Foreign retailers likely to withstand Covid-19 effects in Malaysia

Most giant retailers like Zara, Uniqlo and H&M are financially strong and have more sustaining power

by S BIRRUNTHA/ pic by TMR FILE

FOREIGN retailers in the country are expected to withstand the impact of plunging sales resulting from the Covid-19 pandemic and the Movement Control Order since March 18.

Malaysia Retail Chain Association VP Datuk Liew Bin said many foreign retailers operating in the country see their businesses remaining solid, despite the challenging economic situation.

He explained that international retailers have continued to be the anchor tenants of shopping malls in Malaysia and they would not have to negotiate with mall owners regarding rental issues.

“So far, I haven’t heard of any foreign retailers that are withdrawing from the Malaysian market and we don’t see it coming as of now.

“The rental rate for foreign retailers here is generally cheaper compared to other countries. They also continue to be one of the attractions for mall visitors. So, I don’t think any of the mall owners would want to let them go,” he told The Malaysian Reserve (TMR) in a phone interview recently.

Liew also said this is backed by the large number of people who still prefer shopping international brands, despite the higher price point.

“Most giant retailers like Zara, Uniqlo and H&M are also financially strong. They are doing okay in our market, because we are recovering quite fast against Covid-19 compared to the European market.

“In fact, brands that are finding it hard to sustain are already out of the market. We saw ESPRIT closing down recently. It’s been a long time coming for them,” he said.

He also noted that the foreign retailers’ segment has majorly contributed to the growth of the country’s retail industry over time.

“They are actually quite important to the industry and we can’t afford to lose them because it will affect the market sentiment,” he added.

Meanwhile, Savills Malaysia Sdn Bhd associate director of retail services Murli Menon said international retailers generally have more sustaining power compared to small and medium-sized retailers in the country.

“However, if any of them have to or plan to shut down, it will be a combination of factors which would have been building up over time. This would include the relevance of what they are offering to consumers, as well as their marketing and perceived price etc.

“Those that have already been struggling would obviously find it even more difficult to sustain their operations during such times and hence may decide to exit the market sooner than planned,” he told TMR.

Murli noted that foreign retailers have greater exposure in terms of running fixed overhead costs during such times of crisis when business has come to a complete standstill.

However, he added that the current challenges of coming out of the pandemic are not unique to foreign retailers, it cuts across all types and categories of retail whether local or foreign.

He also said foreign retailers will manage to keep their revenue, as they can always leverage online platforms to gather sales during time of crisis.

“Given their stronger resources, international brands could use social media to continuously engage their customers, as well as stay relevant and active in the consumers’ minds,” he said.

According to a report by Retail Group Malaysia, the Malaysian retail industry is projected to suffer a negative growth rate for the first time in 22 years.

For the whole of 2020, the group estimates that the retail industry will experience a decline in sales by -5.5% compared to last year.

The group attributed the negative growth rate to the restrictive measures taken by the country to contain the Covid-19 pandemic.