On 9th March 2021, Vasantha
Ganesan of The Edge reviewed retail growth in 2021. The Malaysian retail
industry registered its worst performance in over two decades last year,
contracting by 16.3% and recording only RM90 billion in retail sales. This was
due to Covid-19 pandemic which forced people to stay home and retail stores
remained shut. For 2021, the industry is expecting to grow 4.1% and ring-in
sales to the tune of RM93.7 billion. In 2019, the country’s retail sales
expanded by 3.7%, translating into RM107.5 billion.
Malaysia’s retail industry recorded the
worst performance in 22 years. In 1998, retail sales in Malaysia dropped by
20%,” Retail Group Malaysia (RGM) managing director Tan Hai Hsin said in the
latest edition of the Malaysia Retail Sales Report (March 2021). In 2020,
retail sales contracted for four consecutive quarters at 11.4%, 30.9%, 9.7% and
19.7% respectively.
For this year, RGM has cut its growth
projections to 4.1% from 4.9%, after major states nationwide were once again
placed under the movement control order (MCO).
“Interstate travel ban is expected to be
enforced for longer period of time and it has been affecting domestic tourism
spending,” Tan said.
“The return of foreign tourists will be slow
and gradual. Travel bubbles with selected countries will likely begin towards end
of this year,” he added.
Tan noted that vaccinating the majority of
the population will take a while and expected movement restrictions and social distancing
measures to be in place until the end of the year.
“For the entire year, consumers’
spending is not expected to recover back to 2019 level,” Tan emphasised. Sales
in 1Q2021 is estimated to shrink by 13.4% with department store operators expecting
to contract by 47.4%, while supermarkets and hypermarkets will decrease by 14%.
However, a recovery of 7%, 4.1% and 13.9% respectively is anticipated over the
next three quarters.
In 2020, most of the retail sub-sectors
contracted by double digits, with the department store, and fashion and fashion
accessories segments shrinking the most at 38.3% and 37.9% respectively.
The only two sub-sectors which grew last
year were the mini-markets, convenience stores and cooperatives which expanded
by 14.8%, and furniture and furnishings, home improvements and electrical and
electronics (E&E) which grew by 0.4%. All other retail sub-sectors
contracted by double digits. (see table for specific sub-sectors).
Meanwhile,
in the October to December 2020 (4Q20) period — traditionally a very strong
quarter for retailers due to the year-end holidays, Christmas shopping and
back-to-school shopping — retail sales contracted by 19.7% from a year earlier,
after the second conditional movement control order (CMCO) was enforced in
the Klang Valley on Oct 14, 2020.
The Klang
Valley accounted for 60% of the country’s retail sales. Retail sales were
further dragged down when the CMCO was later extended to include all states except
Sarawak until the end of 2020, according to the report.
In 4Q20,
the retail sub-sector that was the worst hit was the fashion and fashion
accessories segment, which contracted 49.6%. Another segment that was badly
hit was the department store category, which slumped 44.7%, according to the
Malaysia Retail Sales Report.
On a
positive note, at least two retail sub-sectors expanded. The furniture and
furnishing, home improvements and E&E segment grew 11.7%, while the
mini-market, convenience store and cooperative segment grew 10.2%, it said.
Unless
disposable income increases, jobs pick-up, tourism recovers, domestic
consumption will remain muted. Government cash transfers are for essentials and
will not change subdued retail sales. Meanwhile, we will see mall closures and
retail outlets shuttered until overall tempo of economic activity improves, hopefully
by 2022.
Reference:
1. Vasantha Ganesan, Pace of retail growth
in 2021 won’t undo 2020’s devastation, says RGM, 9 March 2021, The Edge
2. Retail sales slump to worst showing
since 1998 Asian financial crisis, 8 March 2021, Free Malaysia Today
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