Retail Group expects weaker growth rate for retail sales for 2009

PETALING JAYA: The retail industry is expected to grow bleaker in the second quarter but this will likely change in the third quarter when sales improve.

Retail Group Malaysia managing director Tan Hai Hsin expects the retail market to move into the “negative zone” in the second quarter.

“It will be worse than the first quarter of this year, which registered a marginal increment,” Tan told StarBiz.

“More retailers see a further drop in consumer spending in the coming months,” he said.

Cities and towns that were not affected significantly six months ago would be in the coming months because the retail industry had not bottomed out yet, Tan said.

“During the first quarter, we had Chinese New Year. Now in the current period, it is traditionally a slow period for retailers,” he said.

“Worst of all, the economy is still weak. Thus, Malaysian consumers do not have the motivation to spend more,” Tan said.

However, he was optimistic about the third quarter.

“By the third quarter, retail sales will improve and climb slowly back to the positive zone. For the whole year, retail sales should record a 3% growth rate.

“We expect the retail industry to climb back faster than our GDP (gross domestic product) growth,” he said.

Tan said the influenza A(H1N1) breakout would not affect retail sales very much.

“This is because we are better prepared compared to the SARS (severe acute respiratory syndrome) breakout a few years back.

“At the time, we panicked and were told not to go out to restaurants and shopping centres. For a few, retail sales were badly affected,” he said.

“This time, consumers will know how to manage their daily lives better as we have the previous experience,” Tan said.

“This is the same situation as the current world financial tsunami. Because of the previous lessons learnt from the Asian financial crisis, we are more prepared this time.

Similarly, it started in the American continent and spread all over the world very quickly.

“We as a consumers did not panic when the recession affected our country. We became cautious with our money after the hard lessons learnt 10 years ago.

“Thus, our spending on goods and services did not come to a halt during the last six months,” he said.

Tan said retailers were now offering heavy discounts to attract shoppers to visit and buy from their stores. Some were using creative ways to attract shoppers’ attention. Some offered value-for-money packages to survive.

For hypermarket Carrefour Malaysia managing director Shafie Shamsuddin, the retail outlook is “changing” in line with the seismic change in consumer behaviour.

“Customers are tightening their belts and spending modestly on every day items,” Shafie said.

He said there was an apparent switch to household brands.

While it could not anticipate a pick up in sales for the second half, Shafie said Carrefour’s sales had been increasing.

“The demand for essential and housebrand items continues to be the key pull factor for consumers,” he said, adding that he anticipated a pick-up in sales during festive periods and school holidays.

Metrojaya Bhd assistant general manager for advertising and promotions Alice Tan said consumers had been cautious in the first half.

“But sales in the second half are usually better compared with the first half due to public holidays, school holidays and festivals,” Tan 0said.

Demand for consumer products has slowed and she believes that consumers are developing new habits of not spending money.

“Consumers only buy when there is a real bargain and do not stock up unnecessarily,” she said.

On whether there are signs of a pick-up in the second half, Tan said: “The stock market has picked up and we hope the retail market will pick up soon.”

Sunway City Bhd property investment managing director Ngeow Voon Yean also agreed that buying power had contracted in the first quarter.

“While Sunway Pyramid still has a relatively high number of visitors, consumer spending has been softer in the first half,” Ngeow said.

He said retailers that were still growing were new brands and retail concepts that kept ahead of trends.

Ngeow said that “traditionally the second half is better,” but most retailers had tempered down expectations of growing sales for the second half. For latest Bursa Malaysia indices, charts and other information click here

For latest Bursa Malaysia indices, charts and other information click here

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