One year into GST, Retail still slow growth rate

(Marketingmagazine.com.my)- In its latest report, Retail Group Malaysia after interviewing members of the Malaysia Retailers Association (MRA), recorded a lower-than-expected growth rate of 7.5% in retail sales for the second quarter of this year. A drop of 4.4% was seen in retail sales, as compared to the same period last year.

The latest quarterly result was 24% lower than the estimate made by members of MRA in June 2016 (at 9.9%).

This period marked the first anniversary of the implementation of Goods & Services Tax (GST) by Malaysian government on 1 April 2015.

A year ago, Malaysian retailers suffered a severe decline in retail sales of 11.9%. It was the worst quarterly growth rate since 1999. For the first 6 months of this year, the retail sale growth rate was 0.5%, as compared to the same period a year ago.

Supermarket and Hypermarket see good Q2 run

The report showed how sales of all retail sub-sectors rebounded (Table 3) from GST during the second quarter of 2016. 

What do the next 3 months look like?

MRA members estimate an average growth rate of 5.9% during the third quarter of 2016 (Table 4).

Similar to the sales results in second quarter of this year, the projected average growth rates of the retail sub-sectors varied considerably. The department store cum supermarket operators are expecting a moderate growth rate of 2.7% for the third quarter of this year.

On the other hand, department store operators are expecting their businesses to dip with a negative growth rate of 7.6% for the third 3-month period of this year.

Supermarket and hypermarket operators are expecting a stronger recovery with 19.3% growth rate for the third quarter of 2016.

Retailers in the fashion and fashion accessories sector expect their businesses to slow down again with a positive growth of only 0.2% during the third quarter of 2016.

Retailers in the Pharmacy and Personal Care sub-sector are expecting to maintain their recovery with a growth of 11.4% during the third quarter of 2016.

Retailers in Other Specialty Stores sub-sector (including photo shops, sporting goods stores, optical shops, children-related stores, second-hand goods, TV shopping channels, toy stores as well as restaurants) are less hopeful of their businesses in the coming months. 

For the third 3-month period of 2016, this sub-sector expects its business to drop by 5.1% as compared to the same period a year ago.

What does the rest of the year look like?

The projected retail sale growth rate of Malaysia’s retail industry in 2016 by Retail Group Malaysia stays at 3.5% (Table 5) or RM 99.5 billion in retail sale values.

In view of the current weak economy and more increases expected in prices of retail goods and services before the end of this year, Malaysian consumers will continue to stay cautious in their spending.

Based on the latest projection by MRA members, the third quarter growth rate has been revised upwards slightly from 5.0% (estimated in June 2016) to 5.9%.

Hari Raya festival in early July contributed to this positive growth rate.

The rise in the Minimum Wages Oder implemented in 1 July 2016 have raised the average purchasing power of Malaysian working population to some extent.

Minimum wages of workers were raised to RM 1,000 per month (from RM 900) for Peninsular Malaysia and RM 920.00 per month (from RM 800) for East Malaysia. For civil servants in Malaysia, the minimum wage increased to RM 1,200 per month.

Pokemon Go event recently held at Sunway Pyramid

Pokemon Go, launched in August, has attracted more visitors to shopping centres and retail outlets throughout Malaysia. Nevertheless, it is not expected to contribute significantly to retail sales. Foods & beverages outlets and grocery stores located near to Pokestops will benefit the most from this craze.

The fourth quarter growth rate estimated in the report remains at 5.5%, taking into consideration the growth of 1.3% achieved during the same period a year ago.

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