Covid-19 effects fuel convenience stores’ expansion in Malaysia

Operators and convenience stores have recorded rapid growth both in footfall and sales since the pandemic hit the country


THE Covid-19 pandemic has pushed convenience chains and grocery stores to expand aggressively for greater reach, penetration and product offerings as part of a more aggressive business strategy to grow revenues.

Operators like KK Supermart and 99 Speedmart and convenience stores like MyNews, FamilyMart and 7-Eleven have all recorded rapid growth both in footfall and sales since the pandemic hit the country, propelling them to enter larger segments of the market.

More recently, MyNews announced it will launch MyNews Supervalue to offer customers a wider variety of ‘Berbaloi’ goods including baby products, cooking ingredients, cleaning products, frozen food, pet food and more.

The group introduced a new category of frozen goods, Frozen Delights, which offers seafood, nuggets, in addition to sausages, burger patties and nuggets.

It is part of the company’s strategy to be the destination that meets consumers’ demand for an assortment of products while offering the convenience of deliveries as well.

Hong Leong Investment Bank Bhd analyst Gan Huan Wen said over the various Movement Control Orders, convenience stores relatively recorded more stabilised foot traffic compared to larger destination shopping malls located in the city.

“This is most likely why these operators have decided to grow and expand in numbers particularly in suburban areas. Even more so right now, with the current lockdown, I anticipate these convenience stores will be more robust than supermarkets despite overall foot traffic will be affected,” he told The Malaysian Reserve (TMR).

According to Gan, despite some items being more expensive in comparison, the growing diverse range of products offers a convenience factor.

“Some of the operators have a diverse offering, and in some cases, attractive fresh food options in stores like FamilyMart and CU. These stores are located in strategic locations and not in big malls where parking may be an issue targeting people who want to get in and out quickly,” Gan said.

For instance, Maru Kafe is a MyNews brand that offers readyto-eat meals, bakery and fresh food items which are prepared daily in its factories.

Savills Malaysia associate director and head of retail services Murli Menon said mini-marts and convenience stores were on an upward trajectory even before the pandemic hit, but now having been considered essential, have further boosted their confidence and accelerated expansion plans.

“Being categorised as essential within the retail industry and allowed to stay open till late even during the lockdown periods has boosted this category. As its name suggests, the convenience factor is a major advantage, allowing customers to pop in and purchase essential items without having to worry about huge crowds, long queues or the lack of social distancing,” he said to TMR.

According to Menon, over the years, the stores have gradually moved from stocking essential items to now offering a wide range of items, including ready-to-eat meals.

“Mini marts now even offer fresh foods including fruits and vegetables, and while the range may not be as wide as what is offered by the typical supermarkets, it is enough to cater to at least basic day-to-day needs.”

“Some of the mini-marts like 99Speedmart have also strategically expanded into untapped catchments and neighbourhoods, bringing daily needs closer to targeted customers. Given their smaller formats, they can reach into these pockets where a typical large format supermarket or hypermarket would not enter given the economies of scale and critical mass they typically need in terms of catchment and hence business volumes,” Menon said.

He added in terms of competition with bigger brands and names, there is usually a trade-off between convenience and pricing.

“While typical convenience stores and mini-marts can charge a slight premium since they are bringing in the convenience of proximity to the target customer, there are also some brands with retail network big enough who are able to compete and offer similar if not lower prices than supermarkets because of the volume they move because of their wide network,” he said.

He added many convenience stores are also integrating backward and setting up central kitchens in an attempt to provide better quality, fresh and value-added items.

Menon said convenience stores in Malaysia have a penetration rate of one store for every 9,000 people compared to countries like Japan or Vietnam that have one store for every 2,000 people.

“There is also a growing need and market for ready to eat and ready to cook foods as well as impulse buying in this category. This is also reflected in the fact Malaysia has been tracking the highest growth in terms of expansion in this category compared to other countries in the region,” Menon said.

He added there is room and potential for the growth of international brands given the gap available as the younger consumers are more aware of international brands and concepts and are constantly seeking new experiences and offerings.

Menon noted brands and operators with a longer-term strategic vision should capitalise on the current depressed retail environment and secure a more aggressive expansion plan with better commercial terms given that the market is sure to rebound once the pandemic is brought under control.