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PETALING JAYA: The Covid-19 pandemic may have changed consumer habits in Malaysia, but there are still opportunities within the retail space which can be tapped into, even though consumers’ spending habits remain focused on the home.
Overall, total retail sales in Malaysia contracted by -9.2% year on year in June 2020, but is still a marked improvement on the decline recorded in April 2020 of -32.4% year on year, indicating a recovery moving in sync with the reopening of the country’s economy.
Google Mobility data for July 2020 shows that mobility to public transit stations remains at -24% lower than the baseline period recorded in January and February. Similarly, mobility to workplaces is down -18.2% to the baseline.
Fitch Solutions highlighted in a report that three consumer trends have emerged in the recovery movement control order period (RMCO) which consumer-facing retailers in Malaysia can take advantage of.
These are: consumers focusing on speciality stores for their priority goods, work from home, invest in the home and the rapid development of e-commerce.
According to the Department of Statistics, retail sales at non-speciality stores continued to contract, declining by 1.2% on-year in June 2020, while speciality stores selling food, beverages and tobacco products continue to post positive growth, with sales growing by 3.4% on-year for June.
“We believe this is Malaysian consumers prioritising their basic essentials, making the conscious choice to avoid crowded supermarkets (where goods may be relatively cheaper) and choosing speciality grocery stores to do their shopping. This trend will continue over the short term, as Malaysian consumers choose to limit their exposure to crowded areas,” it said.
The research arm of Fitch Ratings said that globally, there is a trend of consumers staying at home and investing in their home and it believes that this trend is starting to play out in Malaysia, hence the recovery trajectory for household goods.
“The monthly retail sales data for household equipment (a category that includes household goods) remains in contraction in June 2020 at -16.5% year on year, but this marks a considerable improvement and indicates a road to recovery for this segment, when compared to the -48.3% year on year recorded in April,” it added.
It noted that Malaysia will increasingly offer household goods retailers an attractive market over the medium term, with government incentives and an expanding real estate market with first-time home owners key consumers of household goods.
“This sector will have to navigate a tough 2020 and H121, but we believe that there is a stronger growth opportunity for retailers in this sector over the medium term, with a average yearly growth of 6.5% projected for consumer spending on household goods in Malaysia between 2022 and 2024.”
Finally, it said that while Malaysia’s e-commerce sector is still nascent, the fear of infection from Covid-19 and pandemic-related lockdowns have led to a greater number of consumers embracing e-commerce.
In the peak of Malaysia’s lockdown, online retail sales grew 28.9% on-year in April, and despite lockdown restrictions being relaxed in May and June 2020, online retail sales expanded by a further 39.3% and 35.5% on-year respectively.
“This bolsters our view that the Covid-19 pandemic will function as an accelerator for e-commerce adoption globally,” Fitch Solutions said.
