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Retailers continue to bleed

Kuala Lumpur , 30/09/2020 , - Empty Shopping Mall in Sunway Putra Mall during Covid-19 Pandemic. Credit to TMR

AT LEAST 51,000 more retail stores are expected to close down soon as the Covid-19 pandemic continues to batter businesses in various sectors.

Retail Group Malaysia (RGM) MD Tan Hai Hsin said the number of outlets facing closure represents some 15% of the total retail stores nationwide.

As it is, the beginning of 2021 was not good as many outlets continued to bleed following the reintroduction of the Movement Control Order (MCO 2.0).

“For the first two months of 2021, we had witnessed a relatively high number of closures. The implementation of the MCO 2.0 led to some retailers giving up their businesses,” he told The Malaysian Reserve.

He said since the first MCO started last year at the beginning of the pandemic, about 5% of shopping centre tenants in Malaysia and 10% of ground floor shop office tenants had closed down.

“The closure was obvious immediately after the first MCO was lifted and accelerated in October 2020 when the bank moratorium ended,” he said.

The retail industry reported a discouraging growth rate of -19.7% in the fourth quarter of 2020 (4Q20), compared to the same period in 2019.

The latest quarterly result did not meet the earlier projection by RGM in November 2020 at -18.2% and was much lower than the average estimate made by Malaysia Retailers Association (MRA) members, at -15.1%.

The retail sale growth rate was -16.3% for the whole year of 2020 compared to the same period a year ago.

Last year, Malaysia’s retail industry recorded the worst performance since the Asian financial and economic crisis that took place 22 years ago. In 1998, retail sales in Malaysia dropped by 20%.

RGM, an independent retail research firm, in its Malaysia Retail Sales Report (March 2021), has revised the industry’s growth rate projection downwards from 4.9% to 4.1% for 2021.

This latest revision is also based on other factors of consideration, including movement restrictions that will continue to affect shopping traffic throughout the country and interstate travel ban that is expected to be enforced for a longer period, affecting domestic tourism spending.

“The return of foreign tourists will be slow and gradual. Travel bubbles with selected countries will likely begin towards the end of this year.

“Vaccination on the majority of the population will take a while. Thus, movement restrictions and social distancing measures will remain until the end of this year. For this entire year, consumers’ spending is not expected to recover to 2019 level,” the report stated.

Members of two retailers’ associations — MRA and Malaysia Retail Chain Association — estimate an average growth rate of -13.4% during 1Q21.

The negative estimate is attributed to the MCO and Conditional MCO in nearly all states during the first two months of this year which have affected almost all types of retail businesses.

Department store cum supermarket operators also expecting better performance during the 1Q and business contraction to be smaller at -9.1%.

On the other hand, department store operators are not anticipating a recovery so soon.

This retail subsector is expected to suffer from another double-digit negative growth rate of 47.4% for the first three-month period of 2021.

Similarly, supermarket and hypermarket operators do not foresee their businesses returning to black during 1Q21 and anticipate their businesses to record another negative growth of 14% during this period.

Operators of mini-mart, convenience store and cooperative are counting on their business to maintain at the same growth level as 2020 and expect their business to grow by 12.5% in 1Q21.

For 1Q21, retailers in the fashion and fashion accessories subsector forecast a poor growth rate of -40.6%, retailers selling children and baby products project their businesses to suffer a decline of 21.5%, while retailers in the pharmacy and personal care subsector are expecting their businesses to drop by 7.8%.

Retailers in other specialty stores subsector forecast their businesses to decline by 6.4% during the first three months of 2021.

However, furniture and furnishing, home improvement, as well as electrical and electronics subsector is one of the two subsectors that expect to report a positive growth rate during this quarter with a turnover by 14.6% compared to the same period a year ago.

Cafe and restaurant operators expect business to contract by 13.4%, while food and beverage kiosks and stall operators are not optimistic about their business performance and predict sales to weaken by 14.8%.

Source: The Malaysian Reserve

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