Retail sector banking on year-end festivities


MALAYSIA’S retail sector is banking on the year-end sales and festivities to improve its performance, which has been heavily battered by lockdown this year.

SME Association Malaysia national VP Chin Chee Song told The Malaysian Reserve (TMR) that during the initial stage of the relaxation in October, most retailers experienced a return of strong sales due to “revenge shopping”, especially in major shopping malls and towns with a high density such as the Klang Valley.

“However, during the middle of November, the sales didn’t pick up as expected. The retail sector indicated underperformance worse than the similar period in 2020,” he said.

Chin further noted that overall, sales are up 60%-65% and by the end of the year, with the festive seasons just around the corner, most expect a strong recovery in the business.

Retail Group Malaysia (RGM) MD Tan Hai Hsin said retail sales will climb even higher in December this year, as well as January next year, on Christmas and Chinese New Year celebrations.

According to RGM, Malaysia’s retail industry recorded a positive growth rate of 3.4% in retail sales in the second quarter of 2021 (2Q21) compared to 2Q20.

For the 4Q21, the estimated growth rate is 12.7% compared to a year ago. The positive growth rate during the quarter was due solely to the low base effect a year ago. During the 2Q20, Malaysia’s retail industry suffered a year-on-year decline of 30.9% because of business closures.

“The shopping traffic began to build up in August this year. The situation is getting better, however, despite the upward movement, the retail segment will take a slow route to return to the pre-pandemic level,” Tan said.

He noted there are various reasons that curtailed the increased sales such as the limited in-store shoppers’ capacity, restriction of seating arrangement and more.

“Additionally, during recent lockdowns, many retail and food and beverage (F&B) outlets let go of some of their staff in order to save cost. It will take time to recruit and train new staff.

“Our economy is still in the process of recovery. Therefore, take-home pay is still lower than pre-pandemic level,” he said.

On the other hand, the Malaysia Retail Chain Association (MRCA) president Shirley Tay commented that following the reopening, the F&B sector is leading the way as the dine-in crowd has returned.

“The F&B retailers are recording higher growth than specialty stores with an estimated growth of about 5%-20% year-on year growth,” she said.

Despite that, many retailers were caught unprepared by the sudden announcement on the trade reopening as they were unable to build up their inventory level within a short time.

“The number of visitors to the malls is high, but the conversion rate remains low for most retailers. Therefore, the customer traffic does not necessarily translate into better sales performance due to various factors including locality, product availability and target customers.”

She added that more volatility in sales projection for retail trade is expected as businesses are also affected by the supply chain crisis as well as the issue of shortage of staff, ingredients and increased prices of raw material.

Moving forward, these are issues that may affect growth and profitability since the robust growth expected for F&B and retail trade does not only rely on imported goods.

“The global supply chain crisis has exacerbated the situation due to longer lead time and delayed shipment (from the shortage of free containers). The limited inventory will have a negative impact on the overall performance of the retail sector, especially the ones that rely on imported goods,” she told TMR.

“With that in mind, the cost of doing business has also increased significantly due to a rise in (prices of) raw materials and logistics,” Tay said, adding that although it is hard to predict, generally the retail trade and F&B should be able to improve.

Amid the recovery, any unexpected surge of Covid-19 cases may result in tightening measures by the government as shown in other countries. This remains the biggest concern for a majority of business owners.