E-Commerce in Malaysia: Trends, Challenges, and Growth Potential

Electronic commerce (EC) is the process of buying, selling, or exchanging products, services, or information over electronic systems or computer networks such as Internet. It is the technology that allows transactions and exchanges of digitized information between individuals or organizations. To define e-commerce in a broader way, it is also known as “e-business” that consists of servicing customer, collaborating with business partners, and conducting electronic transactions within an organization.”

E-commerce organizations can be differentiated by brick-and mortar organizations, virtual organizations and click-and-mortal organizations.

Brick-and-mortal organizations conduct business off-line, selling products and services in a physical store whereas virtual organizations perform business activities solely online. While click-and-mortal is a type of business model that involves both online and offline operation which usually include a website and a traditional store. E-commerce is classified into six categories which is business-to-business (B2B), business-to-consumer (B2C), business-to-employees (B2E), consumer-to-business (C2B), intrabusiness EC, and business-to-business-to-consumer (B2B2C).

Technology evolved over the years, internet has become indispensable and is truly ingrained in Malaysians’ daily lives and activities.

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Malaysians spend on average of 20 hours online each week and their internet usage supports the fact that Malaysia has bright future for e-commerce industry. Malaysian internet users use the internet for different purposes such as communicate with one another, online shopping and obtain information for education purpose. According to the Star online, Nielsen Company has conducted a study that Malaysians spent RM1.8bil shopping on the internet last year and, it is expected to grow aggressively in the next few years.

The acceptance of up-to-date technology, growing trend for online shopping and increased number of internet users are some of the crucial keys to development of Internet business in Malaysia. For example, the use of mobile internet has unquestionably given a push to e-commerce industry as the access is available for consumers at one’s fingertips.

Internet business is taking a big bite out of the market share as it provides convenience to consumers. The implementation of website allows consumers to purchase products and services in the comfort of one’s home instead of travelling to the physical store. Consequently, it eliminates travel time and cost of consumers. Not only that, it also provides round-the-clock access. Most physical stores usually follow the standard business hours which is operate at least 8 hours a day, or at most 16 hours a day. Nevertheless, an online store is available and accessible 24 hours a day without closing time.

Furthermore, internet business overcomes the geographical limitations. Online business practically reaches customers all around the world. Thus, it creates a wider awareness of the products and services as well as the company. However, Malaysian e-commerce companies are experiencing the same challenges as those in other countries, with customers who consider transaction security, as well as who prefer to see and test products before making purchase decision.