Malaysia Retail Industry Report

By Tan Hai Hsin, Retail Group Malaysia

For this report, Members of Malaysia Retailers Association (MRA) were interviewed on their retail sales performances for the last part of 2016 till March 2017.

2016 Q4 Overview

For the fourth quarter of 2016, Malaysia retail industry suffered another sharp drop in retail sales with a growth rate of 0.3%, as compared to the same period in 2015 (Table 1). This latest quarterly result was way below the market expectation. It was 95% below the estimate made by members of MRA in November 2016 (at 5.5%).

The year-end school holiday and festive celebration did not motivate Malaysian consumers to spend more. The weak economic environment and bleak job prospect discouraged shoppers to buy more than usual.

This last quarter’s growth rate in 2016 was a letdown taking into consideration the low growth rate of 1.3% during the same period in 2015.

For the entire year of 2016, Malaysia retail industry expanded by a mere 1.7% as compared to 2015.

During the GST (Goods & Services Tax) year of 2015, the retail industry grew by 1.4% only. After almost 2 years, the retail industry had yet to recover. Economic condition remained tough for retailers.

Comparison of Retail Sales with other economic indicators

For the fourth quarter of 2016, Malaysia national economy reported an encouraging growth rate of 4.5% (Table 2, at constant prices), as compared to 0.3% for retail sales (at current prices).
This latest quarterly GDP growth rate was supported by rise in manufacturing activity and expansion in services sector.

The average inflation rate during the fourth quarter of 2016 rose to 1.7%. Food and non-alcoholic beverages registered the highest increases in prices, especially oils & fats sub-group.

Private consumption growth managed to sustain at 6.2% during the last quarter of 2016.
Contributors to this quarterly performance included wage and employment growth.

During this quarter, the Consumer Sentiment Index (by MIER) dropped further to 69.8.

Malaysian consumers were still concerned on their rising cost of living and future job prospect.

Unemployment rate during the fourth quarter of 2016 was maintained at 3.5%.

Retail sub-sectors sales comparison

The latest quarterly growth rates among retail sub-sectors were mixed (Table 3). It had been a roller-coaster ride for many of the retail sub-sectors during the year.

The performance of Department Store cum Supermarket sub-sector worsened during the last quarter of 2016. This sub-sector suffered a decline of 2.3% as compared to the same period a year ago. For the whole year, the sales of this sub-sector fell 3.4%. This was the worst performing retail sub-sector in 2016.

It was the worst performing retail category during the third quarter of 2016. But the Department Store sub-sector managed to turnaround with a positive growth of 6.0% during the last quarter of the year. For the entire year, this retail sub-sector registered a drop of 1.4% in growth rate.

During the fourth quarter of 2016, the Supermarket and Hypermarket sub-sector maintained its growth rate at 0.5% as compared to the same period in 2015. For the whole of last year, its growth rate was 0.7%.

Fashion and Fashion Accessories sub-sector continued to fare well during the last quarter of 2016. It managed to sustain its business with a growth rate of 6.9% as compared to the same period a year ago. This retail sub-sector was the best performing retail sub-sector in 2016 with a growth rate of 5.8%.

During the last 3-month period of this year, the business of Pharmacy and Personal Care sub-sector slowed down considerably with a growth rate of 0.8%, as compared to the same quarter a year ago. For the entire period of 2016, this retail sub-sector recorded a growth rate of 0.4%.

The Other Specialty Stores sub-sector (including photo shops, optical shops, children-related stores, second-hand goods’ stores, toys’ stores, TV shopping as well as restaurants) was the worst performing retail category during the last quarter of 2016. This sub-sector suffered a deficit in growth rate by 7.7% as compared to the same period a year ago. During the whole year, this sub-sector suffered a decline of 2.2% in its business.

2017: Q1 Forecast

Members of the Retailers Association are pessimistic on the sale performance for the first 3 months of 2017. As consumer confidence remains low, they estimate an average growth rate of 0.9% only during the first quarter of 2017 (Table 4).

After two quarters of poor results, department store cum supermarket operators are expecting to return to positive zone with a growth rate of 3.2% for the first quarter of this year.

After a strong recovery during the last quarter of 2016, the department store operators are expecting their businesses to grow by 0.9% only during the first 3 months of this year.

Similarly, supermarket and hypermarket operators are expecting the growth of their businesses to maintain at a positive growth rate of 0.9% for the first quarter of 2017.

After a strong performance in 2016, retailers in the fashion and fashion accessories sector expect their businesses to slow down with a positive growth of 2.5% during the first quarter of 2017.

Retailers in the Pharmacy and Personal Care sub-sector are optimistic of their business prospect at the beginning of the year. They project their businesses to grow by 7.6% during the first quarter of 2017.

Retailers in Other Specialty Stores sub-sector (including photo shops, optical shops, children-related stores, second-hand goods’ stores, toys’ stores, TV shopping as well as restaurants) are not hopeful that their businesses will return to black in the coming months. For the first 3-month period of 2017, this sub-sector expects its business to decline by 8.2% as compared to the same period a year ago.

Moving Forward

Retail Group Malaysia projected a 5.0% growth rate in retail sales for 2017 during the end of last year. Taking into consideration the recent developments, it has revised the growth rate downwards to 3.9% (Table 5).

For the first quarter growth rate, Retail Group Malaysia is more optimistic than MRA members.
It predicts a 1.5% improvement in overall retail business.

The weak Malaysian currency has affected the costs of large number of retail goods sold locally.
Many retailers have begun to raise prices, including prices of foods and beverages, household goods as well as other daily necessities.

Malaysian consumers are expecting to be cautious in their spending on retail goods during the first half of this year. Their cost of living has risen and their purchasing power has reduced during the last one year.

For more information, please write to [email protected].

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