Hypermarkets face a bleak future on waning appetite

The hypermarket segment has been crowded out by the overbuilding of shopping malls and small-time grocers

by SHAHEERA AZNAM SHAH / pic by MUHD AMIN NAHARUL

HYPERMARKETS are facing a bleak future as more operators are pulling the shutter or revisiting their business model due to the high operational costs, waning customers’ appetite and a fightback from smaller outfits which have made some locations untenable.

Internet shopping has hit these mega retailers as consumers opt for cheaper options online, subsequently thinning the footfalls of these huge hypermarkets.

GCH Retail (M) Sdn Bhd, the operator of Giant Hypermarket, has closed down seven of its retail chains since 2017.

Giant Hypermarket Seksyen 18 in Shah Alam pulled the shutter on June 27 and Giant Supermarket Paramount Garden in Section 20, Petaling Jaya, ended its operation on Feb 20 this year.

GCH Retail, one of the largest hypermarket-chain operators, has also decided not to continue the leasing contracts for five of its outlets in the same year. It did not give any reasons why it is closing down the branches in Shah Alam.

Last May, GCH Retail MD PierreOlivier Deplanck had said the company’s investments for the year have been channelled into refreshing its Giant Malaysia outlets via the increase in product range, new shop layout and vibrant colour themes.

“We are also going to do this for our Cold Storage outlet in Gurney Plaza, Penang, so we hope to give a modern shopping environment to our stores and make it relevant.

“Then only we’ll look into the possibility of expansion as there are some opportunities that we will evaluate in due course,” he said at the relaunch of Giant Hypermarket in Batu Caves.

AEON Co (M) Bhd, the operator for the Japanese-owned hypermarket chain, had downsized its departmental store areas in several locations and refurbished the stores to concentrate on food items.

The Malaysia Retail Chain Association council member Raymond Woo said city areas are saturated with shopping malls and hypermarkets, while consumers in the rural areas may be attracted to smaller-size sundry shops or wholesale chains.

“The hypermarkets have been overbuilt and become less appealing compared to shopping malls where the array of displays are more exciting and diverse.

Plus, hypermarkets’ space utilisation against the yield has been less encouraging,” he told The Malaysian Reserve.

To counter the overcrowding of hypermarkets and dwindling sales, he said the operators are right-sizing their business to meet the demand at the moment.

“They are trying to adjust their operation and find the right equilibrium to improve the ecosystem,” he said.

Many of the hypermarkets are converting the unused space into rentable area for food and beverage businesses, as this segment has been growing faster than the traditional retail business.

He added that the emergence of online platforms has shed the necessity of having a physical retail store.

“With the new landscape of online store, it has contributed to the shrinking of hypermarkets. So, there would be some adjustments,” he said.

The hypermarket segment has been crowded out by the overbuilding of shopping malls and small-time grocers.

Smaller chain retailers have also contributed to the slow exit of hypermarkets. Retail chains like 99 Speedmart and Mr DIY have mushroomed all over the country, including at smaller towns, subsequently biting into hypermarkets’ revenues.

In some areas, they have opened multiple stores in a radius of a few kilometre as consumers shunned hypermarkets for daily necessities.

According to the statistics compiled by Retail Group Malaysia (RGM), the hypermarket segment has been slumping since 2017.

The Malaysia Retail Industry Report for June 2019, which measures the domestic retail performance between January and March this year, warned of negative growth for the supermarket and hypermarket segment in the near future.

RGM MD Tan Hai Hsin said the subsector was in the red in the first quarter of this year (1Q19), and is expected to post a negative growth in the April through June period.

“The supermarket and hypermarket subsector remained in the red in terms of the retail sale growth rate. Its growth rate was negative 2.3% during 1Q19, the worst among the retail subsectors.

“Supermarket and hypermarket operators will not see improvements in their business in the coming months as they expect to remain in the red with a negative growth rate of 7.4% for 2Q19,” he said.