Retail industry suffers worst decline in 33 years

by HARIZAH KAMEL/ pic by MUHD AMIN NAHARUL

MALAYSIA’S retail industry recorded the worst growth rate in 33 years with the outlook remaining negative for the year, as consumers are expected to tighten their spending when the loan moratorium ends this month.

The industry suffered a negative growth rate of 30.9% in retail sales for the second quarter of 2020 (2Q20) compared to the same period last year.

The latest performance is deemed as the worst quarterly result in the history of the country’s retail industry.

According to Retail Group Malaysia’s (RGM) Malaysia Retail Industry Report September 2020, the latest quarterly result was within market expectations as members of the Malaysia Retailers Association (MRA) projected 2Q20 growth rate to dwindle by 28.8%.

“This year has been the worst period for retailers in Malaysia since 1987. The retail market turned into a bloodbath since the middle of March with the implementation of the Movement Control Order (MCO),” RGM said in a statement yesterday.

With the Recovery MCO (RMCO) extended until the end of the year, shopping centres and retailers will not be able to operate at full capacity compared to pre-Covid-19 period due to continued strict social distancing measures.

RGM noted that consumers are expected to tighten their spending during the last three months of the year when the six-month moratorium ends on Sept 30.

“With consideration of the latest growth revisions and market conditions, RGM has revised the retail sale growth rate for the whole year from -8.7% (estimated in July) to -9.3%. This is the fourth revision in the annual growth rate of Malaysia retail industry.”

The nationwide lockdown affected the retail performances of all retail subsectors during 2Q20, which reported double-digit negative quarterly results except for the supermarket and hypermarket subsector.

Despite opening during the entire lockdown period, the supermarket and hypermarket subsector reported a negative growth rate of 9.9%.

Department store cum supermarket recorded a disappointing growth rate of -34.6%, while businesses of department store contracted 62.3%, the worst-performing subsector in 2Q20.

The fashion and fashion accessories subsector also experienced a decline of 44.2% due to retailers not permitted to open during the initial lockdown period, plus shoppers were not allowed to try on clothes and shoes when the lockdown was initially relaxed.

Sales of pharmacy and personal care suffered a decline of 26.2% while the other specialty stores (including toys’ store, optical store, photographic equipment shop, store retailing children related merchandises, as well as secondhand goods’ store) reported a poor performance of -40.9%.

Moving forward, the business outlook among members of the retailers’ association in 3Q20 is mixed with an estimated average growth rate of -3.4%.

“The department store cum supermarket operators hope their businesses will turn around with a positive growth rate of 5.7% for 3Q20, the highest projection among the retail subsectors.

“On the other hand, the department store operators are expecting their businesses to drop by 3.5% in 3Q20,” RGM said.

Operators and retailers in supermarket and hypermarket, pharmacy and personal care, and other specialty stores expect businesses to shrink by 6.7%, 10.6% and 9.5% respectively in 3Q20.

However, retailers in the fashion and fashion accessories subsector expect their businesses to recover with a positive growth rate of 4%.