Malaysia e-shopping king of the region, 9 out of 10 online by end-2021

This article first appeared in The Edge Malaysia Weekly, on October 11, 2021 - October 17, 2021.
Malaysia e-shopping king of the region, 9 out of 10 online by end-2021
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MALAYSIANS love to shop. We love to window shop, we love our discounts and promotions and we love our malls. So, when the pandemic hit and our movements were restricted, we appeared to have moved our shopping habits online. We browse, wait for a sale and even shop-hop before deciding to buy.

Indeed, Malaysia appears to be the region’s king of e-shopping. A recent retail survey has revealed that as many as 22 million consumers in Malaysia are digital consumers and online channels now play a four times larger role than offline channels. Not only do consumers spend 80% of their time online prior to making a purchase decision, they shop-hop across as many as seven websites before deciding to buy!

The data — from a survey conducted by Facebook and Bain & Co in their annual SYNC Southeast Asia report — looks at the digital economy and the future of e-commerce in the region. The fourth edition of the research, it was based on 16,700 digital consumers and insights from interviews with over 20 C-level executives in Malaysia, Indonesia, the Philippines, Singapore, Thailand and Vietnam.

In an interview with The Edge, Gwendolyn Lim, partner at Bain & Co, shares some insights into the survey, including that 88% of the total Malaysian population are digital consumers today versus the Southeast Asian (SEA) average of 78%. Malaysia is also ahead of Indonesia at 80% and Singapore at 79%. And by end-2021, nine out of 10 Malaysians are expected to shop online. She attributes Malaysia’s lead to the burst in the adoption of e-payment, better logistics and the improved role of e-commerce players.

Lim attributes Malaysia’s e-wallet adoption to intensive marketing and promotion while improvement in logistics was backed by hefty investments amounting to US$2.5 billion in e-commerce logistics start-ups across SEA in 2020. “Shopee Malaysia, for example, is able to do nationwide delivery within one to four days now instead of over 10 days as recently as two to three years ago,” she points out. The e-commerce players, meanwhile, created consumer trust and offered quality products, which then increased customer satisfaction.

The online consumer psyche

The survey also revealed that while most shoppers were mimicking their physical shopping habits online, many do not know what they want to buy when they set out to browse.

“When consumers go online, they have that shopping mall mentality or browser window shopping mentality, and they go ‘this is interesting’. And they are also shop-hopping across [about] seven websites before making a purchase decision and visiting stores they have never tried before. Last year, they visited [an average of] 4.8 websites,” says Nicole Tan, country director for Facebook Malaysia.

Lim elaborates that people are visiting more websites as they are looking for value, especially for non-essential items. “Consumers are willing to wait for deals and promotions before making a purchase, particularly when it comes to electronics, clothing and cosmetics,” she adds.

In fact, 44% are trying new online stores this year. While a majority shopped online for electronics, clothing and apparel, and cosmetics pre-Covid-19, the shopping category that saw a marked increase is grocery.

“Grocery sales online is 4% of total grocery sales,” Lim points out, adding that the category of sales will continue to grow moving forward. Another area that saw an uptick is items for children and babies. It is noteworthy that 2021 also saw a 47% increase in online shoppers from 2020.

Another interesting revelation from the survey is that 63% of the online shoppers do not know what they want to buy when they go “shopping”. “In the past, people had an idea and searched for it. Right now, the behaviour is what we term as a discovery generation,” Tan says. Those from the discovery generation seek inspiration and are often influenced by what they see online and on social media. Since they don’t have a clear idea of what they want to buy, the journey involves discovery of brands and new products online.

But will consumers behave differently post-pandemic? According to Lim, habits developed over the past 1½ years will transcend the pandemic and become a permanent shift in behaviour. She explains that while a lot of the shift to online shopping was accelerated by the Covid-19 movement restrictions, “behind that there is also a drive to seek value, convenience in online shopping that has been embedded in people’s psyche now.” In fact, some 46% of Malaysians have already adopted online purchase as their primary purchasing channel.

“Online sales account for 57% of total retail sales in Malaysia. We do think that it will go up because of the convenience and the value.” Similarly, she opines that for items such as grocery, personal care and baby care as well as food delivery, consumers will continue to rely on e-commerce. She expects that at most, there may be a small decline in online shopping if things go back to normal.

How businesses can tap consumer habits

As consumers shop more online, businesses and brands will also be able to benefit from it.

For example, Facebook has launched Shops — a virtual store or storefront that provides a platform for small businesses that are unable to sell in the physical space due to the movement restrictions. Another example is Reels, which is available on Instagram, the latter also owned by Facebook. Reels are short entertaining videos that are influencing the way people advertise and shop.

Yet another avenue is conversational commerce. Consumers are discovering products and making purchases through messaging (for example, Facebook messenger) and conversational apps such as WhatsApp. Muslimah clothing, for example, saw an increase in sales with the use of WhatsApp.

This, Tan says, is important from Facebook’s perspective going into 2022 given that businesses such as small and medium enterprises are the driving force of economic recovery. Given the pandemic shift in behaviour around online shopping, it is important for businesses to think about their multi-year strategy and how they are going to use all the different parts of digital offerings to help them navigate through this. Brands would also need to think of the influencers they want to get on their side to promote their products.

One of the surprises from the survey was from an environmental aspect. “Eighty-seven per cent of Malaysians tell us they would choose a brand that has environmental, social and governance (ESG) built into their brand and business and 77% were willing to pay a 10% premium. We know that a lot of clients we speak with are thinking through their ESG strategies and this is good insight for them.”

Meanwhile, Lim says there is US$8 billion in total unspent capital with SEA private equity funds.

“Of the money that has gone into investments, close to 90% has flowed into the internet/tech space in SEA as at 1Q2021. This is a higher percentage than in 1Q of last year or what went into India or China. A lot of these investments have gone into spaces like fintech, digital learning (e-learning) and digital health.

“These investments, especially those in fintech, over time will boost customer experience and innovation in terms of payments, such as buy now and pay later financing, that will continue to boost the amount of online consumption going forward,” she adds.

 

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