Malaysia’s retail sectors hit hard by the COVID-19 pandemic


The retail industry in Malaysia has been severely impacted by the COVID-19 pandemic in the third quarter (3Q) due to the movement control orders (MCO) leading to a fall in consumption.

Retail Group Malaysia (RGM) stated the retail sector recorded a -27.8% drop in third-quarter sales compared to the same period last year.

The retailer association’s report stated the quarterly result was way below market expectations. Members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) had projected the 3Q to contract at -15.1% in September 2021.

The report states the lockdown imposed in Malaysia during the first half of the 3Q of 2020 had a significant impact on the retail industry.

Most retailers were forced to shut down during the first half of the 3Q of 2021. Malaysia’s national economy contracted by 4.5% in the 3Q of 2021, at current prices.

RGM noted the closure of cinemas, theatres, and other entertainment venues during the first half of the 3Q also contributed to a decline in consumer spending.

The average inflation rate during the quarter of 2021 slowed to 2.2%.

The Consumer Price Index (CPI) remained positive for the 8th consecutive month since February this year due to the lower base effect in 2020 as a result of the decline in fuel prices for private vehicles. During the third quarter, the average price of transport rose 11.0%.

Private consumption dropped by 4.2% during the 3Q of 2021. This was a sharp contrast as compared to the double-digit expansion of 11.7% during the preceding quarter.

During the third 3-month period, the Consumer Sentiment Index (by MIER) jumped to 101.7 points. This was after 11 consecutive quarters below the 100-point threshold level of optimism. When almost all economic sectors had been allowed to open in stages since August, consumers’ outlook turned positive.

The unemployment rate during the third quarter of 2021 slowed slightly to 4.7%, marking a slight improvement from the previous quarter.

“The movement restrictions led to lower consumption and investment. When the government relaxed restrictions on the number of passengers in a vehicle as well as the limit on travel distance on Aug 21, 2021, shopping traffic in major shopping centres gradually returned,” RGM stated.

The report also noted the different impacts of the COVID-19 pandemic on the retail industry in the sub-sectors in the third quarter of 2021.

For example, the food and beverage outlets recorded a negative growth rate of 0.8% in the 3Q21. Similarly, food and beverage kiosk and stall operators are anticipating their businesses to grow by 20.5% during the 4Q21 as the Covid-19 pandemic eases.

On the other hand, the growth rates of retail sub-sectors during the 3Q21 were similar to those of the 2Q of 2020, when the first MCO was implemented.

The department store and hypermarket sub-sectors suffered a drop in retail sales of 41.9% and 43.6% in the 3Q21, respectively, as compared to the same period a year ago.

Mini-markets, convenience stores, and cooperatives enjoyed a small growth rate of 2.6%, making this segment the best performing retail sector during the quarter. Retailers in the fashion and fashion accessories sector expect their businesses to revive with a strong recovery of 50.4% growth rate in the 4Q21.

This retail sub-sector has the highest estimated growth rate for the next three months, with children’s and baby products retailers anticipating their business to recover with a moderate growth rate of 12.8% during the last three months of this year.

In September this year, RGM estimated a 0.8% growth rate in retail sales for 2021. This projection needs to be revised downwards again, taking into consideration the worse-than-expected growth during the 3Q as well as a revision of the 4Q estimate.

During the 3Q of this year, the pharmacy sub-sector reported a negative growth rate of 10.3%, as compared to the same period a year ago. This sub-sector was one of the few retail trades that remained open throughout this period.

The personal care sub-sector recorded another poor retail sales growth rate of 51.7% in the period as physical stores stayed shut for almost the entire third quarter of this year.

The Furniture & Furnishing, Home Improvement, as well as Electrical & Electronics sub-sectors reported another decline in growth rate of 28.5% during the 3Q21.

The other specialty store sub-sector (including photo shops, fitness equipment stores, second-hand goods stores, as well as stores retailing musical instruments) suffered another drop in retail sales by 20.7% during the quarter as compared to the same period last year.