Retail Group Malaysia’s latest report shows discouraging growth levels in retail industry

For 23 years, Malaysia Retailers Association (MRA) and Retail Group Malaysia (RGM) have jointly published close to 100 retail reports and this year, Malaysia Retail Chain Association (MRCA) has been included as a partner in the duo’s quarterly survey and this year, the report includes 5 new sub-sectors.

The following is the report:

The report derived from a survey conducted among members of MRA and MRCA on their retail sale performances for the entire year of 2020 and the first quarter of 2021 revealed that Malaysia’s retail industry reported a discouraging growth rate of -19.7%, as compared to the same period in 2019.

This latest quarterly result did not meet the earlier projections announced by Retail Group Malaysia in November 2020 at -18.2% and was in fact much lower than the average estimate made by MRA members (at -15.1%) at the end of last year. 

For the whole year of 2020, the retail sale growth rate was -16.3% as compared to the same period a year ago and last year, Malaysia’s retail industry recorded the worst performance since the Asian financial and economic crisis that took place 22 years ago in 1998 when retail sales in Malaysia dropped by 20%.

The Department Store sub-sector continued to suffer from reduced revenue during the last quarter. Its business deteriorated with a double-digit negative growth rate of 44.7% during the fourth quarter. 

For the whole year of 2020, the Department Store sub-sector achieved a growth rate of -38.3%, the worst retail performer among the retail sub-sectors. As for the Supermarket and Hypermarket sub-sector, despite being able to remain open throughout the COVID-19 pandemic, it reported poor results during the last quarter, a decline of 19.6% in the fourth quarter of 2020 and a drop of 12& for the whole year. 

The Mini-Market, Convenience Store and Cooperative sub-sectors were the least affected asit grew by 10.2% in the last quarter of 2020 and in the entire business expanded by 14.8% for the entire year.

The Fashion and Fashion Accessories sub-sector reported the worst performance among the retail sub-sectors. Compared to the same quarter a year ago, fashion retailers reported a large decline in sales by 49.6%. 

The Children and Baby Products sub-sector achieved a negative growth rate of 28.2% during the fourth quarter of last year and for the whole year, its business declined by 20.2%.

The Pharmacy and Personal Care sub-sector stayed in the negative growth zone during this last quarter but during the last 3-months of 2020, this sub-sector recorded a growth rate of -11.7%, as compared to the same period a year ago. For the year of 2020, this sub-sector suffered a decline in business by 11.8%.

The Furniture & Furnishing, Home Improvement as well as Electrical & Electronics sub-sector performed well during the last quarter of 2020. It expanded by 11.7%, as compared to the same quarter a year ago. However, it managed to grow by merely 0.4% for the entire year of 2020.

Operators of Mini-Mart, Convenience Store and Cooperative are counting on their business to maintain at the same growth level as 2020. For the first quarter of 2021, they expect their business to grow by 12.5%.

The business of retailers in the Fashion and Fashion Accessories sub-sector is not expected to return to normal anytime soon. A poor growth rate of -40.6% is likely during the first quarter of 2021.

Retailers selling Children and Baby Products are doubtful of a recovery in business during the first 3 months of this year. They project their businesses to suffer a decline of 21.5% during the quarter.

Retailers in the Pharmacy and Personal Care sub-sector did not benefit as much during the recent MCO period. They are expecting their businesses to drop by 7.8% during the first quarter of 2021.

Furniture & Furnishing, Home Improvement as well as Electrical & Electronics sub-sector is one of the two sub-sectors that expect to report a positive growth rate during this quarter. For the first 3-month period, retail turnover in this sub-sector is expected to climb by 14.6% as compared to the same period a year ago.

Retailers in Other Specialty Stores sub-sector (including photoshop, second-hand goods’ store, fitness equipment store, optical store, shop selling baking ingredients, store retailing musical instruments, arts & crafts store as well as TV shopping channel) forecast their businesses to decline by 6.4% during the first 3-month period of 2021.

Cafe and restaurant operators are still not hopeful for the first 3 months of this year. They expect their food business to contract by 13.4% as compared to the same period last year.

COMPARISON OF RETAIL SALES WITH OTHER ECONOMIC INDICATORS

For the fourth quarter of 2020, Malaysia’s national economy contracted by 3.4% compared to -19.7% for retail sales (at current prices). Except for manufacturing, all economic sectors recorded negative growth rates during this quarter. The reduction in economic activities was mainly attributed to the imposition of Conditional Movement Control Order (CMCO) on many states in the country since October. The average inflation rate during the fourth quarter of 2020 declined by 1.5%. 

Food & Non-Alcoholic Beverages increased by an average of 1.4% during the quarter. On the other hand, cost of Transportation dropped by 9.9% on average and costs of Housing, Water, Electricity, Gas & Other Fuels decreased by 3.2% on average.

Private consumption contracted by 3.4% during the fourth quarter of 2020 and although online retail spending climbed higher, overall household spending slowed due to restricted movement in many states of Malaysia.

The Consumer Sentiment Index (by MIER) fell to 85.2 points during the last quarter of 2020. It had been below the 100-point confidence threshold for 9 consecutive quarters. Malaysians were very concerned about their future income and job prospects due to prolonged COVID-19 pandemic.

Malaysia’s unemployment rate during the fourth quarter of 2020 worsened slightly to 4.8%. 

RETAIL SUB-SECTORS’ SALES COMPARISON

During the fourth quarter of 2020, the performances of almost all retail sub-sectors remained poor.

The business of Department Store cum Supermarket sub-sector declined sharply during the last 3 months of 2020, with a negative growth rate of 26.8%. For the entire year, it recorded a weak performance of -18.7%. 

The Other Specialty Stores sub-sector (including photoshop, second-hand goods’ store, fitness equipment store, optical store, shop selling baking ingredients, store retailing musical instruments, arts & crafts store as well as TV shopping channel) reported a negative growth rate of 5.2% during the fourth quarter of 2020. For the entire year, its growth rate was  -11.7%. 

Food & Beverage Outlets (Cafe and Restaurant) were allowed to open throughout the COVID-19 pandemic. Nevertheless, its business still recorded a negative growth rate of 18.8% as compared to the same quarter a year ago. For the Year 2020, the business of this sub-sector reported a decline of 12.8% in terms of growth rate.

For Food & Beverage Outlets (Kiosk and Stall) that focused on take-away and delivery, its business did not fare as well. For the last quarter of 2020, its sale dropped by 14.9%. For the entire year, its sales fell by 18.3%.

NEXT 3 MONTHS’ FORECAST

Members of the two retailers’ associations estimate an average growth rate of -13.4% during the first quarter of 2021. Movement Control Order (MCO) and CMCO in almost all states of Malaysia during the first 2 months of 2021 has affected almost all types of retail businesses.

The department store cum supermarket operators are hopeful of better performance during the first quarter of this year. For this quarter, it expects the business contraction to be smaller at -9.1%.

On the other hand, the department store operators do not anticipate a recovery so soon. This retail sub-sector is expected to suffer with another double-digit negative growth rate of 47.4% for the first 3-month period of this year. 

Similarly, supermarket and hypermarket operators do not foresee their businesses to return to black during the first quarter of 2021. They anticipate their businesses to record another negative growth of 14.0% during this period.

Similarly, food and beverage kiosk and stall operators are not optimistic of their business performance during the first quarter of 2021. They expect sales to weaken by 14.8%.

THE YEAR 2021

In November last year, Retail Group Malaysia (RGM) projected a 4.9% growth rate in retail sales for 2021. However, this projection is no longer valid due to the re-implementation of MCO in the first 2 months of this year. 

RGM has revised its growth rate projection downwards from 4.9% to 4.1% for the whole year of 2021.

This latest revision is also based on other factors of consideration. 

More retail businesses will be allowed to open from March 2020. Nevertheless, movement restrictions continue to affect shopping traffic throughout the country.

Interstate travel ban is expected to be enforced for a longer period of time and it has been affecting domestic tourism spending.

The return of foreign tourists will be slow and gradual. Travel bubbles with selected countries will likely begin towards the end of this year.

Vaccination on the majority of the population will take a while. Thus, movement restrictions and social distancing measures will remain until the end of this year.

For this entire year, consumers’ spending is not expected to recover back to 2019 level.