New brands still land in Malaysia despite closure concerns

KUALA LUMPUR (April 27): Some 95 new foreign brands have made their debut in the Malaysian retail market since 2017 to date.

“Last year and up to recently, we have witnessed the closure of various foreign specialty stores. Among them were the closure of Tous Les Jours Bakery, Nature Republic, Tim Ho Wan and Bubba Gump Shrimp Co. So, are we going into a recession?

“But look at the big picture — 71 brands from 17 countries set up shop in Malaysia in 2017,” said Retail Group Malaysia managing director Tan Hai Hsin at a conference entitled “Retail Transformation, Creativity & Beyond — A Diverse Perspective” on April 26.

Tan said of the new foreign brands that had set foot in the country last year, 13 were from Taiwan while 12 were from South Korea. About 62% of them are in the F&B sector.

Around 75% of them set up their stores in the Klang Valley and 15% in Johor.

For this year so far, 24 foreign brands from 13 countries have set up their first outlets in Malaysia. A majority of them were from
Singapore and Taiwan. The stores are mainly located in the Klang Valley, Johor, Pahang and Seremban.

According to Tan, Johor is a very vibrant market which one cannot ignore.

“It won’t lose out to the Klang Valley. Quite a number of foreign brands had actually set up business in Johor before they expanded to the Klang Valley,” he said during his presentation entitled “Retail Today — An Overview” at the one-day conference organised by the Malaysia Retailers Association.

Addressing the question as to whether physical stores will be eclipsed by e-commerce, Tan said today’s retail industry is about serving customers through multi-channels — via the internet, physical stores, delivery and mobile.

“Also, Bank Negara Malaysia has begun to regulate e-wallet, so the shopping experience will improve through new technologies.

“Online shopping will not replace you [retail stores] but you have to learn how to capture your customers. Every circumstance and market change represent new business opportunities,” he said.

According to Tan, online retail sales account for about 2% of total retail sales in 2017.

“E-commerce is not replacing physical stores. In recent years, both sides of the retailing formats are crossing over each other’s territory — and this trend will continue. From offline to online, many stores have started to offer online services, such as Tesco, Jaya Grocer, Borders and Sen Heng.

“[For stores that cross over] from online to offline, we have FashionValet, Xiaomi, Naelofar, Buku Fixi and Twenty3,” he elaborated.

With the recent recovery of the ringgit, Tan said the projected retail growth rate for the Malaysian retail sector stands at 4.7%. On a quarterly basis, the retail growth rate is estimated to grow at 5.4% (1Q18), 3.7% (2Q18), 5.2% (3Q18) and 5% (4Q18).

Based on the 2017 growth rate by retail sub-sectors, Tan pointed out that those in the category of “other specialty retail stores” registered the highest growth rate of 5.6%, followed by pharmacy and personal care (4.9%). The supermarket and hypermarket sub-sector declined by 3.2%.

In 2017, the Malaysian retail industry’s turnover was RM99.8 million and has employed 1.2 million workers in more than 240,000 retail stores, excluding hawker centres, offered Tan.

This story first appeared in EdgeProp.my pullout on April 27, 2018. Download EdgeProp.my pullout here for free.