Malaysia no longer viable for international hypermarkets

The hypermarkets here are struggling to see sales due to the competition from local players


MALAYSIA is no longer a viable arena for international hypermarket operators, with a rather gloomy outlook in the coming years as bigger operators like Tesco plc continue to pull the shutters down due to high operational costs and waning customers’ appetite.

Malaysia Retail Chain Association VP Datuk Liew Bin said the overall perspective reveals that it will be challenging for international brands to survive in the country.

“For example, the last hypermarket that had to pull out from the market was Carrefour SA and now, we have news that Tesco is doing the same.

“Generally, hypermarkets here are struggling to see sales due to the competition from local players such as NSK Trade City Sdn Bhd, Giant, Mydin Mohamed Holdings Bhd and Econsave Cash and Carry Sdn Bhd, which are still doing quite well because of their cheaper pricing, as well as newer concepts that they are introducing to attract more customers.

“In the retail industry, opening and closing shops are very common. To me, it might also be Tesco’s worldwide strategy, as it is not easy competing in the current Asian market,” he told The Malaysian Reserve (TMR) yesterday.

Liew said Tesco’s exit could also be a signal for Malaysians to support local players such as KK Supermart Holdings Sdn Bhd and NSK.

“Another reason for more hypermarkets closing down could be the increasing number of convenient shops. More and more stores are being opened. I heard that KK Supermart is going to open 500 new outlets nationwide next year.

“So, you can see how they are growing so well despite the current market sentiment,” he said.

Meanwhile, Mydin MD Datuk Dr Ameer Ali Mydin said Tesco’s exit may open up more opportunities and leverage for local players including Mydin to grow.

“Although we may see a negative trend from this to the overall industry, the reflective impact could be taken advantage of by other players in the market.

“It could be more positive for the local players, especially in terms of the customers’ perspective and also the suppliers’ perspective,” he told TMR in a phone interview.

Ameer Ali said suppliers will now have to look for new support as the foreign operators are phasing out their businesses.

He added that Mydin itself has progressively increased its sales by about 7% this year compared to last year.

Currently, supermarket chain Tesco trades from 1,967 stores in Thailand and 74 in Malaysia.

As of Aug 24, the businesses together generated sales of £2.6 billion (RM14.25 billion), up at constant exchange rates, and operating profit of £171 million, up 42.3%.

Meanwhile, Sime Darby Bhd, which has a 30% group effective interest in Tesco, stated that the group remains committed to creating value for its stakeholders and will continually assess strategic options to divest its non-core assets, and focus on its core trading businesses of industrial and motors.

“With reference to news reports on Tesco’s review of the strategic options for its businesses in Malaysia and Thailand, Sime Darby cannot speak on behalf of Tesco. Any queries on this matter should be directed to them.

“Should the need arise, we will make the necessary announcements in accordance with Bursa Malaysia’s disclosure requirements,” the group said in a statement yesterday.

The statement came after Tesco’s release that it was looking to sell off its businesses in Thailand and Malaysia.

“Tesco confirms that, following inbound interest, it has commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale of these businesses.

“The evaluation of strategic options is at an early stage, no decisions concerning the future of Tesco Thailand or Malaysia have been taken, and there can be no assurance that any transaction will be concluded.

“A further announcement will be made if and when appropriate,” Tesco said.