MRCA Event
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Restructuring Today For A Rapid Recovery Tomorrow Recognising the challenges faced by retailers, MRCA’s F&B Division hosted a webinar on preparing for future crisis, improving retailers’ knowledge on working capital and business cashflow position, as well as how to sustain a business in the long-term, among other key concerns faced by retailers. he webinar featured Lim Ben-Jie, Head of e-Commerce, AirAsia and K L Boon, Director of Advisory, YYC Advisors Sdn Bhd, who share insights on challenges faced by businesses during the pandemic and how to sustain effectively.
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LIM BEN-JIE Ben-Jie explained that a significant number of retailers have been struggling over the last 2 years and have downsized their operations, with some even closing their businesses down permanently, caused by low demand and supply chain issues, among other reasons. He adds that a survey conducted by MRCA on its members’ businesses revealed that 55% of retailers have downsized, 72% have reported a workforce reduction, and 40% have terminated at least more than 10 staff. Ben-Jie highlighted that a total of 36% of MRCA’s members’ businesses have been unable to operate beyond 3 months with their cash flow position.; while another survey conducted indicated that 52% of businesses required financial assistance. He noted that changes in consumer behaviour has also been observed in terms of purchasing habits and the switch to online e-commerce platforms.
K L BOON Boon shared that since the pandemic started in 2020, Phase 1 of the Movement Control Order (MCO), between March and June 2020, witnessed 10,000 SMEs closing their operations; while the RMCO period Malaysia Retailer Vol 9 No 3
saw nearly 30,000 SMEs close down. In August 2020, close to 20,000 companies ceased their operations. FCMO 2021 saw approximately 580,000 or 49% of micro, small and medium enterprises closing down by October this year. Citing research conducted by SME Corporation, Boon said that key factors leading SMEs to fail included lack of financial and business planning; poor cash flow management; lack of updating accurate financial information; the absence of competitor analysis; funding and financing issues; challenges with internal management; and, lack of effective delegation of responsibilities. He added that the pandemic had impacted businesses with supply chain disruptions, bankruptcy and soaring shipping costs, among others. According to Boon, specifically F&B businesses were impacted in several areas from a financial perspective that included, a deterioration of GP margin; excessive staff cost and rental of restaurants; lack of clarity on company valuation; and, over-reliance on bank borrowings resulting in a highly geared position. From an operational
perspective, F&B businesses were impacted by the increase of the presence of e-commerce and the shift in consumer behaviour; business digitalisation; and, food supply chain disruptions. The market outlook for the F&B industry in 2022 revealed that the services industry is expected to experience a year-on-year growth rate of up to 7%, and F&B and Accomodation is expected to increase by 7.3%. Boon advised that this is a good time to harness the opportunities to cash out on missed sales over the past few months. Statistics revealed that only up to 54% of SMEs can sustain up to 2 to 3 months with their current cash flow position. Boon advised business owners to assess how long their cash flow is able to sustain and what is their cash burn-rate. Several strategies on how to prolong cash flow was highlighted during the session, which included clearing excess inventory and turning them into cash; assessing how to reduce capital expenditure; quantifying cost savings; reducing rental; cutting sponsorships and ineffective marketing costs; deferring unnecessary operating expenses; identifying alternative
