Retail market performance next year depends on success of Visit Malaysia 2020

Under the VM2020 campaign, the country is eyeing 30m tourist arrivals

by FARA AISYAH / pic by HUSSEIN SHAHARUDDIN

THE performance of Malaysia’s retail market next year will depend on the growth of tourist arrivals spurred by the Visit Malaysia 2020 (VM2020) campaign.

The outlook is positive, but very cautiously so, Savills (M) Sdn Bhd head of retail services Murli Menon said.

“Much would hinge on the growth of tourist arrivals next year, given that it is going to be a Visit Malaysia year. The Ministry of Tourism, Arts and Culture (Motac) is also planning an aggressive campaign for the same.

“The retail performance so far has been quite sluggish. As such, most retailers tone down their growth expectations for the year,” he told The Malaysian Reserve.

Even categories like beauty and wellness, which have been seeing double-digit growth, seem to have slowed down especially in the third quarter of 2019 (3Q19), Murli added.

Under the VM2020 campaign, the country is eyeing 30 million tourist arrivals next year, with a targeted income of RM100 billion.

For 2019, the Motac aims to welcome 28.1 million tourists and collect RM92.2 billion worth of tourist receipts. Domestic retail industry growth slumped to 1.8% in 3Q19 from a 6.7% growth in the same quarter last year, according to recent data from Retail Group Malaysia (RGM).

The latest quarterly growth was below market expectations as members of the Malaysia Retailers Association (MRA) projected an expansion of 3.2% in 3Q19. It was also weaker than the 4.5% increase registered in 2Q19.

“The high growth rate (in 3Q18) was fuelled by the remaining two months of the tax break, before the Sales and Service Tax was reintroduced in September 2018. Malaysian consumers rushed to retail stores to buy more in order to save more.

“For the month of September 2018, many retailers maintained their prices in order to attract shoppers to buy,” RGM said in a statement.

Low consumer confidence levels, coupled with an unsettled global market environment and slow domestic economic activities, also led to poor sales in 3Q19 as consumers were discouraged to spend more.

For the first nine months of this year, retail sales expanded 3.6% compared to the same period a year ago.

Many members of the MRA are not optimistic about their businesses for the next three months, with an estimated average growth of 2.7%.

As such, RGM has revised downwards its expected retail growth for 4Q19 to 3.8% from 5.8% previously, while full-year growth is forecast at 3.7% versus the previous estimate of 4.4%.

Based on the latest revision, the total sales turnover for Malaysia’s retail industry in 2019 is expected to stand at RM107.5 billion.