This article first appeared in City & Country, The Edge Malaysia Weekly on May 1, 2023 - May 7, 2023
Opening a fully-owned mall anywhere in Malaysia is a daunting task. But that is exactly what Tenaga Nusantara Sdn Bhd CEO and executive director Tey Fui Kien decided to do in her home town of Kluang.
Kluang Mall, the largest shopping centre in central Johor with a net lettable area of 360,467 sq ft, sits on 6.5 acres. It features five levels with 930 parking bays and 138 retail lots. The anchor tenants are Pacific Hypermarkets and Department Store, GSC, H&M, Uniqlo, Popular Bookstore and Ampang SuperBowl. It is the only single-owned mall in the Kluang district.
The town is a 90-minute drive or 103km southeast of the capital Johor Baru, and 54km from Batu Pahat. Tey says that before Kluang Mall came up, she — like many Kluangites — would drive to those two places for retail therapy.
She recalls how the idea for the mall came about.
“Back in 2005, we [management of Tenaga Nusantara] decided it was high time that Kluang had a shopping destination. Growing up, I often travelled out of town to shop. As a property developer, we roughly know where people go. And hence, after several years of research, working with research companies and gaining some understanding of the [Kluang] market, we came up with a proper shopping mall [in Kluang].
“We started building in 2008. It was completed, I can still remember, in 10 months and 28 days. It was crazy as we were scrambling to ensure we would open on time because we had committed retailers, so basically, [the mall] was demand driven,” says Tey.
What sets Kluang Mall apart from other shopping complexes in Kluang is that it is 100%-owned by the developer, which manages it as well. The other malls are strata-titled. Initially, a lot of naysayers didn’t believe anyone would want to rent a retail lot instead of owning it, which was the norm in town. But Tey and her team soon proved them wrong.
To ensure that they are kept abreast of the community’s needs, the management conducts exit surveys involving 1,000 shoppers. The first survey was carried out in 2013 and another was done in 2016. Another exit survey will be conducted this year.
Due to the data collection, the mall expanded its offerings on the lower ground level, improved amenities and conducted asset enhancement between 2014 and 2015, where tenants were moved to better locations and, to the town’s excitement, international brands such as H&M and Uniqlo were brought in.
“We did the first primary market research in 2013. That collected a lot of data — I think it was 85 pages’ worth — that we could share with [the international brands] about the shoppers, specifically those who come to Kluang Mall. We believe the data intelligence was the main reason or, at the very least, instrumental in convincing them that Kluang is the market for them,” Tey explains.
“Hence, we are very thankful that until today, we are the first shopping mall in a Tier-2 town to bring in international brands. Without that data intelligence, I think it would have been very difficult for them to understand the Kluang market.”
She adds that the follow-up survey in 2016 showed that shoppers came to the mall at least six to seven times a month, and had a household income of over RM5,200, which is a respectable amount for a town like Kluang.
“More importantly, [the shoppers] come to the mall as a family. It is a destination for them.”
The data also provides the management with enough information to place tenants in more conducive locations. This has resulted in little pushback from tenants.
“I won’t say we encountered a lot of resistance [from tenants being moved] because prior to the exercise, we had a lot of communication with them. We shared with them our research because our first massive, primary market research was done in 2013 … we compiled intelligence and data about what our customers want, their shopping behaviour and patterns, and we communicated that to our tenants … it is all about communication.”
She explains that the focus of the mall, besides being profitable, is also to serve the community, which includes the shoppers, tenants and management team.
“My management philosophy has always been to humanise the business and the most important aspect is having empathy in our decision-making process.
“During the pandemic, it was too easy to objectify the problems in numbers. We always felt we had a social responsibility to our community. Our mall is built by community support and serves the community,” Tey says.
“We want to be a mall that blesses the community and management that leads from the heart. That is not easy to achieve but that is my goal. The main part [to achieve our goal] is simple: Can we afford to use our reserves to support our goal? Do we feel we have a long-term future? Since the answer is ‘yes’ on both accounts, then we deal with the problems in a humanistic way.”
As such, tenants were given rental rebates and assistance where possible, there was no retrenchment or letting go of staff or any salary cuts during the challenging period.
“I always have that at the top of my mind when dealing with a problem — first and foremost, would I want to be treated that way? Who we are as an organisation is reflected in our core values. Every day, we put our best foot forward to lead in truth, competence and care,” says Tey.
Best practices for greater improvement
Since the country transitioned to the endemic stage, Kluang Mall’s performance has exceeded expectations. Once the country opened up more, footfall and sales performance rebounded after the two-year lockdown.
Tey reveals that Kluang Mall’s revenue in 2022 exceeded 2019 pre-Covid numbers. “Our net profit income in 2022 was 96% of 2019’s and revenue in 2022 surpassed 2019 by 2%. In other words, we made a full recovery in 2022. It was a welcome relief to achieve the rebound so quickly, but it also validated our conviction that we are here for the long haul and that this pandemic will one day pass.”
Moreover, Tey reveals that during the pandemic, the mall was able to attract 30 new tenants. The occupancy rate of the mall this year is 99.3%.
“What was interesting for us is that despite the tenant performance, traffic was still below 2019. Our 2022 visitor numbers were about 4.2 million, up by 70.8% from 2021 but down by a quarter compared to 2019. Our observation is that our mall traffic has changed to ‘shopper’ traffic,” she says.
Tey defines shopper traffic as shoppers who come to the mall with a specific purpose, such as to buy something or to eat, unlike browser traffic, who come with no main purpose other than the “free aircon [air-conditioning]”.
To stay relevant, the management of Kluang Mall is always looking to improve the shopping, working and tenant experiences.
“Part of the best practices philosophy is continuous improvement. We look at continuously upgrading our operations and practices. This is because the mall remains a dynamic environment and shoppers’ tastes and habits are continuously evolving,” says Tey.
With regard to the ever-increasing importance of environmental, social and governance (ESG) matters, the management has started implementing these aspects in the mall and its operations.
Since 2022, the management has had a cashless and ticketless parking system, which saves the cost of physical tickets. It has installed UV lighting in air handling units to kill airborne germs. The team has also changed all light bulbs to LED, which has halved the number of bulbs required.
“We installed 1,903 LEDs to replace the legacy 3,806 bulbs. According to our calculations, this provides us an annual saving of 234,548kWh or a reduction of 54% in cost,” says Tey.
The air-conditioning and mechanical ventilation systems are being upgraded with the help of a company that won the Malaysian National Energy Award and the ASEAN Energy Award.
“We are targeting a RM40,000 reduction in monthly energy use, which translates into 76 tonnes of carbon emissions equivalent to 1,950 trees saved. This project is expected to be completed in the next few months.”
To ensure that the mall is safe and secure, the management has installed an artificial intelligence (AI) and perimeter breach detection system.
“The AI is able to capture faces. We can upload pictures of theft suspects, for example, and the CCTV system can detect if they have entered the mall. It can recognise up to 22 human faces per second. This is very important in setting up Kluang Mall as a safe sanctuary from criminal activity. In fact, we were able to capture a thief who had been tracked in the mall.”
Touching on the social aspect, Tey reveals that there are plans to create a new type of communal space within the mall.
“We are currently working on an inclusive play space where children of all abilities can enjoy a wide range of physical, sensory and social experiences. We are committed to making Kluang Mall a platform to enrich the lives of our community and creating wonderful memories for them.”
She adds that the mall will update amenities with universal design features to allow for ease of movement for everyone.
“We will be redesigning our main entrance for drop-off and pick-up services to be more convenient for people with disabilities. We will also study areas around the mall that can be improved for mobility-impaired shoppers. We are even studying where to upgrade accessibility for shoppers with other impairments. We hope to implement some of these design features incrementally through the rest of the year.”
Additionally, there is Ruang, a space for local entrepreneurs to showcase their wares and to help them grow their business “because we want the entire Kluang to prosper, not just Kluang Mall”, says Tey.
As for the governance side, she says the management has brought in competent and experienced advisers.
“Among them are Richard Chan from RCMC Sdn Bhd and Tina Leong from Stratos Pinnacle (formerly known as MIRP), whom I worked with to carry out market studies on the retail prospects of Kluang prior to the development of the mall.
“Fast-forward to today. Our team has benefited from training courses and on-the-job training and we are always looking out for professionals with deep experience or a long track record — such as our current adviser Shaifulddin A Majid, who has more than 30 years of experience in mall operations and project management, and a former senior manager of malls and real estate investment trusts — to further refine our practices.”
What is a key lesson learnt from 15 years of overseeing mall operations? “What I have learnt is the virtue of patience. Engaging with and talking to tenants involves a lot of patience, which is basically getting their feedback, analysing it, bringing it back to the drawing board and finally coming up with something. And that takes time. Patience has been developed from this process.”
On the mall’s performance thus far, she says, “I think its success can be measured in two parts. The first concerns management practices; that is, to ensure that even though we are in a Tier-2 town, we deploy best practices in managing the mall. But the heart of it is the philosophy behind it.
“As management, we truly believe we have to humanise the business because at the end of the day, we serve the community. We truly believe that Kluang Mall is a platform to bless the community and we want to be management that truly leads from the heart.”
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