bandwidth scale: As your business grows, the online traffic to your store will increase. The platform should have a scalable bandwidth to manage the increasing inflow.  
• Mobile friendliness: As more and more online shoppers use mobile devices to make purchases (mobile commerce), the platform should be mobile-optimized. 
• Integrations: The platform should have the facilities to integrate plugins or add-on apps as and when the need arises for marketing, sales, and advertising purposes. As your business evolves there would also be requirements for sales channel integrations. Ensure this facility is also provided for.
• Security: Ecommerce usually caters to digital payments and hence, care should be taken to avoid data theft, which could be done by having necessary security measures in place.
• SEO friendliness: Your online business should be optimized with SEO features to get a high ranking in search engine results. Features to add blogs, provision for own domain name usage, SEO checker, and addition of customer review capability must be present. 
• Customer care: Customer support service is compulsory as it can make or break your business. 
• Analytics: The ability to perform number crunching of the marketing, sales, and advertising data is important to assess the performance of your business.
• Inventory & Shipping: There should be visibility into your stocks to ensure hassle-free order taking and product management. Also, proper logistics need to be ensured for timely and accurate delivery. 

3. Deciding the Best Payment Gateway for your Business

The ideal payment gateway is best decided depending on your market, demographics, and customer location. Globally renowned payment gateways like PayPal may not find favor with localities. They may prefer iPay88 or senangPay which popular in Malaysia. These local payment gateways are integrated with local marketplace platforms. Also, an eye must be kept if foreign currencies are also supported in the gateway which is crucial due to the globality of e-commerce. 

4. Selection of Logistics Partner

The logistics involved could be just about packing and shipping; or it could be an advanced model involving warehouses, insurance, and tracking. Choosing the right shipping carrier to deliver your products essentially boils down to the needs of your business and customers. 

As an online enterprise, customers who visit your website choose to buy your product not just for its price and quality but also if your shipping provider offers free shipping and fast delivery. The latter two factors determine the customer conversion rate from the shopping cart to your address. 

If the delivery fails or delays, your brand reputation is at stake. Hence as a shipper, that is, as the company that owns the goods being shipped you must decide on the carrier on multiple factors like:  

5. Cost & Reliability of Shipping Service

Don’t choose a shipping carrier only because it is cheaper than the rest as it may be counter-productive. It could be cheap because of cutting corners in terms of quality and speed of service. 

Hence thorough research should be done on the shipping agency’s reputation and reliability through referrals, industry opinion in your circles, customer reviews, and buzz on online forums and social media. Conclude with how much you can stretch your budget.

• Type of Products

While assessing different shipping carriers, talk with them to determine if the size, shape, and weight of your products would be able to be packaged or handled by them. Some carriers refuse to ship very fragile, perishable, and hazardous products.

• Tracking of Packages

Currently, customers by de facto take the provision of real-time GPS tracking of the products being shipped to them as a given. Hence ensure this feature is in place, as automatic updates on the movement of the product through the supply chain is a very important customer preference as they demand total transparency on the journey of their consignment.

• Type of Shipping Carrier

There are two types of shipping carriers, asset-based or full-service carriers, and non-asset-based or brokerage carriers. An asset-based carrier owns all the equipment needed like trucks and instruments. Whereas non-asset carriers hire the needed equipment on demand making them more negotiable with the pricing of their services. However, if your order fulfillment requires warehouses or inventory management then an asset-based carrier would fit the bill. 

• Delivery Speed

Amazon has raised the bar when it comes to shipping speed with its one-day or two-day delivery options. Thus customers expect the same quickness from the rest of the fraternity. Hence choose the best amongst the delivery partners you are having a dialogue with at the pricing feasible to you.

• Location of Consignee

If you are catering to customers or consignees, located abroad, ask the shipping carrier if they have international operations.

• Insurance 

Having insurance options is a good idea if it is entailed by the nature of your operations or products. Negotiate for an affordable scheme.

• Software Integration

Check whether the shipping provider’s software applications would integrate with yours. For example, are their tracking systems compatible with your inventory software? This should be deliberated upon during the discussion stage to avoid hiccups later. 

• Sustainability Practices 

Are the shipping carrier’s operations eco-friendly (like utilizing reusable packing material) or are the vehicles used energy efficient? It can bring home financial benefits and also raise your green reputation.

Thus, a shipping partner plays an extremely important role in the success of your venture and is actually like a brand ambassador for your business. 

Some credible logistics partners in Malaysia include Shopee Supported Logistics, Lazada E-Logistics, Pos Laju, Ninja Van, and Gdex amongst others. Popular third-party logistics (3PL) companies in Malaysia include Hitachi Transport System, Kintetsu World Express, Quanterm, KGW Logistics, and NNR Global Logistics amongst others.

More on Logistics: Which is better 3PL or Inhouse Logistics?

As your e-commerce enterprise scales up the growth curve, there is a dilemma on whether you should acquire a warehouse and a logistics team for internal fulfillment or in-house logistics; or outsource fulfillment to a 3PL company.

Fundamentally by outsourcing to a 3PL, you are leaving the show to experts and will be able to concentrate on other aspects of your business like product development, marketing, and sales. Whereas internal fulfillment allows you to have more control over the various processes involved.

If your internal team has a core competency in order fulfillment, then in-house logistics is ideal to have full control over inventory and warehouse operations; and also enjoy a customized experience rather than the standardization of a one-size-fits-all 3PL mechanism. 

Choosing either depends on the unique aspects of your business in terms of costs, scalability, supply chain issues, workforce, infrastructure, technology, proximity to shipping destinations, seasonality of the business, risks involved, insurance policies, customer care, and time available.

Last Word

Setting up an e-commerce business in Malaysia can be a very rewarding experience and this guide could help you facilitate that. However, entrepreneurs and especially first-timers could take help from seasoned experts in order fulfillment. 

As Malaysia sees an explosion of 3PL and e-commerce companies, there is an unabating need to cater to the need for powerful fulfillment operations to answer customer expectations and stand up to the cut-throat competition. To solve this twin demand, companies like Hopstack are bringing in remedies that respond to end-to-end warehouse management or fulfillment center issues. 

Hopstack brings to the table integrated Warehouse Management Operating Systems that seamlessly install and integrate with your systems, are cost-effective and are supported by proven technology. This technology by Hopstack fulfills the full spectrum needs of a comprehensive order fulfillment suite for e-commerce companies ranging from inventory optimization, synchronization, reconciliation, outbound fulfillment optimization, omnichannel order management, integration with shipping carriers to automate shipping tasks and label generation, analytics, and reporting, and device management.

Hence it is paramount that you choose a complete 3PL service provider that offers solutions to manage your e-commerce business with tested logistics solutions, thus helping to streamline your business workflow. If you would like to know how this is done, read about it by registering here. We can also give you a first-hand account, where you can directly interact with us through scheduling a demo with us.