Malaysia Retail Industry Report (November 2022)

Preamble

Members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) were interviewed on their retail sales performances for the second half of 2022.

This is the 25th anniversary of Malaysia Retail Industry Report. The rst report was published in 1998 during the Asian nancial and economic crisis.

Latest Retail Performance

For the third quarter of 2022, Malaysia retail industry recorded another impressive growth rate of 96.0% in retail sales, as compared to the same period in 2021 (Table 1).

This latest quarterly result was beyond market expectation. Members of MRA and MRCA projected the third quarter growth rate at 61.7% in September 2022. Retail Group Malaysia (RGM) estimated the quarterly growth rate at 50.0%.

During the same period a year ago, retail industry contracted by 27.8% (Table 1). Majority of retailers were forced to shut down during the rst half period of third quarter 2021.

Enhanced Movement Control Order (EMCO) was enforced in large parts of Selangor and selected locations in Kuala Lumpur from 3 July 2021 and ended on 16 July 2021. Retail businesses in the largest retail market of Malaysia were badly hit during this critical period.

From 16 August 2021, more retail businesses under National Recovery Plan (NRP) Phase 1 had been allowed to open. They included fashion shops, jewellery shops, electrical & electronics shops, furniture shops, sports shops, car accessories shops, hair salons, barber shosp and car showrooms.

When the government relaxed restrictions on number of passengers in a vehicle as well as the limit of travelling distance on 21 August 2021, shopping tra c in major shopping centres gradually returned.

Cinemas, entertainment centres and beauty salons were allowed to open from 9 September 2021 for fully vaccinated individuals.

Recreational centres were allowed to resume their operations from 10 September 2021 for their fully vaccinated customers. Gyms were allowed to open from 18 September 2021 for their fully vaccinated members.

Klang Valley (Kuala Lumpur, Selangor and Putrajaya) was upgraded to NRP Phase 2 on 10 September 2021. More relaxations, including dine-in, were allowed for fully vaccinated individuals.

E ective 17 September 2021, more retail businesses were allowed to open for states under Phase 1 of NRP. They included personal care shop, toys store, antique shop, outdoor shop, tobacco shop, carpet shop, used items store, photography shop, souvenirs and cra shop, nursery as well as florist.

For the third quarter of this year, all retail businesses were operating with limited social distancing measures. Therefore, all retail businesses were able to operate at full capacity.

Shoppers from all over Malaysia returned to physical stores during the third quarter of 2022. Businesses of majority of retailers rebounded.

A er 2 years of lockdown, many Malaysians travelled around the country for holidays, visited family members and relatives, as well as caught up with friends. Retail shops in tourist areas and small towns enjoyed brisk businesses.

For the rst 9 months of this year, Malaysia retail industry expanded by 45.9% (Table 1), as compared to the same period in 2021.

The very high growth rates for the rst 3 quarters of this year are unprecedented. It is unlikely to happen again unless another forced closure of retail shops took place.

Comparison Of Retail Sales With Other Economic Indicators

For the third quarter of 2022, Malaysia’s national economy grew by 14.2% (Table 2, at constant prices), as compared to 96.0% for retail sales (at current prices).

The strong performance during this quarter was mainly due to the low base e ect a year ago. During the third quarter of last year, the Malaysian economy contracted by

4.5%. The recovery of domestic demand also contributed to the higher growth rate.

The average inflation rate during the third quarter of 2022 jumped much higher to 4.5%. Once again, the increase surpassed the average inflation in Malaysia for the period 2011 to June 2022 at 2.0% only.

During the quarter, all main groups in the consumer price index recorded increases except for Communication which remained unchanged. Food & Non-Alcoholic Beverages reported the highest average increase (7.0%), followed by Restaurants & Hotels (6.4%). In addition, the average price of Transport rose 5.4% during the quarter.

Private consumption rose by 15.1% during the third quarter of 2022. Higher consumer spending resulted from stable labour market and increased income.

During the third 3-month period, the Consumer Sentiment Index (by MIER) climbed to 98.4 points. However, it was still below the 100-point threshold level of optimism. Malaysian consumers remained cautious in spending due to uncertainty in the domestic economy.

Unemployment rate during the third quarter of 2022 slowed down slightly to 3.7%.

RETAIL SUB-SECTORS’ SALES COMPARISON

Several retail sub-sectors enjoyed three-digit growth rates during the third quarter of 2022.

The sales turnover of the Department Store cum Supermarket subsector rose sharply by 104.4% during the third quarter of 2022, as compared to the same period a year ago.

In addition, retail business of Department Store sub-sector leaped by 376.5% during third 3-month period of this year.

TABLE 2: COMPARISON OF RETAIL SALES WITH OTHER ECONOMIC INDICATORS, 2022

Notes:

*- children and baby products include apparel, accessories, equipment, school uniform and toys

Source: MRA/ MRCA/ Retail Group Malaysia

This was the highest growth rate achieved among the retail subsectors for the quarter.

The business of the Supermarket and Hypermarket sub-sector continued to normalise a er Malaysians returned to their usual lifestyles. This sub-sector recorded a zero-growth rate during the third quarter of 2022.

On the other hand, the MiniMarket, Convenience Store & Cooperatives sub-sector enjoyed an encouraging growth rate of 26.1% in retail sales during the third quarter of this year.

During the third quarter of 2022, the business of Fashion and Fashion Accessories sub-sector surged by 244.6%, as compared to the same period a year ago. This was the second highest growth rate achieved among the retail subsectors for the quarter.

Similarly, the Children and Baby Products sub-sector enjoyed a robust growth by 133.8% during the third 3 months of this year.

During the third quarter of this year, the Pharmacies sub-sector reported a promising growth rate of 33.9%, as compared to the same period a year ago.

The Personal Care sub-sector achieved another rosy retail sales with 110.6% in growth rate during the third 3-month period of this year.

The Furniture & Furnishing, Home Improvement as well as Electrical & Electronics sub-sector reported an encouraging growth rate of 55.1% during the third quarter of 2022.

The Other Specialty Stores subsector (including photo shop, optical store, second-hand goods’ store, store retailing musical instrument, health equipment store, arts & cra store as well as direct selling rm) reported a moderate growth of 25.3% during the third quarter of 2022, as compared to the same period last year.

NEXT 3 MONTHS’ FORECAST

Members of the two retailers’ associations are highly con dent of their retail prospect for the next 3 months. They project an average growth rate of 61.7% in retail sales during the third quarter of 2022

(Table 4).

The department store cum supermarket operators are expecting their sales to rise further with a growth rate of 98.9% for the third quarter of this year.

A er two impressive consecutive growths, the department store operators are expecting their businesses to expand at a slow pace. Estimated growth rate of this subsector is 8.4% for the third 3-month period of this year.

The supermarket and hypermarket operators are expecting their businesses to normalise further in the next 3 months. They expect their businesses to slow down with a -2.6% growth rate for the third quarter of 2022.

In contrast, operators of minimarkets, convenience stores and cooperatives are foreseeing their growth momentum to maintain. For the third 3-month period of this year, their businesses will expand by 17.4%.

Retailers in the fashion and fashion accessories sector expect their businesses to enjoy another round of robust growth at 165.1% during the third quarter of 2022. This is the most optimistic growth projection among the retail sub-sectors.

Retailers selling children and baby products are anticipating their businesses to accelerate further with a growth rate of 132.8% during the third 3 months of this year.

Pharmacy operators are also hopeful of their retail sales during the third quarter of this year with a growth rate of 24.2%.

Retailers in the personal care sub-sector are expecting their businesses to swell by 102.2% during the third quarter of 2022.

Operators of furniture & furnishing, home improvement as well as electrical & electronics are upbeat of their businesses in the next 3 months. They project their businesses to expand by 129.5%.

Retailers in other specialty stores sub-sector (including photo shops, sporting goods’ stores, stores retailing musical instruments, optical stores, stores selling health equipmemnt, arts & cra s stores as well as direct selling rms) are equally hopeful for this period. They expect their businesses to rise by 53.7% during the next 3-month period.

The Rest Of Year 2022

In September this year, Retail Group Malaysia (RGM) estimated 31.7% growth rate in retail sales for 2022. However, this projection needs to be revised upwards again taking into consideration the better-thanexpected growth during the third quarter as well as a revision of fourth quarter estimate.

RGM has revised Malaysia’s annual retail industry growth rate for 2022 to be from 31.7% to 41.6% (Table 5).

On November 3, Bank Negara Malaysia decided to raise the

Overnight Policy Rate (OPR) by 25 basis points to 2.75%. This is the fourth revision since May this year. Malaysian households need to brace for reduced spending power due to higher monthly loan repayment.

For the fourth quarter of 2022, the growth rate estimate has been revised upwards from 1.0% (estimated in September 2022) to 6.0%. This is lower than the forecast made by members of retailers’ associations (at 13.9%).

This lower revision takes into consideration the high base a year ago (at 26.5%) as well as the current challenges of the Malaysian retail industry.

Nevertheless, retailers in Malaysia are hopeful that the retail industry will continue to recover end of this year due to two upcoming major festivals- Christmas and Chinese New Year (end January 2023).

*- include apparel, accessories, equipment, school uniform and toys

#- furniture & furnishing, home improvement and electrical & electronics

MRA/ MRCA/ Retail Group Malaysia

Year 2023

Retail Group Malaysia (RGM) forecasts 3.5% growth rate for the Malaysian retail industry in 2023.

The biggest challenge for Malaysia retail industry in the new year is the rising cost of living.

Prices of basic necessities have been rising since the beginning of this year. In addition, prices of many consumer goods have also increased. In fact, prices of many foods and consumer goods increased by double-digit within a short period of time.

Higher retail prices lead to higher cost of living. This means lesser money to buy non-essential goods and services. The shopping behaviour and patterns of B40 and M40 households have changed in recent months. They cook more at home, delay buying high-value goods, pay greater attention to o ers and discounts given by retailers, as well as make lesser trips to cafes and restaurants.

FOOD & BEVERAGE SECTOR

As compared to non-essential retailers, food & beverage outlets stayed opened for take-away and food delivery during the lockdown periods in third quarter last year until 9 August 2021.

Starting from 10 August 2021, dine-in was allowed for all foods & beverages outlets under the National Recovery Plan (NRP) Phase 2 or higher states.

From 20 August 2021, dine-in was allowed for fully vaccinated individuals in states under Phase 1

Footnote: of NRP. Fully vaccinated parents were allowed to take their children who are under 17- years-old to dine with them.

Beginning 23 September 2021, foods & beverages establishments were allowed to open from 6am to 12am daily for all phases under the NRP.

Night entertainment outlets have been allowed to re-open since 15 May 2022 a er more than 2 years of closures.

Food & Beverage Outlets (Cafe and Restaurant) recorded a positive growth rate of 8.5% during the third quarter of 2022, as compared to the same period a year ago (Table 6).

The businesses of Food & Beverage Outlets (Take-Away, Kiosk and Stall) jumped by 46.0% during the third quarter of 2022, as compared to the same period one year ago.

During the fourth quarter of this year, all F&B establishments have been able to operate as normal except with limited social distancing measures.

As food businesses return to pre-covid era, growth rates start to normalise as well.

At the same time, F&B operators are still struggling with higher raw material costs, increasing operation costs, rising rental cost and depleting pro t margin during the fourth quarter of 2022.

Worst of all, many F&B outlets are still facing shortage of kitchen sta and servers.

Cafe and restaurant operators are foreseeing their businesses to increase by 2.6% (Table 6), as compared to the same period last year.

Similarly, food and beverage kiosk and stall operators are anticipating their businesses to grow by 27.3% during the fourth quarter of 2022.

Notes:

- Cafe and restaurant include fast food restaurant, cafe, co ee cafe, bakery cafe, restaurant, full-service restaurant and caterer.

-Take-away, kiosk and stall include food outlet caters for take- away only, bakery without seating, kiosk and food stall.

(e)- estimate

Source: MRA/ MRCA/ Retail Group Malaysia

• This report is provided as a service to members of MRA, MRCA and the retail industry. It provides industry data that give retailers better analytical tools for running their retail businesses.

• This report is not allowed to be reproduced or duplicated, in whole or part, for any person or organisation without written permission from Malaysia Retailers Association, Malaysia Retail Chain Association or Retail Group Malaysia.

• Retail Group Malaysia is an independent retail research rm in Malaysia. The comments, opinions and views expressed in this report are of writer’s own, and they are not necessary the comments, opinions and views of MRA, MRCA and their members.

• For more information, please write to tanhaihsin@yahoo.com.