Author | Leci Zhang
Editor | Yiran Xing
Key Takeaways:
In a mid-sized market of just 30 million people—geographically dispersed, highly regulated, and institutionally complex—simply replicating China’s “involution-style” competition model only accelerates losses rather than creating scale effects.
Malaysia’s constraints are not only “physical” (population size, logistics, costs), but also cultural and institutional. Halal certification, religious sensitivities, and labor regulations directly define the real ceiling for consumer brands.
Experience across sectors such as food & beverage, consumer electronics, and IP-driven consumption shows a clear pattern: low prices are not the problem—de-localized low prices are. Sustainable success comes either from extreme supply-chain efficiency or from clear brand premiumization and product leadership.
For Chinese consumer brands to achieve long-term growth in Malaysia, they must abandon the illusion of “market takeover.” Instead, they need a model grounded in compliance and local users—built through differentiated positioning, localized services, and emotional value creation—shifting from “exporting involution” to “exporting capabilities.”
In January 2026, a piece of news sent shockwaves through Southeast Asia’s venture capital circles and WeChat groups of overseas-expanding entrepreneurs: Flash Express, the Thai unicorn that once vowed to take over half of Southeast Asia’s logistics market, officially announced that it would shut down its Malaysia operations on January 31.
Flash Express’s withdrawal is a typical outcome of excessive cut-throat competition in Malaysia’s local courier sector: in a small and medium-sized market with limited capacity, relentless cash burning, subsidies, and price wars can only lead to sustained losses and, ultimately, a forced exit. In other words, Malaysia is not a vast market that can endlessly absorb “Chinese-style involutionary competition.”
In fact, this problem is not confined to the logistics sector. In many other industries as well, relying solely on an involution-style competitive strategy is equally incapable of “conquering” the Malaysian market. Taking Flash Express as a point of entry, this article will conduct an in-depth analysis of the structural challenges faced by Chinese companies entering Malaysia across consumer-oriented sectors such as e-commerce, food and beverage, beauty, and 3C consumer electronics.
01 Illusions Shattered: Re-measuring the “30 Million Population” — Physical and Cultural Dimensions
In the past, one of the most common mistakes made by Chinese entrepreneurs was being misled by the “illusion” created by macro-level data. When expanding into Malaysia, many entrepreneurs tend to view it as a scaled-down version of the Chinese market, and therefore enter the market with the budget and tactical mindset of “one province” or even “one city.” Here, Chongqing is used as an example to illustrate the differences between the two markets.
In Chongqing, a single hotpot restaurant can reach hundreds of thousands of high-density users within a five-kilometer radius through delivery platforms such as Meituan or Taobao Flash Delivery. In Malaysia, however, a population of 30 million is dispersed across two landmasses separated by the South China Sea (Peninsular Malaysia and East Malaysia). This means that for the same level of GDP output, the logistics fulfillment cost (Fulfillment Cost), cross-cultural management cost, and compliance cost borne by enterprises in Malaysia may be several times, or even ten times, higher than in Chongqing.
One of the causes of Flash Express’s failure was precisely its attempt to apply the logic of “Chinese-style express delivery” — namely, using extremely high order density to dilute extremely low per-order prices — to the Malaysian market. The result was that, due to the existence of East Malaysia (Sabah and Sarawak), logistics costs simply could not be reduced, while order volumes could never reach the kind of “hundreds-of-millions-level” scale effects seen in China. In short, the Malaysian market has a limited capacity: both the total number of consumers and per capita purchasing power determine a relatively low ceiling. Even if a brand were to seize 100% of Malaysia’s market share through low pricing, it would still only be able to serve around 30 million consumers, making it extremely difficult for orders and sales scale to grow exponentially.
In addition, cultural factors must also be taken into account. Malaysia has a unique multicultural and regulatory environment. For example, about 60% of the mainstream consumer population consists of Muslim Malays, and Halal certification is crucial in industries such as food and beverage and beauty. If products do not meet Halal standards, they will lose access to a vast Muslim consumer base. Put in numerical terms: if the food or beauty industry lacks Halal certification, the market ceiling is automatically locked into the remaining less than 40% of the population. Out of a total population of 30 million, this means only a little over 10 million people — fewer than the population of Shenzhen.
Therefore, any China-based food and beverage brand entering the Malaysian market must undergo localization. For other non-food industries, companies must also recognize that religious sensitivity is an absolute red line in Malaysia. Any unintentional offense to Islam or improper use of Halal labeling may trigger widespread social backlash. For example, KK Mart faced fierce resistance from Malaysian society following the sale of socks bearing the word “Allah” and the subsequent “ham sandwich misuse of Halal labeling” incident. The brand suffered devastating reputational damage, which even led to legal proceedings and senior management paying formal apologies to the Yang di-Pertuan Agong (the King).
At the same time, Chinese companies must also recognize that Malaysia does not provide the social soil for work-style “involution.” Malaysia’s Employment Act imposes strict regulations on overtime pay and public holidays (Public Holiday). If employees work on public holidays, employers must pay triple wages. Attempts to use “responsibility systems” to circumvent overtime payments will not only result in heavy fines from the labor department, but will also be exposed on social media, potentially destroying a brand’s reputation overnight. From a life-philosophy perspective, Malaysians work in order to live, not live in order to work. Forcibly imposing “wolf culture” will only produce teams with extremely high turnover rates and extremely low efficiency.
02 On-the-Ground Record of Chinese Consumer Brands Expanding into Malaysia
In the food and beverage sector, the performance of Chinese brands shows extreme polarization. The success of Mixue Ice Cream & Tea (蜜雪冰城) and Chagee (霸王茶姬) stands in sharp contrast to the struggles of brands such as Nayuki, Heytea, and some hotpot chains. Mixue Bingcheng’s expansion in Malaysia can be described as a textbook case of success. Its core competitiveness lies not merely in low pricing, but in the perfect combination of “supply-chain globalization” and “cultural compliance.” Mixue Bingcheng’s business model is essentially B2B: its profits mainly come from selling raw materials and equipment to franchisees rather than from direct C-end consumer sales. This model is highly effective in Malaysia because it allows franchisees to operate at extremely low costs, thereby supporting terminal prices that competitors find impossible to match. More importantly, Mixue Bingcheng’s most critical localization strategy has been its emphasis on Halal certification. In 2025, the company announced that more than 100 of its outlets in Malaysia had obtained Halal certification issued by JAKIM (Department of Islamic Development Malaysia), enabling it to gain the trust of a broad base of Muslim consumers.
Unlike Mixue Bingcheng’s down-market penetration strategy, Chagee has successfully pursued a path of “premium cultural export” in Malaysia, becoming a rare example of high-end positioning among Chinese tea beverage brands. Chagee did not enter low-price competition; instead, it built brand momentum through a high-profile “large-store strategy.” In 2025, its global flagship store opened at WOLO Bukit Bintang in Kuala Lumpur, with design, experience, and products all benchmarked against Starbucks Reserve stores. This strategy caters to the Malaysian middle class’s demand for a “third space” and social currency. Another key moat for Chagee lies in technology: by introducing automated tea-making equipment, it reduced cup output time to under eight seconds, significantly alleviating labor shortages in Malaysia’s service sector.
Chagee’s global flagship store at WOLO Bukit Bintang, Kuala Lumpur
Image source: Marketing Interactive
The hotpot sector is also undergoing major transformation. Although brands such as Haidilao (海底捞), Xiao Long Kan (小龙坎), and Shu Daxia (蜀大侠) still retain a market within the Chinese community, their growth ceilings have effectively been locked due to the lack of Halal certification. In recent years, localized Halal hotpot brands (such as Supamala) have risen rapidly, filling the gap in the Muslim market for a “mala (spicy) experience.” This once again demonstrates that in Malaysia, whoever can solve the compatibility challenge between “Halal” and “authenticity” will control the next growth opportunity.
In the 3C sector, Chinese brands have already shed the “low-cost” label. According to IDC data, Roborock (石头科技) not only topped global rankings in 2024, but also occupied a premium niche in the Southeast Asian market, with market share even surpassing iRobot. This indicates that Malaysia’s middle class is willing to pay high premiums for innovative functions such as self-cleaning and AI obstacle avoidance. In other words, the overseas strategy of Chinese companies in the 3C sector has shifted from “cost leadership” to “product leadership.” DJI (大疆) has further strengthened its brand image by opening experience stores in high-end shopping malls, forming a differentiated complementarity with brands such as Xiaomi (小米), which continue to adhere to an extreme cost-performance strategy.
In the IP economy sector, Pop Mart (泡泡玛特) achieved a staggering 619% growth in Southeast Asia in 2024–2025 driven by “Labubu.” This “blind box economy” successfully leveraged viral dissemination on social media, proving that Malaysian consumers are willing to pay for “emotional value.” Another brand, Miniso (名创优品), has successfully transformed from a “ten-yuan store” into an “IP collaboration factory,” significantly increasing average transaction value and brand stickiness through partnerships with top global IPs such as Harry Potter and Chiikawa. Its “large-store strategy” (such as Miniso Land) has turned it into a traffic engine within shopping malls.
03 Conclusion and Recommendations: Reconstructing the Going-Global Methodology
Overall, the current landscape of Chinese consumer enterprises in Malaysia reflects a process of “divergence and reconstruction.” The failure of Flash Express demonstrates that simply replicating China-style “involutionary competition” is unworkable in a market with limited stock and capacity. By contrast, the successful companies — Mixue Ice Cream & Tea (蜜雪冰城), Chagee (霸王茶姬), and DJI (大疆) — all display a high degree of local adaptability and refined operational capabilities.
First, abandon the pursuit of being “big and all-encompassing,” and focus instead on being “small but refined.” Companies should not aim for market monopoly: monopolizing a 30-million-person market does not generate much value in absolute terms. It is far more rational to pursue higher average transaction value. Malaysia ranks third in ASEAN in terms of GDP per capita and income per capita. Accordingly, enterprises should either follow Chagee’s path by increasing per-customer spending through brand premiumization and targeting the mid-to-high-end market, or follow Mixue Ice Cream & Tea’s path by winning competition in the mass market through an extremely integrated supply chain and tight cost control. Any strategy that attempts to seize market share through low margins or even negative margins is ultimately unsustainable.
Second, always remember that compliance is productivity. For the food and beverage sector, Halal certification is the only key to accessing the market segment that represents 60% of the population. Compliance must not only be achieved, but also made highly visible and integrated as part of brand assets. For other industries, attention must be paid to deep-rooted channel development and after-sales service. Today, Chinese manufacturers such as Haier (海尔) and Gree (格力) place greater emphasis on building localized service networks when entering the Malaysian market: working closely with local distributors, establishing after-sales service centers, and deploying technical teams to ensure consumer trust and peace of mind. In the era of social media, any negative information can be rapidly amplified, posing a severe blow to Chinese brands that are still in the process of building their reputation. Therefore, “winning through quality” is in fact a wiser strategy in small markets.
Finally, the skillful use of digital marketing and social commerce is also one of the most powerful weapons for Chinese brands to penetrate the Malaysian market. Malaysian consumers are deeply influenced by social media: surveys show that 74% of consumers discover new brands through social platforms, and 76% consult social media content before making purchase decisions. Chinese brands often possess rich experience in short-video platforms and livestream e-commerce. For example, Chinese beauty brands such as Perfect Diary (完美日记) entered Malaysia by leveraging TikTok and Instagram, inviting local beauty influencers to conduct livestream try-ons and launching hashtag challenges, quickly building awareness among young consumers. As material consumption becomes more rational, brands that provide “emotional value” through social platforms — such as IP, blind boxes, and lifestyle narratives — enjoy stronger premium-pricing power.
In sum, the expansion of Chinese consumer brands into Malaysia presents both opportunities and hidden risks. The market offers a friendly environment, digitally savvy users, and early success stories, but also faces constraints such as a low market ceiling, homogeneous competition, and divergent consumer preferences. If companies mechanically copy domestic “involution-style” strategies and assume that low prices alone can rapidly conquer the market, the likely outcome will be futile: resources are exhausted in price wars, yet no brand loyalty or competitive moat is built. When subsidies fade, consumers disperse. By contrast, the Chinese brands that have truly taken root in Malaysia demonstrate a clear lesson: only through deep localization and meticulous cultivation can the cycle of involution be broken and long-term value achieved. By delivering genuine value-for-money products, sincerely listening to local user needs, and building differentiated brand identities, Chinese enterprises can secure sustainable development in Malaysia — and use it as a starting point to gradually expand across the broader Southeast Asian market.
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