Leverage internet penetration to expand e-commerce market

By Sofea Azahar

The booming e-commerce market in Malaysia has been aided by the increasing number of Internet users and Internet access. Hence, the efforts to buttress e-commerce market should be continued, as one of the ways to sustain digital economy.

On average, Malaysians have been in the online community for 8.5 years since the implementation of the National Broadband Initiative in 2010. The population of Internet users in Malaysia rose from 81.2 per cent in 2018 to 84.2 per cent in 2019.

Malaysia has outperformed its Asean peers except for Singapore with 88.2 per cent of Internet user population – Vietnam (70.4 per cent), Philippines (60.1 per cent), Thailand (56.8 per cent) and Indonesia (39.8 per cent).

Even in 2016, research by the World Bank had shown that the people community in Malaysia has adopted technology in their daily lives quite well with an index score of 0.64 surpassing other Asean countries like Vietnam, Philippines and Indonesia, as well as Asian economies namely China and India.

According to the latest statistics released by the Department of Statistics (DOSM), households’ access to Internet went up from 87 per cent in 2018 to 90.1 per cent in 2019. Access to computers decreased slightly from 71.7 per cent to 71.3 per cent while access to mobile phones remained high at 98.2 per cent with more access to smartphones – from 89 per cent to 91 per cent.

Based on 2Q20 statistics released by the Malaysian Communication and Multimedia Commission (MCMC), fixed-broadband penetration rate has risen from 33.8 per cent in 1Q20 to 34.5 per cent in 2Q20 while mobile-broadband penetration rate fell from 118.5 per cent to 116.7 per cent, but still considered high.

Among the Internet users, majority of them utilises the access to Internet to participate in social networks (97.1 per cent), to download images, movies, videos or music; playing or downloading games (84.7 per cent), to find information about goods and services (83.5 per cent), telephoning over the Internet (77.4 per cent) and for applications or software downloads (77.1 per cent).

The broader access to Internet could hence explain the greater Internet usage to find information about good and services and participation in social networks, and these activities could have ascended even more since the pandemic.

In other words, these had helped support the expansion of e-commerce market in Malaysia alongside the ease of bank transfers, as well as card and digital payments which explains increasing gross value added of e-commerce to the economy over the years between 2010 and 2019 – from RM37.7 billion to RM127 billion.

In June, the Malaysia Digital Economy Corporation (MDEC) had already projected e-commerce contribution to rise to as high as RM170 billion for this year.

Monthly statistics from Bank Negara up until October this year also show that internet banking and mobile banking penetration rate are on increasing trends.

Reported by the Sun daily, a study conducted by MasterCard revealed that Malaysia ranks top in e-wallet usage within Southeast Asia, surpassing other countries like Philippines, Thailand and Singapore.

Moreover, confidence within the consumer community may have been due to the negligible e-commerce fraud cases (0.02 per cent in 2018), falling slightly from 0.03 per cent in 2017, according to digital payment provider iPay88.

These developments should provide positive signals to the stakeholders involved to continue developing the e-commerce market further. It should be considered as a crucial alternative or option for the local entrepreneurs who suffer from weak sales due to the extension of Movement Control Order (MCO) and lingering Covid-19 infections.

The government has indeed shown commitment to do so through the Covid-19 stimulus packages as well as Budget 2021, addressing both supply and demand side.

In Budget 2021, RM150 million worth of allocation has been set aside for training programmes, sales assistance and digital equipment for 100,000 local entrepreneurs to join the e-commerce market under the e-Commerce SME and Micro SME Campaign which was introduced in Penjana.

On the consumer side, another RM150 million was also allocated to extend the Shop Malaysia Online introduced in Penjana to continue propping up online spending. According to Statista, online traffic in thousand clicks as of 2Q20 revealed that the top e-commerce sites in the country are Shopee and Lazada.

Additionally, Malaysia Digital Economy Corporation (MDEC) had also recently launched a new digital initiative known as Go-eCommerce.

It is an online entrepreneurial platform that provides the essential tools for entrepreneurs to bring their businesses to the next and more advanced level, covering business management, financial management, social media networks, websites as well as mobile applications.

Data does prove that e-commerce market should be taken seriously not only now but also going forward, especially for business players to remain competitive with rapid evolution in technology. Full utilisation of the announced initiatives will then be able to distribute benefits to many – the people, the businesses and the economy.

Sofea Azahar is Research Analyst at EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research.

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