Malaysia 5 Years of Digital Transformation Within A Year

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Malaysia’s overall IT spending is forecast to be approximately $11bn this year, and a large proportion of that spending has shifted to , suggesting that enterprise is somewhat playing a role in Malaysia.

According to Facebook and Bain & Company who released a recent study titled ‘Digital Consumers of Tomorrow, Here Today’, higher spending power and a heightened preference for contactless transactions will continue to drive the exponential growth of the digital economy in the region.

Digital Transformation in Southeast Asia

Southeast Asia is expected to see more digital consumers by the end of 2020.

The study looked into the rapid acceleration of the digital economy and how it affects the future of e-commerce in Southeast Asia.

Some 16,500 digital consumers and close to 20 chief experience officers in six Southeast Asian countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam were surveyed and interviewed for this study. Everyone of those surveyed were those who’ve made an online purchase in at least 2 product categories in the past 3 months.

To be exact, 310 million digital consumers with millions more expected to join in the coming years.

Interestingly, this growth was originally forecasted for 2025 in the 2019 study, ‘Riding the Digital Wave’. But the pandemic has only accelerated the growth. In short, almost 70 percent of Southeast Asian consumers will go digital by the end of the year. That’s about 7 in every 10 people.

Malaysia makes the highest number of percentage

The research found that Malaysia has the highest percentage of digital consumers with 83 percent of its population of those aged 15 and above. 48 percent of them switched to purchasing mostly online in the past year.

Online retail gross merchandise revenue (GMV) is expected to double from US$4 billion to approximately US$9 billion by 2025.

More and more Malaysians are not only purchasing online but also buying into more categories. In 2020, they purchased an average of 5 categories.

Southeast Asians are also now more receptive to grocery shopping online with 43 percent of respondents in the region doing just that. In Malaysia, online groceries recorded the highest growth (2.2 times) in online retail penetration in 2020 since 2018.

What’s consumer behaviour like?

Malaysians are shop-hopping across 4.8 online sites before making a purchase decision, a notable increase from an average of 4.2 sites in 2019.

More are still searching for better pricing (56 percent) and product quality (34 percent) when browsing across sites. Due to this, an average of 5 in 10 respondents said that they changed their most purchased brand in the three months prior to the study, with reliability and value being the top two reasons for doing so.

Discovery commerce and online inspiration remains all-important with 67 percent of Malaysian consumers saying that they still don’t know what they want to purchase before they shop online, while 66 percent said they learn about new products and brands via social platforms, with short videos being cited as the top format of choice.

Facebook Malaysia’s Country Managing Director Nicole Tan said the impact of digital adoption on businesses has never been more apparent with five years of digital acceleration condensed into one year.

“In Malaysia alone, we are expecting approximately 4 million new digital consumers in 2020. Online is no longer just one of many channels, for many businesses, it has become their main channel. It is crucial for businesses to connect with consumers in ways that are frictionless and to replicate in-person interactions through social platforms, messaging and short videos as much as possible to drive discovery and loyalty.”

While the last decade was about bringing consumers online, this decade is all about rapid immigration of digital consumers from offline to online.

Coupled with the evolution of home-consumption habits, more brands have shifted
their business models beyond the “omni-channel” option to meet the consumers where they are.

What does this mean to brands?

To succeed in an omni-channel space, businesses will need to adapt today’s consumer trends as it continues to shape the next normal. Companies will also need to prepare for a fully digital purchasing funnel and develop omni-channel capabilities by partnering or investing to build proprietary assets.

With more and more capital available to digital disruptors, large brands can expect to face constant challenges from emerging brands, the report states.

Disruption may be more apparent in healthcare, education, and online entertainment as it
rapidly evolves to adapt to consumer’s home-consumption habits such as home-based learning, telemedicine and the sharp increase in preference for online gaming and live-streaming.

“Southeast Asia is a dynamic region and is fast growing to be one of the top growth engines for the global digital economy. The number of Southeast Asian digital consumers has grown exponentially and their consumption habits are shaping today’s new norm. Looking forward, online spending is expected to triple by 2025 and reach close to US$150Billion,” Gwendolyn Lim, Partner at Bain & Company said.

Nicole believes that turbulent times are often the catalyst for the rise of new business models and Facebook’s goal is to help businesses as they speed up their transformation to meet the new digital consumers where they already are by providing new tools and solutions.

She cited an example where the U.S. tech giant introduced Shops for businesses to set up free storefronts that are accessible on both Facebook and Instagram. In partnership with Facebook, L’Oréal launched the first ever virtual Luxury Beauty Festival in Malaysia, with an aim to let their customers experience Beauty Discovery via Facebook Live.

“We garnered 17,000 leads in 24 hours with three times the increase in our sales conversion and more importantly, we successfully stayed connected and engaged with our customers in the way they hoped for,” Jennie Ma, General Manager, L’Oreal Malaysia – Luxury Division, said.

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