Property retail segment consolidates

PETALING JAYA: Although the property retail scene will remain challenging in the next couple of years as a result of rising retail space and the competition brought about by e-commerce, the retail sector will continue to grow, albeit at a much slower pace, backed by more “targeted valued content and offerings” using different delivery channels.

Piecing together a 2018 first quarter report from property consultancy Nawawi Tie Leung and two presentations made by Savills Malaysia deputy executive chairman Allan Soo and Retail Group Malaysia managing director Tan Hai Hsin last Thursday, the overall consensus was that the retail sector would continue to grow, brought about by new entrants replacing those who have left, with departmental stores closing unprofitable outlets and retailers downsizing or leaving altogether and new entrants taking their place.

The outcome of the upcoming election will also have long-term implications on the economy going forward.

“Whether there is continuation of tried and tested policies of the present administration, or a drastic overhaul, is dependent on the election results.”

Aside from the general election, the Nawawi Tie Leung report said occupancy of malls in Kuala Lumpur eased to 86% in the first quarter of 2018, compared to 87% in the last quarter of 2017.

As with all other sectors of the economy, the digital economy continues to wield its influence over the sector.

New delivery channels and payment options, backed by fintech, will continue to emerge to lure customers to part with their cash, be it physical cash or new payment options, in order to grow the retail industry pie which last year was reported by Retail Group Malaysia to be worth RM99.8bil. It was RM97.8bil in 2016.

For 2018, it is expected to increase to RM104.5bil.

The May 9 elections may just be a bit of a distraction to the market in the second quarter. Tan said the retail growth rates for the April-June quarter is estimated to be 3.7%, a drop from the 5.4% expected in the first quarter, helped by the Lunar New Year season. The third quarter is expected to bounce up to 5.2%.

On an annual basis, projected retail sales are forecast to grow at 4.7%, both Nawawi Tie Leung and Retail Group Malaysia said.

Three years after the introduction of the goods and services tax (GST) effective on April 1, 2015, Tan said the retail sector has “yet to recover from it”. He was presenting his paper “Retail Today: An Overview” at the Retail Transformation, Creativity & Beyond: A Diverse Perspective held on April 26.

The rate of retail sales growth rate was 5.5% in 2012, 4.5% in 2013, 3.4% in 2014 and 1.4% in 2015. Retail sales rate went up marginally to 1.7% in 2016 and reached 2% in 2017.

Some quarters said the GST has contributed more than RM40bil to the country’s coffers. Challenges include the weak ringgit which invariably “pushed prices of retail goods higher” in 2017, said Tan.

Coupled with that, “rising cost of living continues to weaken the people’s purchasing power” in 2017, which has led to various closures of foreign speciality stores and departmental stores.

Nonetheless, changing circumstances and the market “present new business opportunities” although he expects consumers to remain cautious on retail spending.

“They will continue to look out for value-for-money goods and services,” Tan said, adding that despite the various delivery channels, bricks-and-mortar stores, Internet or mobile, the retail industry is about services and content.

“The shopping experience will be elevated through new technologies like ewallet, social media and in-store infotainment,” he said.

While Tan considered every changing circumstance as a business opportunity, Savills’ Soo took a different approach.

He posed the question of whether the current retail sector, with its burgeoning floor space and e-commerce, was going through an apocalypse... or retail renaissance?

The success of the sector will be driven by demographics, presented by a new generation of younger and more tech-savvy consumers and wealthier tourists.

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