This article first appeared in City & Country, The Edge Malaysia Weekly on September 12, 2022 - September 18, 2022

According to the Malaysia Retail Industry Report for September 2022, the country’s retail industry recorded a growth rate of 62.5% in retail sales in 2Q2022, versus 18.3% in 1Q2022. Malaysia is projected to have an average growth rate of 61.7% for the next three months.

Retail Group Malaysia (RGM), which wrote and compiled the report, spoke to members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) about their retail sales performance for the second quarter and the rest of 2022.

The report attributes the country’s growth rate in retail sales to the Hari Raya festival, relaxation of Covid-19 standard operating procedures (SOPs) as well as the forced closure of many retail shops in May and June last year.

“The relaxation of many Covid-19 SOPs from April 1, 2022, encouraged more Malaysians to return to their usual shopping behaviour and patterns. There was no more restriction on the operation hours of retail shops,” the report adds. 

Owing to the low base of growth rates in retail sales during the partial lockdown till May 2021 and the full lockdown in June 2021 (2Q2021), the rates for 2Q2022 appear to be higher. 

Meanwhile, the country’s economy recorded a growth of 8.9% for 2Q2022, according to statistics from Bank Negara Malaysia, the Department of Statistics Malaysia, Malaysian Institute of Economic Research (MIER) and RGM.

Private consumption rose 18.3% in 2Q2022 compared to 5.5% in 1Q2022. The report explained that this was driven by higher spending on goods and services, including restaurants, hotels, recreational services and home furnishing.

In contrast, the Consumer Sentiment Index by MIER fell to 86 points in 2Q2022. “[The index] dropped below the 100-point threshold level of optimism again. Higher cost of living and weak employment prospects were the main concerns,” the report says.

According to the report, members of the two retailers’ associations are optimistic about their prospects for the next three months.

The projected average growth rate has taken into account the growth rates of retail sub-sectors such as department store-cum-supermarket; department store; supermarket and hypermarket; minimart, convenience store and cooperative; fashion and accessories; children and baby products; pharmacy; personal care; furniture and furnishing, home improvement as well as electrical and electronics; and other specialty retail stores.

“The department store-cum-­supermarket operators are expecting their sales to rise further, with a growth rate of 98.9% for the third quarter of this year. [On the other hand,] after two impressive consecutive [quarters of growth], department store operators are expecting their businesses to expand at a slow pace. [The] estimated growth rate of this sub-sector is 8.4% for the third three-month period of this year,” the report says.

The fashion and accessories sector is set to witness robust growth at 165.1%, which is also the most optimistic growth projection among the retail sub-sectors. In 2Q2022, the sector achieved a growth rate of 152.8%, after its business suffered severely from partial and full lockdowns a year ago.

Following the children and baby products sub-sector’s big jump of 65% in 2Q2022, the business is anticipated to accelerate further with a growth rate of 132.8% in 3Q2022.

“Retailers in other specialty store sub-sectors, including photo shops, sporting goods stores, stores [selling] musical instruments, optical stores, stores selling health equipment, arts and crafts stores as well as direct-selling firms, are equally hopeful for this period. They expect their businesses to rise by 53.7% during the next three-month period,” the report says.

In June, RGM had estimated that the Malaysian retail industry would grow at 13.1% this year, but raised its projection to 31.7% in view of “the firm recovery of the Malaysian retail industry since [the] beginning of this year”.

“Malaysia’s retail industry has stepped off from the Covid-19 wave,” the report says.

Based on the latest economic developments and spending behaviour of Malaysians, the report says the two retailers’ associations’ forecast growth rate in retail sales of 61.7% is overly optimistic.

“Although [they are increasing] at a slower rate in recent weeks, prices of retail goods continue to rise. Prices of many foods and consumer goods increased by double digits within [a] short period of time since the beginning of this year. The purchasing power of [the] majority of Malaysian consumers has been affected,” the report notes.

In addition, the shortage of both local and foreign staff has affected the country’s retail sales and operating hours.

From May 1 this year, the minimum wage was raised to RM1,500, from RM1,200, for companies that employ at least five employees.

“This has increased the cost of operation for not just retailers but also all operators involved in the entire retail supply chain. Prices of consumer goods have increased, [owing to] this hike, [and] in stores located throughout the country, including small towns and rural areas,” the report says.

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