This article first appeared in The Edge Malaysia Weekly on December 13, 2021 - December 19, 2021

AS shoppers return to brick-and-mortar retail stores now that movement restrictions have been eased, retailers’ cash registers are ringing up better sales. They are hopeful of a boost in sales until the end of the holiday season and well into the new year.

A better October to December quarter, traditionally a strong period for retailers, is expected to help the industry post a marginal sales growth of 0.5% year on year, translating into RM90.4 billion worth of sales. In contrast, the industry contracted 16.3% last year — the worst performance in 22 years.

Retail Group Malaysia (RGM), in its latest retail industry performance report for the July to September period, forecasts retail sales to grow by 18.3% y-o-y in the fourth quarter of 2021 (4Q2021). This will help the industry end the year on a positive note.

For next year, RGM is projecting retail sales to expand 6%, or RM95.6 billion. 

Despite the rosier outlook, the road ahead is not without challenges. Some retailers are still struggling. For example, RGM’s report, which is based on interviews with members of the Malaysia Retailers Association (MRA) and the Malaysia Retail Chain Association (MRCA), shows that department store and speciality retail store sales contracted 43.6% and 20.7% respectively in 3Q2021. These segments are expected to contract 2.6% and 15.6% respectively in the final quarter of the year.

When contacted for additional details following the release of the report, RGM managing director Tan Hai Hsin tells The Edge that the shopper traffic that began to build up since August has returned at all major shopping malls nationwide. 

He observes that on weekends, major shopping malls are packed with shoppers and diners, and the traffic jams inside shopping mall car parks have returned. “Shopping behaviour and patterns are back to pre-pandemic levels too.”

However, it is not so for sales, says Tan, partly attributing this to the limits on in-store shopper capacity and controlled seating capacity at food and beverage (F&B) outlets.

“For retail stores, there is a limit on the time spent in a store. For F&B outlets, restrictions on seating arrangement discourage social gatherings of more than two people [many F&B outlets allow a maximum of two people per table],” he says.

Moreover, the night entertainment outlet segment is still not allowed to operate.

“During the recent lockdowns, many retail and F&B outlets let go of their staff to save costs. It will take time to recruit and train new staff,” he adds.

Compounding this is the state of the overall economy, which is still slowly recovering, while take-home pay is still lower than pre-pandemic levels.

On a positive note, since interstate travel has been allowed from mid-October, retail businesses that depend on tourists have received good response. “It is not just for those in the Klang Valley, but also in Langkawi, George Town, Ipoh, Genting Highlands, Cameron Highlands, Pangkor Island, Desaru Coast and Melaka,” says Tan.

But he expects recovery to be slow for many retail businesses in Johor Baru, Melaka, Genting Highlands, Penang and Kota Kinabalu. “Many shopping centres and retail shops in Johor Baru and Melaka had been dependent on Singaporeans.” 

Tan anticipates that it could take up to six months to see a meaningful number of tourist arrivals. “The current entry requirements are too much of a hassle to attract leisure tourists,” he says.

On the issue of the global supply chain crisis, which led to empty supermarket shelves in some countries, and whether that could happen in Malaysia, Tan replies, “Not at the moment. There is no supply shortage of retail goods in Malaysia. There are no incidences of shoppers rushing to stock up on retail goods.”

Despite these setbacks, he maintains that Malaysian retail sales will return to pre-pandemic levels in 2024. For now, retailers are hoping that positive growth momentum in December will continue until Chinese New Year, which falls on Feb 1.

Moving forward, Tan warns of challenges arising from the rising number of Covid-19 cases, including a new wave of infections and the Omicron variant, and a spike in the price of consumer goods. He anticipates the higher prices — owing to an increase in raw material prices, commodity prices and the global logistics crisis — to continue for several months into the new year.

“Coffee shops, food courts, cafes and restaurants have gradually increased their prices. Eco-Shop [Marketing Sdn Bhd] and Setia [SetiaHub Sdn Bhd] fixed-price stores have increased prices by 10 sen,” Tan points out. Previously, Eco-Shop and Setia sold items at RM2.10.

“McDonald’s has also increased the price of all its desserts. Hotels have increased the price of their weekend buffets,” he notes.

“The price increases are not due to the festive season and will last for several months into next year. This is not a Malaysia problem — it is a worldwide problem.”

The report also shows that retail sales contracted 27.8% in 3Q2021 and 11.9% in the first nine months of 2021. This is expected to reverse in the October to December quarter, with an 18.3% increase.

The retail sub-sectors that are expected to perform well are fashion and fashion accessories (50.4%), department store-cum-supermarkets (35.9%), personal care (16.5%), children and baby products (12.8%) and pharmacies (10%).

Other categories expecting growth this quarter are furniture and furnishing, home improvement and electrical and electronics (9.7%), mini-markets, convenience stores and co-ops (8.8%), and supermarkets and hypermarkets (0.9%).

As for the performance of the F&B industry, the café and restaurant business (including fast food restaurants, bakeries and caterers) is expected to post a growth of 20.7% in 4Q2021, after three consecutive quarters of negative growth. The take-away, kiosk and stall segment, meanwhile, is expected to grow 20.5%.

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