From Hal Lai Keong and Ong Tze Chin
Public debates about online shopping often focus on isolated problems: unpaid taxes, unsafe products, platform power, or the decline of local businesses.
These are real problems, but they are also symptoms of a single underlying structure — the e-commerce ecosystem. Without understanding that structure, regulation will always be reactive, partial and ineffective.
The term “e-commerce ecosystem” refers to the interconnected system that makes online trade possible.
Platforms organise markets. The sellers who supply goods, payment systems that move money, logistics networks that deliver products, consumers who generate demand, and the legal rules that shape taxation, competition and consumer protection.
It is not a metaphor for nature, but a way of describing how these elements depend on and reinforce one another.
The e-commerce ecosystem is not just a market. It is a system of relationships between platforms, sellers, logistics providers, payment systems, consumers and governments.
Each part shapes the behaviour of the others. Platforms design the interfaces that guide consumer choice. Logistics networks determine speed and cost. Tax and customs rules shape pricing and business models. Consumer protection rules influence risk and accountability. When one part changes, the entire system adjusts.
Hence, it is important to understand the term “e-commerce ecosystem”.
Why? Imagine, a government may tighten consumer protection rules, only to find that enforcement collapses because products are shipped from abroad in millions of small parcels.
The government may also raise taxes on platforms, only to see sellers relocate to jurisdictions with weaker rules. It may introduce competition laws, only to discover that market power is exercised through data, algorithms and logistics.
In the context of cross-border e-commerce, consumers and small businesses face high risk — from unsafe or counterfeit products, weak access to redress, and unfair competition driven by platform dominance and cross-border tax asymmetries.
Governments face medium to high risk as tax bases erode, enforcement capacity is strained, and regulation struggles to keep pace with digital markets.
Public infrastructure is also exposed, national postal services face high risk because high-volume, low-margin e-commerce delivery undermines their financial sustainability and threatens their ability to provide affordable, universal access, especially in rural and remote areas.
By contrast, large platforms and global sellers face low risk because they can diversify across jurisdictions, shift operations, and absorb regulatory change through scale and legal sophistication.
The broader economic and social risks are medium to high in the long term, including rising market concentration, weakening trust in rules, and growing inequality between those who benefit from digital markets and those who bear their hidden costs.
Moreover, it also matters because the ecosystem determines who bears risk. In traditional markets, risk was shared among producers, retailers, insurers and regulators.
In digital markets, risk is often shifted onto consumers — who bear the cost of unsafe products, delayed deliveries, data misuse, and lack of redress — and onto societies, which bear the cost of lost tax revenue, weakened local industries and strained public infrastructure.
Most importantly, understanding the ecosystem prevents us from mistaking convenience for progress. Faster delivery and lower prices are visible benefits. But they can be financed by invisible costs: regulatory avoidance, market concentration, labour precarity, environmental strain, and public revenue erosion. These costs do not disappear. They are simply displaced.
To understand the e-commerce ecosystem, then, is to understand how digital markets reorganise economic life itself — how they redistribute power, reshape competition, redefine consumer risk, and alter the relationship between markets and the state.
Understanding this ecosystem matters because no part of it operates alone. For example, a tax exemption changes pricing. Pricing changes consumer behaviour. Consumer behaviour strengthens platforms. Platform power reshapes competition. Weak competition reduces accountability. Reduced accountability increases consumer risk. Each link in the chain affects the next.
Without seeing the system as a whole, policymakers and the public are left addressing isolated problems without understanding their causes. The ecosystem perspective reveals how power, risk and responsibility are distributed — and how they can become concentrated or displaced in ways that are economically efficient for some, but socially costly for many.
Understanding the ecosystem matters because it reveals where power actually sits. It is not always with producers, retailers, or even consumers, but increasingly with those who control digital infrastructure. These actors shape the rules of the game without necessarily being visible to the public.
Hal Lai Keong is a PhD candidate while Ong Tze Chin serves as a senior lecturer at Universiti Malaya’s Faculty of Law.
The views expressed are those of the writers and do not necessarily reflect those of FMT.