Covid-19, political turmoil to further dent retail industry

By FARA AISYAH / Pic By HUSSEIN SHAHARUDDIN

THE Malaysian retail industry is expected to suffer negative growth this year if the Covid-19 pandemic persists amid the political turmoil, said Retail Group Malaysia (RGM) MD Tan Hai Hsin.

“In the event the global coronavirus outbreak and domestic political turmoil take more than the next few months to resolve, it will fur- ther affect the retail consumption pattern in Malaysia drastically.

“The unexpected change of the ruling party on March 1, 2020, will affect existing government policies. This political turmoil in Malaysia has led to an uncertain future in consumers’ spending and private investment on retail shops,” he said in a statement yesterday.

He added that the last time Malaysia’s retail industry recorded a negative growth rate was in 1998, the first year of the Asian financial crisis which saw the market size contracting by 20%.

RGM is now working with the Malaysia Retailers Association (MRA) to collect more information on the negative impact of Covid-19 on retailers during the January to March 2020 period.

The association estimates the decline in shopping traffic to range from 10% to 50%. Shopping centres that are dependent on tourists will be more affected than shopping centres located in residential areas and small towns.

For the first quarter of 2020 (1Q20), RGM estimates the retail industry to decline 3.9% compared to the same period in 2019.

In contrast, MRA members have projected positive growth of 0.4% for the same period.

However, the estimates by MRA members did not take into account the global spread of Covid-19, as they were made between end-January and early February.

For 4Q19, the retail industry recorded a growth rate of 3.8% against 2.7% in the same period of 2018.

“Year-end festivals, school holidays and aggressive promotions by retailers contributed to better growth rate during this quarter,” Tan noted.

The supermarket and hypermarket subsector was the worst performer during the three months, with a sales decline of 3.4%.

The business of department stores cum supermarkets recovered during the last three months of 2019 with a growth rate of 7.6%.

However, the department store subsector continued to suffer from slower sales in 4Q19 with a negative growth rate of 0.3%.

The fashion and fashion accessories subsector enjoyed better business in the quarter with a 3.5% growth rate.

The best performer in 4Q19 was the pharmacy and personal care subsector with an 8.8% expansion.

The other specialty stores subsector (including photo shop, second-hand goods store, fitness equipment store, toys shop) reported a growth rate of 6.3% in 4Q19.

For the whole of 2019, retail sales rose by 3.7% or RM 107.5 billion, compared to 3.9% or RM103.7 billion in 2018.