Malaysia’s 2022 Retail Outlook Positive: Industry Report

Market Info

Malaysia’s 2022 Retail Outlook Positive: Industry Report

Compiled by Retail Group Malaysia

W

hile 2021 saw disappointing retail growth due to the stayhome order for shoppers and the close-shop ruling for store owners, most retailers have risen to the occasion. They have upped their game by moving online, providing the unexpected and meeting customers eye-to-eye.

The country’s retail industry report released in November 2021 and published by the Retail Group Malaysia projects 6% growth rate in retail sale for 2022. Are we on the road to recovery after almost two years of poor growth caused by the pandemic?

Retailers gave a resounding yes, but challenges still remain. They cite high daily positive cases as a worrying factor. There is also the possibility of a fourth-wave of pandemic that is haunting the local retailer sector.

“Malaysian non-essential retailers cannot afford another forced closure of physical stores,” the report noted.

Omicron, the new COVID-19 variant classified as a variant of concern by the World Health Organisation on November 26 and first detected in Malaysia on December 3, is now spreading rapidly across the world. This will have an effect on the economic recovery around the world as well as in Malaysia.

The Malaysian government’s decision to delay the country’s transition into the endemic phase due to uncertainty of the virus pandemic will likely strain the country’s economic progress in the months ahead.

Another factor that could affect the retail industry are foreign tourists arrivals, which could see lackluster growth due to the current virus development. This will affect retail businesses that have been dependent on leisure travelers.

The country’s retail industry report also foresees the spike in the prices of consumer goods to continue in 2022. Rising cost of living will also affect the purchasing power of Malaysian households in 2022.

REVIEW OF 2021

Malaysia’s retail performance for the third quarter of 2021, recorded a disappointing growth rate of -27.8% in retail sales, as compared to the same period in 2020 (Table 1). This quarterly result was much lower than what was expected by members of MRA and MRCA in September 2021.

This was in part due to the enhanced movement control order

Table 1 : Year-on-Year Percentage Change In Retail Sales by Retail Sub-Sector, 2021

Retail Sub-Sector 1st Qtr 2nd Qtr % 3rd Qtr

Department store cum supermarket -14.5 -7.5 -41.9 Department store -24.3 +18.2 -43.6 Supermarket and hypermarket -11.9 -12.3 -12.5 Mini-market, convenience store -3.7 +2.6 +2.6 & cooperative Fashion and fashion accessories -23.4 +2.6 -63.6 Children and baby products* -12.2 +2.6 -48.4 Pharmacy** -6.2 +10.0 -10.3 Personal care** -17.7 -36.1 -51.7 Furniture & furnishing, home improvement +35.3 -1.1 -28.5 as well as electrical & electronics Other specialty retail stores -0.1 41.4 -20.7

Notes: *- children and baby products include apparel, accessories, equipment, school uniform and toys **- pharmacy and personal care stores were grouped under one category in Year 2020 Source: MRA/ MRCA/ Retail Group Malaysia

Table 2 : 3-Month Retail Sales Forecast by Retail Sub-Sector, October-December 2021

Retail Sub-Sector Overall (weighted)

Department store cum supermarket Department store Supermarket and hypermarket Mini-mart, convenience store & coop. Fashion and fashion accessories Children and baby products* Pharmacy Personal care F&F, home improvement and E&E# Other specialty retail stores

% Growth Rate 18.3

35.9 -2.6 0.9 8.8 50.4 12.8 10.0 16.5 9.7 -15.6

Notes: *- include apparel, accessories, equipment, school uniform and toys #- furniture & furnishing, home improvement and electrical & electronics Source: MRA/ MRCA/ Retail Group Malaysia

(EMCO) that was enforced in large parts of Selangor and selected areas in Kuala Lumpur from July 3 2021 to July 16 2021. This forced shutdown saw badly hit.

Subsequently, from August 16 2021, some retail businesses under the National Recovery Plan (NRP) Phase 1 were allowed to open. They included the sub-sectors such as fashion, jewelry, electrical and electronic, furniture, sports, car accessories, hair salon, barbers and car showroom.

When the government relaxed restrictions on the number of passengers in a vehicle as well as the limit of travelling distance on August 21 2021, shoppers gradually returned to malls.

September 9 2021 saw cinemas, entertainment centres and beauty salons open for fully vaccinated individuals. However, most of these businesses only began opening to the public a week or so later after finalising their SOPs with the relevant government departments.

Recreational centres were allowed to resume their operations from September 10 2021 for their fully vaccinated customers while gyms were allowed to open the following week for their fully vaccinated members.

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

From September 17 2021, more retail businesses were allowed to open for states under Phase 1 of NRP. They included personal care shops, toys stores, antique shops, outdoor shops, tobacco shops, carpet shops, used items stores, photography shops, souvenirs and craft shops, nursery as well as florists.

For the first nine months of 2021, the retail sale growth rate contracted 11.9% compared to the same period a year ago.

RETAIL SUB-SECTOR SALES COMPARISON

The growth rates of retail subsectors during the third quarter of 2021 were similar to the second quarter of 2020 when the first movement control order (MCO) in Malaysia was implemented.

The sale turnover of the Department Store and Supermarket sub-sector dipped sharply with a negative growth rate of 41.9% during the third quarter of 2021, as compared to the same period a year ago.

Similarly, retail business of Department Store sub-sector dived during the third quarter of 2021, contracting by 43.6%.

Despite being allowed to open during the recent lockdowns, the Supermarket and Hypermarket sub-sector was still faced with declining retail sales with a negative growth rate of 12.5% seen during the third quarter of 2021.

On the other hand, the Mini Market, Convenience Store and Cooperative enjoyed a small growth rate of 2.6% in retail sales during the same period. This is the best performing retail sub-sector during the quarter.

During the third quarter of 2021, the Fashion and Fashion Accessories sub-sector registered the worst quarterly growth rate in terms of percentage. Business declined by 63.6%, as compared to the third quarter of 2020.

The Children and Baby Products sub-sector suffered a drop in retail sales by 48.4% during the third quarter of 2021.

In the same period, 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.

Market Info

The Personal Care sub-sector recorded another poor retail sale with -51.7% in growth rate during the third 3-month period of last year. Its physical stores stayed shut for almost the entire period of the quarter under review.

The Furniture & Furnishing, Home Improvement as well as Electrical and Electronics sub-sector reported another decline in growth rate of 28.5% during in the third quarter of 2021.

The Other Specialty Stores subsector (including photo shop, fitness equipment store, secondhand goods’ store as well as store retailing musical instrument) suffered another drop in retail sale by 20.7% during the third quarter of 2021, as compared to the same period last year.

FOOD AND BEVERAGE SECTOR

From August 10 2021, dine-in was allowed for all foods and beverages outlets under NRP Phase 2 or higher states. Ten days later, dine-in was allowed for fully vaccinated individuals in states under Phase 1 of NRP. Fully vaccinated parents were allowed to take under 17-yearold children with them.

On September 23 2021, this sector was allowed to open from 6am to 12 midnight daily for all phases under the NRP.

The Food and Beverage Outlets (Café and Restaurant) recorded a negative growth rate of 0.8% in the third quarter of 2021, as compared to the same quarter a year ago.

The businesses of Food and Beverage Outlets (Take-Away, Kiosk and Stall) plummeted 11.1% during the third quarter of 2021, as compared to the same period a year ago.

During the fourth quarter of 2021, almost all F&B establishments have been able to operate as normal with social distancing measures in place.

With Malaysians allow to visit families and friends as well as tourist attractions in other states of Malaysia, F&B outlets dependent on tourists saw service returning.

Another factor lending a boost to the sub-sector was the return of workers to their work places. Food and drink outlets in city centres, business districts and major commercial areas received office workers for breakfast and lunch. Face-to-face business meetings also boosted sales at cafes and restaurants.

Cafe and restaurant operators as well as food and beverage kiosk and stall operators are hopeful their businesses will recover in 2022.

Comparison of retail sales with other economic indicators

In the third quarter of 2021, the local economy contracted by 4.5% (Table 2, at constant prices), as compared to -27.8% for retail sales (at current prices).

The national lockdowns under the National Recovery Plan (NRP) affected economic activities during this quarter. All economic sectors registered contractions. The movement restrictions led to lower consumption and investment.

The average inflation rate during the third quarter of 2021 slowed down to 2.2%. Consumer Price Index (CPI) remained positive for the 8th consecutive month since February 2021 due to the lower base effect in 2020 as a result of the decline in fuel prices for private vehicles.

During the third quarter, average price of Transport rose 11.0%. Private consumption dropped by 4.2% during the third quarter of 2021. This was a sharp contrast as compared to the double-digit expansion of 11.7% during the preceding quarter.

Unemployment rate during the third quarter of 2021 slowed down slightly to 4.7%.

Consumer Sentiment Index (by MIER) jumped to 101.7 points in the third quarter of 2021. 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.

Table 3 : Malaysia Retail Industry Quarterly Growth Rate, 2021

Quarter

First Second Third Fourth

Whole year

(e)- estimate Source: Retail Group Malaysia

Growth Rate %

-9.9 +3.4 -27.8 (e) +18.3

(e) 0.5

Note: The Retail Group Malaysia comprises members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA). They were interviewed on their retail sales performances for the second half of 2021.