Cross-border e-commerce activity is alive and well in the Southeast Asian countries of Indonesia and Malaysia. Both countries are experiencing considerable growth in domestic and international online ordering.
According to ESW, a direct-to-consumer retail provider and a subsidiary of Asendia Group, Malaysia has a population of almost 32m people, of which 14.4m are e-commerce shoppers, a number expected to increase by 4m by 2025. Meanwhile, Indonesia has a population of 272m, of which 158m are e-commerce users, a penetration of 57%, expected to reach 77% by 2025.
Cross-border spending accounts for 44% of all Malaysian e-commerce sales, with 52% of Malaysian shoppers spending cross-border.
Indeed, according to data from Parcel Monitor, an online platform for e-commerce logistics insights and global package tracking, China, the US, and Singapore accounted for 60.3% of international parcels in Malaysia. This increased from almost 58% of international parcels in Malaysia during the first half of 2020.
According to JP Morgan, China is the biggest overseas shopping market for Malaysian consumers due to its sophisticated e-commerce experience, advanced social commerce options, and wide range of products.
In addition, the Malaysian government has partnered with China’s Alibaba to create a Digital Free Trade Zone, intending to make Malaysia a regional and global e-commerce logistics hub and perhaps, encouragement for more e-trade between China and Malaysia.
For Indonesia, Parcel Monitor noted that China, the US, and Malaysia accounted for 84.8% of international parcels in the country for the first half of 2021, a significant increase from the first half of 2020 when the three countries represented 80% of international parcels in Indonesia.
Like Malaysia, China is the most popular overseas shopping destination for Indonesian consumers.
In total, Indonesia witnessed an 814% increase in imported e-commerce parcels, from 6.1m packages to 49.7m in 2019. Access to various products and lower prices were cited to be the most critical factors in customer preferences.
In 2020, the government revised its de minimis exemption on imported shipments from $75 per shipment to $3 per shipment. VAT on these items is 10% regardless of product. For items worth above $3, a range of import taxes apply. According to JP Morgan, some merchants are choosing to bulk-import products and work with local distributors, selling platforms, and trading houses to circumvent this.
Malaysia and Indonesia populations are young and have embraced e-commerce in various forms, including mobile commerce (m-commerce) and cross-border e-commerce.
The COVID-19 pandemic has spurred an already growing trend that will continue to see growth for both countries.
But as cross-border e-commerce grows, in particular, government regulations will need to be mindful of counterfeits. At the same time, offer friendlier customs duties and taxes regulations to encourage growth.
Source: Transport Intelligence, December 2, 2021
Author: Cathy Morrow Roberson