Retail outlook: Risk of more store closures

KUALA LUMPUR (July 17): Retail sales have gone from bad to worse, said an industry expert. “The retail growth rate may be slowed by 1% to 2% this year, depending on the developments over the next two months,” Retail Group Malaysia managing director Tan Hai Hsin told The Edge Malaysia in a report this week.

From an initial projection of 4% growth, the retail industry “is now expecting a minuscule expansion, if any, owing to the interminable and unprecedented duration of movement restrictions and retail shutdowns”, wrote the weekly.

Tan explained that while some retail segments were allowed to operate during the enhanced MCO (EMCO) period, he believes that all retail stores have been badly hit.

He added that retail businesses that refuse to invest in e-commerce facilities “could be fatally damaged”.

Tan said many have continue to conduct their business using WhatsApp “as a temporary measure to survive while others have chosen to close down temporarily until the government lifts the lockdown measures”.

Also, many retailers continue to depend on cash terms “even though online shopping has become a major channel of distribution for goods and services” he said, and cautioned retailers “not to ignore this reality”.

Tan therefore “anticipates” that all retail categories are at a great risk of closure, including businesses exempted from the lockdowns.

“Similar to 1998, we may now see large chain stores collapse. We may also see more foreign retailers give up on the Malaysian market [and exit],” he said.

“Malaysian retailers had never experienced a severe pandemic before which resulted in retail stores being forced to shut down for a long period of time. It did not happen during the 1986 economic recession, 1997/98 Asian financial crisis and the 2008 global financial crisis,” Tan said.

Tan estimates that a recovery in retail sales growth to 2019 levels will have to be “pushed back”. “Conservatively, it will most likely be 2024.”

However, there are some segments that are still “thriving” such as mini-markets and convenience stores, and stores that specialise in fruit, meat, seafood and snacks.

Dollar stores are also doing well, as well as parcel and courier services -- examples are Posstore, which Tan describes as being very aggressive, Parcelhub, J&T Express, Line Clear Express and Yunda Express.

Read the full report in this week’s The Edge Malaysia

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