Retail sector posts 2% growth in Q2, reflecting weaker sentiment

PETALING JAYA: The Malaysian retail sector saw 2% growth – compared with the ideal 5% to 10% – in the second quarter of 2016, reflecting weaker sentiment, said Malaysia Retail Chain Association (MRCA) president Datuk Garry Chua.
He said market sentiment is sluggish due to various factors, such as increased cost of living that made people tend to be more cautious, as well as perception, which influences buying behaviour.
“We expect the second half of the year (2H) to be better, hopefully (retail growth) should be around 3%-5%,” Chua told SunBiz in an interview recently, expecting full-year growth of 3%-4%.
He said 2H growth is expected to be boosted by festive seasons and the influx of Chinese tourists, thanks to the visa-free policy. “We also hope more tourism dollars can come into play. If the crude oil price moves up, it will help.”
Chua, who is also Rotol group managing director, said the food and beverage (F&B) segment is robust and is still one of the driving sectors in retail. Rotol has businesses in the building industry as well as in F&B.
“People are still willing to dine and spend money on food. If they want to save money, they will go for the lower range (of F&B outlets),” said Chua.
Retailers, especially F&B players, also face challenges of high rental and high operating costs, particularly where location is concerned.
“If you want to go for the top malls, the rental is generally high. If (sales) volume does not go up, rental is definitely a challenge. That’s why some retailers are relocating from the top malls to other malls to survive in the long term. Some even switch spots within the same mall.”
With the emergence of new shopping malls, Chua does not think that more malls will be better for retailers.
“More malls doesn’t mean more business. They have to compete for the same category of patrons and shoppers.
“Retailers are giving a lot of discounts, which is a short-term solution to get sales,” Chua said, adding that retailers also look at how to optimise operations to be sustainable.
He said MRCA encourages retailers to be innovative in terms of venturing into the e-commerce market and will organise talks on how to improve retailers’ businesses.
“We encourage them to do franchising, not just within Malaysia. Some of our retailers are doing well overseas. MRCA also organises the yearly Malaysia International Retail, Franchise and Licensing Fair, which will help our members.”
Chua said there should be more aggressive marketing on tourism to make Malaysia a preferred shopping destination, as well as more engagement between the public and private sector.
“Things can improve. Fiscal policy shouldn’t be the mainstay in an economy. The government should give more support to see how to drive the private sector. If driven fast and smoothly, this also takes less pressure on the fiscal or government side.
“In the marketing aspect, even if the market is down, you can still increase your sales through innovative and aggressive marketing,” said Chua, urging retailers to be resilient and to overcome any challenges in the market.