The Ferns struggled to showcase any confidence throughout the final quarter as Malawi continued to turn up the pressure on their crumbling opponents.
Silver Ferns coach Janine Southby was "gutted" with the historic loss, and said that the Ferns were disappointed with the performance they put out on court.
"It's one of those things you never want to do and we're really disappointed with the product we put out there today, and we got punished for it,'' Southby said.
"We were guilty of not really punishing them when we had that lead before halftime."
"Then in the third quarter we just took our foot off the pedal and didn't do our jobs."
Tonight's loss is among the worst in Ferns history. The ambition of winning a Games medal looks less likely by the day.
However, despite the shock and horror expressed on social media by netball fans, in a sense the loss has been coming for some time.
The Silver Ferns had a disappointing start to this year's season and struggled to make a convincing comeback, despite claiming to have made all the necessary changes.
Unsuccessfully being able to defend their Quad Series and Taini Jamison Series titles, the Ferns' confidence progressively wavered from match to match.
Southby admitted that a sense of panic had "crept back in," contributing to the defeat, but said the best thing they could do was to pick themselves up and look ahead at the rest of the tournament.
"I know they won't be happy and they won't be happy with what they put out there, but it's about picking yourself up."
"I don't think it's over, we've got another two games in our pool and that's what we've got to focus on, one game at a time and that's all we can do, take the learnings from today and pick ourselves up and go again."
Southby said the New Zealand players had failed to show "they really wanted it" tonight.
The Silver Ferns will have a shot at redemption tomorrow night when they face Scotland in their fourth preliminary round match, before they play the formidable English on Wednesday.
If they manage to win both they will have a shot in the semifinals. But depending on other results, if they lose one of them, the campaign could be all over.
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