Mastering the Digital Shift: The Importance of E-Commerce for Businesses

Importance of E-commerce for businesses cannot be overstated, as Malaysian commerce is at a significant transformation point. Research shows the digital retail sector will reach MYR67.1 billion by 2028, creating immense, tangible value for business owners and investors who adapt their operations to digital sales channels.

The e-commerce train is well and truly speeding ahead: Malaysia’s digital retail market grew to MYR43.5 billion in 2023, serving 15.63 million online buyers. At the start of 2024, there were nearly 34 million internet users in Malaysia, with internet penetration at 97.4 per cent.

It’s clear that Malaysian businesses, when ready to pull the trigger, have direct access to an expanding digital consumer base:

• Access to 81 million potential customers by 2029
• Revenue potential of MYR3,500 per customer by 2025
• Government programmes supporting 1.51 million SMEs in their digital expansion

The article highlights the importance of e-commerce for businesses in Malaysia that want to stay competitive during the e-commerce gold rush. It will cover market shifts, sector opportunities, and government support available to Malaysian businesses entering digital commerce, along with practical steps for sustainable growth in the online marketplace.

Read more: Unleashing Growth in 2025: How InCorp Malaysia Empowers Business Expansion

Importance of E-Commerce for Businesses in Malaysia: Market Analysis 2024

The Malaysian e-commerce sector shows remarkable financial performance. The latest projections indicate an 8.5% compound annual growth rate between 2024 and 2028, outpacing traditional retail growth. This expansion stems from measurable shifts in consumer behaviour and digital adoption.

Digital payment methods tell an essential story about market maturity. Alternative payment solutions now command 35.7% of transactions, while payment cards account for 24.9% of purchase value. These numbers point to increasing consumer trust in digital transactions.

The Malaysian consumer base continues to expand. With 15.63 million active online shoppers, businesses gain access to a substantial market. Mobile commerce leads this growth, with 97.4% of Malaysians accessing the internet primarily through smartphones.

Cross-border e-commerce adds another dimension to the market. Malaysian online shoppers regularly purchase from regional and international sellers, creating opportunities for businesses to expand beyond domestic boundaries.

The total estimated annual online spending reached USD 9.08 billion in 2022, showing strong consumer engagement with digital retail.

E-Commerce Sectors Experiencing Growth in Malaysia

We see five major sectors that stand out in Malaysian e-commerce, each with distinctive market characteristics and consumer patterns. The Commission Factory found the following in their market analysis:

Electronics and Consumer Technology

Malaysians are enthusiastic adopters of new technologies, making this sector a major player in the e-commerce market. Online spending on electronics reached $2.83 billion in 2023. This sector includes many products, from smartphones and laptops to home appliances and wearable tech.

The demand for consumer technology is expected to remain strong, driven by factors such as the increasing availability of affordable devices and the growing popularity of online gaming and entertainment.

Fashion and Apparel

Fashion and apparel are another notable sector in Malaysian e-commerce, with online spending reaching $2.73 billion in 2023. This sector is driven by global and local trends, seasonal demand, and the increasing variety of online products.

Consumers are drawn to the convenience of online shopping for fashion and the ability to compare prices and find unique items.

Health and Beauty Products

Health and beauty products are also a growing sector in Malaysian e-commerce, driven by the increasing focus on personal well-being and the availability of a wide range of products online. This sector includes everything from skincare and cosmetics to vitamins and supplements.

Online shoppers have come to appreciate the convenience of purchasing these products from the comfort of their homes and having them delivered directly to their doorsteps.

Food and Beverage Delivery

Food and beverage delivery has become a significant part of the Malaysian e-commerce landscape, with online spending on food and beverages reaching $158.4 million and $44.17 million, respectively, in 2022.

This sector has been driven by the increasing convenience of ordering food online and having it delivered to homes or workplaces.

The popularity of food delivery is expected to continue to grow, driven by the increasing variety of restaurants available online and the growing preference for contactless delivery.

Toys and Hobbies

One somewhat surprising performer was toys and hobbies. Spending in this sector climbed by 8.5% year on year, reaching $1.11 billion in 2021.

This sector includes a wide range of products, from traditional toys and games to more niche hobbies such as model building and collecting.

The increasing popularity of online gaming and the growing demand for educational toys are also contributing to the growth of this sector.

Read more: 2025 Business Trends in Malaysia: What Entrepreneurs and Investors Need to Know

Government Support for Digital Growth

Malaysian government agencies have united to speed up digital adoption across the economy. Their combined programmes offer businesses financial backing, new infrastructure and expert guidance. This combination of support puts digital advancement at the centre of Malaysia’s economic growth plans.

MyDigital Blueprint Sets National Digital Priorities

To dramatically advance digital adoption and market participation, the Malaysian government has created the MyDigital initiative, a comprehensive plan to drive digital transformation and position the country as a regional leader in the digital economy.

Targets for MyDigital include:

• Rakyat (People):
  • Creation of 500,000 new jobs
  • 100% household with access to the internet
  • All students to have access to online learning.
• Business:
  • 30% uplift in productivity across all sectors
  • 6% of Malaysia’s GDP to come from the digital economy
  • 875,000 MSMEs adopt e-commerce
  • Attract 2 unicorns (home-grown or foreign)
  • RM70 billion investment in digitalisation; increase the number of start-ups to 5,000.
• Government:
  • 100% of civil servants to possess digital literacy
  • 80% end-to-end online government services
  • All ministries and agencies to provide cashless payment options by 2022
  • 80% usage of cloud storage across the government by 2022.

The MyDigital Blueprint is undergoing a three-phase implementation plan:

 

1. Phase 1 (2021-2022): Strengthen the foundation for digital adoption.
2. Phase 2 (2023-2025): Drive inclusive digital transformation.
3. Phase 3 (2026-2030): Position Malaysia as a regional digital content and cybersecurity leader.

The successful implementation of MyDigital is expected to bring significant benefits to the Malaysian people, businesses, and the government. These benefits include improved quality of life, more significant economic opportunities, and more efficient and effective public services.

The Malaysian government is committed to working with all stakeholders to achieve the goals of MyDigital and create a thriving digital economy that benefits all.

Government Grants Support SME Digital Adoption

The Malaysian government has introduced concrete financial support through the SME Business Digitalisation Grant, administered by BSN, MDEC, and SME Bank. This initiative offers eligible SMEs up to RM5,000 in matching grants, covering 50% of digital solution costs.

To qualify, businesses must meet specific criteria:

• 60% Malaysian ownership
• Registration under Malaysian law
• Operational for at least one year
• For companies operating 1-2 years: minimum annual sales of RM100,000
• For companies operating over 2 years: minimum annual sales of RM50,000 in the previous two years

The grant supports four key digital solution categories:

• ERP/Accounting & Tax systems
• HR & Payroll/CRM solutions
• Electronic Point-of-Sale systems
• Procurement platforms

This funding aligns with Malaysia’s digital transformation goals and provides SMEs with practical support to implement essential business technologies. The grant’s structure encourages businesses to invest in their digital capabilities while reducing financial barriers to adoption.

With 100,000 Malaysian SMEs targeted for support, this programme represents a significant push toward achieving MyDigital Blueprint’s objectives of digital economic growth.

Malaysia Digital: A Framework for E-commerce Growth

Malaysia Digital (through the Malaysian government and Malaysia Digital Economy Corporation (MDEC)) establishes a broad framework that strengthens the foundation for e-commerce expansion.

The programme creates an environment where online businesses can grow and innovate through initiatives like Digital Status and tax incentives.

The initiative’s focus on nine promoted sectors directly supports e-commerce development:

1. Digital Services
2. Digital Agriculture
3. Digital Health
4. Digital Finance
5. Digital Cities
6. Digital Tourism
7. Islamic Digital Economy
8. Digital Trade
9. Digital Content

The programme’s emphasis on digital infrastructure and skills training helps businesses build e-commerce capabilities. Key initiatives include:

• Tax incentives for digital investments
• Support for digital transformation through the PeMangkinMD programmes
• Integration of e-commerce tools through the National E-Invoicing Initiative
• Digital skills development programmes for the workforce

These measures align with Malaysia’s digital retail growth targets and support the sector’s projected expansion to MYR67.1 billion by 2028. By providing both policy support and practical resources, Malaysia Digital helps businesses capitalise on the country’s rising digital consumer base.

Specific Tax Incentives

To encourage businesses to adopt e-Invoicing, the Malaysian government is offering attractive tax incentives. These incentives allow companies to claim accelerated capital allowance on their investments in e-Invoicing systems, reducing their tax burden and promoting faster adoption of digital solutions.

Specifically, businesses can benefit from an initial allowance of 20% and an annual allowance of 40% on qualifying expenditures, such as purchasing ICT equipment, computer software packages, and consulting fees related to e-Invoicing implementation.

This accelerated capital allowance can be fully claimed within two years, providing significant tax benefits for businesses investing in e-Invoicing solutions.

Read more: Investing in the Future: Unleashing Profitable Opportunities in Malaysia’s Smart City

Where to Next with InCorp

The numbers tell a straightforward story: RM67.1 billion in digital retail by 2028. 18.81 million online buyers. RM3,500 per customer in annual spending. These aren’t just statistics – they represent revenue waiting for businesses ready to enter digital sales channels.

Malaysian businesses have a distinct advantage: government support through grants, tax benefits, and development programmes stands ready to offset startup costs. Combined with rising consumer spending and proven market demand, the conditions for digital retail success line up.

InCorp connects businesses to these opportunities daily. Our teams know the grant application processes, understand the tax benefits, and guide companies through digital business setup.

We’ve helped companies access millions in government support and establish profitable digital sales operations.

Contact our Malaysian business specialists to map out your digital retail strategy. We’ll show you how to access available funding and build a profitable digital sales channel.

About InCorp Global Malaysia
InCorp Global Malaysia, an Ascentium Company, is a trusted corporate service provider offering end-to-end business solutions, including company incorporation, compliance, accounting, taxation, and ESG advisory. With deep local expertise and a strong regional network, we help businesses navigate Malaysia’s evolving regulatory landscape. Contact us to learn more.