A year that hypermarkets want to forget — 2017

Hypermarket sales shrank by an average of 3.1% in 9M17, the worst segment in the retail industry

By ALIFAh ZAINUDDIN / Pics By TMR

Hypermarket players with falling sales, shrinking customer base and competition from the corner grocers has made 2017 into a year that hypermarket operators would rather forget.

Numbers for the first nine months of the year (9M17) showed that hypermarket sales shrank by an average of 3.1%, making it the worst segment in the retail industry so far.

At the turn of the year, heavy-weights like Mydin Mohamed Holdings Bhd and AEON BiG Sdn Bhd are shelving expansion plans and cutting costs.

Mydin’s plan to open more outlets across the country has been consigned to the back burner, while AEON BiG is mulling shutdown of stores and picky with locations.

Other operators have been more discreet about their plans, but just two months ago, GCH Retail (M) Bhd suddenly announced that it will not renew leases on five of its Giant hypermarkets when they expire.

Despite a reluctance to acknowledge a retail crisis, hypermarkets, which caused many local sundry shops to close by offering bulk prices to consumers, are now ironically losing customers to smaller shops because consumer spending habits have adapted to changing economic pressures.

Tan Hai Hsin

Consumers are no longer loyal to one store brand, says Tan (Pic by Muhd Amin Nahartul/TMR)

Retail Group Malaysia MD Tan Hai Hsin said consumers have less disposable income and are forced to be price-conscious on household spending, the target market of hypermarkets.

He said the average buyer would try to save more on grocery items by going to grocery stores that offer the lowest price.

“They are no longer loyal to one store brand. They will switch, maybe week by week, according to discounts and special offers introduced by different operators,” Tan told The Malaysian Reserve. At the same time, Tan said, hypermarkets have been pressured by the government to maintain the prices of basic goods even as costs continue to rise.

The shift in shopping habits went as far as to suggest that hypermarket chains were affected by smaller rivals in the form of mini markets which have been expanding swiftly over the last few years.

While hypermarkets find the overall business environment tough, neighbourhood mini markets such as KK Mart and 99 Speedmart appear to be thriving under the same condition.

Mydin MD Datuk Dr Ameer Ali Mydin said as ordinary Malaysians make smaller purchases per shop visit, they are more likely to opt for the convenience of mini markets.

In addition, the growing popularity of online grocery shopping further makes the case that “convenience” sells.

Tesco, the first grocery chain in Malaysia to introduce online grocery shopping in 2015, has recorded over a million orders worth a total of RM179 million in online sales since operations began. Tan said although mini markets and online grocery shopping have grown considerably in Malaysia, these two modes of businesses have not posed a significant threat to traditional hypermarkets.

“Mini markets are not a major competitor to hypermarkets. Mini markets play a different role as their offerings are limited. Shoppers will take less than 10 minutes to travel to mini markets to buy items needed on a daily basis. Items bought will not fill up a basket.

“The same shopper will also make a trip to hypermarkets during the weekend for a whole-week, or whole-month purchase. Items bought will fill up a trolley and shopping will require at least 30 to 50 minutes,” Tan said.

He said online grocery shopping is still relatively small and will not overtake conventional grocery shopping in the near future.

After another poor run this year, hypermarket operators may adopt a more cautious approach as it drags into the new term. As rising living costs continue to plague the lives of average Malaysians, hypermarkets ought to hope they are on the right end of price-conscious shifts in shopping habits.

For the country’s largest hypermarket chain, Ameer said Mydin will continue to expand its store count by opening two new outlets in 2018. However, he lacks the optimism that hypermarkets will perform favourably in the year to come.

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