Malaysia's E-commerce Growth Pressures Local Businesses and Waste Systems

Pinduoduo launched in Malaysia last December, attracting bargain shoppers while direct shipments from China put pressure on local retailers, manufacturers and waste disposal systems. Pinduoduo's growth since its founding in 2015 has relied on direct shipments and allowing consumers to combine purchases into bulk orders from factories and wholesalers. Small local businesses, especially physical retailers and manufacturers, had already experienced shrinking margins amid competition from Lazada and Shopee. Lazada and Taobao are subsidiaries of Alibaba Group, which also owns the South China Morning Post.

Esha Yusof, a 32-year-old employee of a competing e-commerce site, signed up in July and spends an average of 500 ringgit (US$122) monthly. Esha buys home decor, kitchen supplies, fashion and stationery, attracted by low prices, product variety and convenient payments through a popular local e-wallet. Esha said most products were much cheaper than in Malaysia because the products came directly from factories or warehouses in China. Deliveries take at least two weeks, but Esha said the delay encouraged almost weekly purchases to maintain regular parcel arrivals, while urgent orders still went through local platforms.

SME Association of Malaysia president Chin Chee Seong said low-priced foreign e-commerce products were putting tremendous pressure on retailers, wholesalers and manufacturers, particularly micro and small businesses. Chin said operating costs had risen by 80% or more this year. An April SME Association survey found that 76% of respondents reported being hit hard by rising fuel and energy costs. The survey found that 45% of respondents expected a cash-flow crunch over the next six months. Chin said many businesses could not afford further price reductions while facing rising costs and increasingly aggressive price competition.

Micro, small and medium-sized enterprises account for nearly 97% of all registered businesses in Malaysia. These enterprises employ around 8 million people, roughly half the workforce. Socio-Economic Research Centre executive director Lee Heng Guie said businesses losing sales or closing would reduce hiring and demand for banking, advertising, accounting and other supporting services. Lee said shop closures would increase commercial vacancies and could force landlords to lower rents, reducing property income. Retailers of imported consumer goods are likely to suffer the most immediate and visible losses, but economists warn that manufacturing faces the greater danger. Sunway University economist Yeah Kim Leng said overseas purchases of electronics, apparel, footwear, cosmetics and furniture could permanently deprive local factories of domestic market share. Yeah said displaced retailers could shift toward services or niche products, whereas lost manufacturing capacity was much harder to rebuild.

Online shopping expanded sharply during pandemic movement restrictions between 2020 and 2022, and government data show estimated parcel deliveries reached 900 million in 2025 from 52 million a decade earlier. Kenanga Research forecast in February that Malaysia's e-commerce merchandise value would reach 1.5 trillion ringgit in 2027, up from 1.2 trillion ringgit (US$268.9 billion) in 2024. Government figures from last year show Malaysia's 135 landfills were already close to capacity while handling an average of 39,000 tonnes of solid waste daily. The government has also highlighted a recycling rate of only 37.9% of recoverable materials and poor waste separation by households and local councils. Environmental Protection Society Malaysia vice-president Randolph Jeremiah said online shopping, driven partly by competitive prices and convenience, had increased packaging waste. Jeremiah said some platforms, retailers and manufacturers were reducing packaging and replacing polystyrene with recyclable materials such as paper, but these efforts might not match consumption growth.

Government policies seek to modernise solid waste management, expand sustainable materials, encourage recycling and reduce waste generation. Jeremiah said policies would achieve little without addressing waste at source and extending packaging reductions across the entire supply chain. Jeremiah said consumers should make more informed purchases and separate waste and recycle properly.

However, an unnamed local courier operator said demand for small-parcel deliveries had fallen 40% over the past few months because shoppers could receive direct home deliveries. The operator said demand had increased for larger shipments, including furniture, kitchenware and machinery for factories and construction. The operator said an early investment in warehouse space in Guangzhou helped secure clients buying directly from China's factories and made arranging shipments easier. Chin acknowledged the consumer benefits, saying Chin was happy to buy socks for just 12 ringgit. Chin said local businesses wanted fair competition rather than a ban on Pinduoduo and other foreign platforms.

Malaysia introduced a 10% sales tax in 2024 on imported low-value goods worth 500 ringgit or less. Trade groups say many direct overseas shipments escape the tax, giving foreign sellers an advantage. Local industries warn that directly shipped electronics and toys are not subject to Malaysia's safety regulations and may endanger consumers. Chin argued that paying local taxes, employing local workers and complying with regulations should not disadvantage Malaysia's businesses, and consumer protection must not sacrifice businesses, jobs or manufacturing.

Prime Minister Anwar Ibrahim said on October 9, while unveiling next year's budget, that the government would introduce an e-commerce bill at the next parliamentary sitting. Anwar said the bill would close legislative and enforcement loopholes and protect local businesses from unfair competition. Muar MP Syed Saddiq Syed Abdul Rahman said during the budget debate that the government must go beyond legislation by requiring foreign platforms to establish local operations, work with local businesses, open offices and hire local workers, rather than offering handouts or ending competition.