Phasing out traditional businesses

End of an era: Peter Tan is closing down See Kong Ooi.

IN LATE May, The Star ran a story on the closure of George Town’s iconic 84-year-old See Kong Ooi restaurant. After weeks of grappling with the Covid-19 pandemic, third-generation owner Peter Tan said he had not been able to fend off the effects of being closed since March 18 due to the movement control order (MCO).

It opened as a small coffee shop business in 1936 by Tan Kong Chye and his wife who sold drinks and toasted bread to customers of hotels along Transfer Road.

Kong Chye, who moved to the island from the Fujian province in China decided to name his humble business See Kong Ooi after a lake on the western part of China.

It survived the Japanese occupation of Malaya and various economic and financial crisis, the mid-1980 recession, the 1997/98 Asian Financial Crisis and the 2008/09 Global Financial Crisis. But not Covid-19.

“Customers would usually dine in as the dishes are tastier when served hot, ” Peter, third generation owner, said.

He explained that the restaurant did not want to provide takeaway and delivery services as the dishes would be cold and “taste like economy rice”.

“It won’t be value for money as the dishes won’t be tasty any more, ” Peter said.

Embracing change can be a very steep learning curve. Resilience, a new mindset and manoeuvring change can be both scary and revealing.

Retail Group Malaysia managing director Tan Hai Hsin says the closure of various businesses, be it food and beverage (F&B) or other forms of businesses is part of the economic cycle.

“Even without this pandemic, some of these traditional restaurants will phase out eventually. During this pandemic, the owners had found the right opportunity to close down, ” Tan, who is managing director of Henry Butcher Retail says. Henry Butcher is a retail property consultancy while Retail Group Malaysia is an independent research consultancy.

The situation is similar to the time when the government introduced the goods and services tax (GST) in 2015.

“Many traditional retail shops closed down as they could not modernise their businesses, ” says Tan about old family F&B in general, with no direct reference to See Kong Ooi.

He says some of these F&B outlets – and there are many highly popular old family names in Penang, Perak, Klang Valley and Johor – may already have been facing operation and financial problems prior to Covid-19.

F&B outlets face the same problems as many traditional retail businesses in Malaysia. Owners may be facing health issues due to their age, others could not find younger people to take over their businesses.

They may be facing staff shortage as young people do not want to work long hours and are unable to hire foreign workers, Tan says.

“Traditional F&B outlets have low profit and staff are required to work long hours. Some of them may have great recipes, but no one wants to take over from them.

“Intense competition is another contributing factor. Many individuals and private companies venture into F&B businesses due to its popularity and low entry cost. This sector is more over-crowded compared to the retail sector. Of course, the failure rate is also high, ” says Tan.

Consumers’ changing dining preferences have also affected the survival of traditional restaurants. The younger generation prefers F&B outlets that offer better dining environment even though the prices of food and drinks are slightly higher.

However, this does not mean restaurants that have been operating for more than 50 years do not have a future. There are many examples in Taiwan, Japan, China and South Korea where a 100-year-old restaurant remains a popular dining place for new generations of consumers and foreign tourists.

“There are lessons to be learned from these countries on how old restaurants can thrive in the modern world.

“This is the same situation as provision shops in Malaysia. When the government introduced GST, many of these operators refused to modernise their business. The owners refused to learn new skills. They were not willing to accept new technologies. Eventually, they were phased out, ” says Tan.

F&B is part of the small and medium-sized enterprises, which includes many retail stores and shops. Tan says that up to 30% of retail stores located outside malls are expected to close permanently, while not more than 10% located inside malls will close. As a whole, about 51,000 retail stores out of a total 325,000 are expected to close in the next five to seven months, or about 15%, he says.

He says small-scale and independent retailers are one of the most affected businesses during this crisis. These individual shop owners are “most likely to be cash strapped” during this period.

“We expect many of them to close down in the next three months. Many have shut down their stores during the last few weeks, ” he says.

“This crisis will lead to the survival of the fittest, ” Tan says.