DESPITE increasing competition and rising costs, the retail sector still has room for growth, said RAM Consultancy Services Sdn Bhd managing director and chief economist Dr Yeah Kim Leng.
He said Malaysia's sustained economic growth, rising affluence and growing working and middle-class segments provided ample opportunities for the retail sector to expand operations, move upscale and broaden its product price and quality spectrum to serve various income segments and niche markets.
The retail sector's favourable outlook is reflected by the entry of new players and expansion of outlets, he added.
Yeah noted that statistics from the Domestic Trade and Consumer Affairs Ministry showed a significant increase in the number of direct-selling licenses issued and approval of hypermarkets, specialty stores and general trading outlets over the last two years.
However, Yeah cautioned that retail players would have to contend with the prospects of rising costs, on the one hand, and intensifying competition on the other in the immediate term.
In the longer term, with the Asean Free Trade Area in place and various bilateral trade agreements being negotiated, home-grown players will have to think about regional competition and market positioning, he said.
Retail Group Malaysia managing director Tan Hai Hsin expects major retailers to continue to consolidate their businesses this year.
There have been numerous closures as well as mergers and acquisitions of departmental stores cum supermarket operators in the country in the last year.
Metrojaya replaced Super Tanjung in Penang, Tesco took over Super Kinta in Ipoh, UDA Holdings Bhd sold its shares in UDA-Ocean, Pasaraya Hiong Kong Sdn Bhd closed down all its seven outlets, and Parkson sold Xtra to Giant, he noted.
Tan also foresees competition heating up among the major grocery retailers, especially with the opening of new shopping centres like Mydin Hypermarket in USJ, Klang City Square, Jusco Cheras Selatan, Jusco Taman Equine and Carrefour Kepong.
The major shake-up of the shopping centre industry in the Klang Valley will come in 2007 when the second phase of several mega shopping centres are ready, he said.