PETALING JAYA: Global management consulting firm Mckinsey & Co’s survey on Malaysia’s consumer sentiment in April shows 80% of the respondents are more careful about how they spend money and two-thirds (66%) are cutting back on their spending amid the Covid-19 pandemic.
The firm’s partner Suyin Soon (pic below) told StarBiz the survey revealed that while the economic challenge is significant, it also found Malaysian consumers to be relatively optimistic.
She said 32% of them believed the economy would rebound within two to three months and be at least as strong as before the pandemic.
“That’s compared to developed economies like Australia (22%), South Korea (13%) and Japan (6%). However, this is lower when compared to large emerging Asian markets such as China (57%), India (57%) and Indonesia (45%), ” she noted.
The findings also showed that there was positive consumer spending intent as more consumers were expecting to increase their spending after the pandemic compared to before the outbreak. These are for the following categories: groceries (+28%), food delivery (+11%) and takeout (+6%), entertainment-at-home (+12%) and telecommunications (for example mobile phone service, home Internet service) (+22%).
Malaysian respondents, Soon said, were also spending more on groceries online.
“We see a positive consumer spending behaviour (i.e. more consumers increasing spending than those decreasing spending during Covid-19 than before) for online grocery shopping (+58%) and a positive consumer intent to do so even after the outbreak (+24%).”
On whether she expects the pandemic to impact the retail sector, Soon said the survey showed Malaysian consumers were deferring and cutting back spending on non-essentials (for example apparel, jewellery and accessories, furnishings and appliances and consumer electronics) which could impact retail traffic and business.
“Depending on the category, we see about 20% to 60% of respondents expecting to cut back spending during the pandemic outbreak and close to 10%-30% are expecting this behaviour to continue after the outbreak.
“Whether retailers will close in Malaysia this year depends on a number of factors. These include existing cash reserves and cashflow situation, level of debt/leverage, ability to tap external funding and/or government support programmes, the speed of economic recovery and the strength of customer value proposition – not all of which are correlated with size.
“Smaller retailers with an attractive local catchment area and a clearly differentiated offering (for example unique assortment, strong customer loyalty, flexible offerings using phone and social messaging apps) might see a resurgence in demand as consumers opt to shop closer to home in smaller outlets and avoid larger, more crowded, locations, ” Soon noted.
What is clear, she said, is that retailers that were underperforming pre-crisis would find it challenging to weather this crisis.
For example, she said, major retailers in the US like J.C. Penney, J. Crew and Neiman Marcus have all filed for bankruptcy recently whereas high-performing retailers would be able to use this crisis to their advantage, reinvent their businesses and emerge even stronger post-crisis.
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