WHEN the government allowed businesses to resume operations back in May following the imposition of the movement control order (MCO), many in the retail industry expected to see a recovery for the sector by the fourth quarter of this year.
Unfortunately, the current fresh wave of Covid-19 cases is a setback on the path to recovery for retail operators.
The question on everyone’s lips is, how long will the recovery take this time?
Sunway Malls and Theme Parks chief executive officer HC Chan admits that the recent wave of Covid-19 infections will have an impact on the operations of retail players everywhere.
“In the short term, there will be a temporary setback in terms of recovery. Before this wave, since the re-opening on May 4, both traffic and sales have seen a healthy recovery trend and generally on an uptick, ” he tells StarBizWeek.
Chan adds that this was also in tandem with more sectors reopening and the travel restriction ease beyond 10km.
“This is encouraging to note as it signifies the returning of consumer spending in Sunway Malls.
“Our August figures indicated sales and traffic figures had recovered into the 80% range, compared with the previous corresponding period in 2019.
“The contagion effect of this resurgence is expected to push back recovery.
“The degree of that will be dependent on how swiftly the R-naught is brought down below one.
“We see this as an important psychological barrier to break for the general population to resume commercial activity.”
An “R-naught” is a mathematical term used to indicate how contagious an infectious disease is.
“For example, if a disease has an R-naught of 10, a person who has the disease will transmit it to an average of 10 other people.
The current spike in Covid-19 cases has led the government to implement a 14-day conditional MCO in Sabah and the central region of Selangor, Kuala Lumpur and Putrajaya from Oct 14 to 27.
The outbreak also saw several notable malls within the Klang Valley reporting Covid-19 cases.
Some of the malls have been shut down temporarily for disinfection work and contact tracing, after Covid-19 cases were detected within their premises.
Among the malls within the Klang Valley that reported cases within their premises included 1 Utama, Mid Valley Megamall, Bangsar Shopping Centre, Setia City Mall, 3 Damansara, Paradigm Mall, The Linc KL, Suria KLCC, KL Gateway Mall, NU Sentral and Sunway Pyramid.
Chan says the conditional MCO, albeit a painful short term pain, is a necessary step towards long term economic continuity.
“The pandemic effect is not a short term zero game, but rather a long term recurring game whereby first is survivability and then sustainability.
“We see the importance in adopting a long term outlook in managing this.
“We appreciate the Health Ministry’s efforts in flattening the curve to prevent our infection rate from jumping to and R-naught of 2.2.”
UOB Kay Hian in a recent report notes that there has been a decline in footfall in malls amid the rise in Covid-19 cases.
“Footfall has noticeably declined at malls in the past weeks ever since a number of malls in the Klang Valley had issued alerts on Covid-19-positive shoppers/ staff.”
CGS-CIMB meanwhile says the reinstatement of the conditional MCO will negatively impact the retail sector.
“We anticipate a challenging recovery period for retail malls in terms of consumer sentiment reverting to a more cautious stance; declining mall visitations in the second half of 2020 and falling footfall, which would reverse the improving trends observed since July.
“We also anticipate subdued tenant sales, especially for non-essential items and temporary shutdown of entertainment/ social-related outlets during the two-week conditional MCO period.”
Boosting confidence and safety
In light of the challenges faced, Chan says doing the right thing and being transparent is an important and ethical aspect of business.
“We have to be reminded and be mindful of the fact that we are still in the midst of a pandemic.
“While there is a need for economic vitality, it is imperative that it is balanced with public health.
“It must be equitable.
“While many of the new cases are linked to malls, one salient point to take note of is the speed and comprehensiveness of the measures that are undertaken to tackle the situation.
“This includes both preventative and corrective measures.”
Chan says malls generally have been quick to undertake action.
“As a controlled environment, it grants malls a better control access compared to insecure and uncontrolled, street-like shops.
“Confidence-restoration is a continuous process of diligent, stringent and regular safety, as well as the implementation of sanitisation protocols.
“Safety is a collective responsibility. Public adherence and self-discipline are also important considerations.”
In terms of outlook, Chan says Sunway had an initial forecast going into the fourth quarter of this year.
“Our initial forecast, without any Covid-19 up-spike and continued containment, was that we anticipated to see sales and traffic to normalise to around the 90% range for the fourth quarter of 2020 and first quarter of 2021 for Sunway.
“Traditionally, the fourth quarter is one of the strongest for malls and retailers.
“The resurgence of the new wave meant recovery has been pushed back.
“On the degree of how much will be largely dependent how swift the R-Naught is brought down.
“This is an important game-changer for the retail sector.”
According to Bank Negara in its “Financial Stability Review – First Half 2020, ” shopping complexes were adversely affected by the decline in footfall during the MCO (which was implemented on March 18) and lagged recovery during the subsequent conditional MCO and RMCO (which was imposed from June 10).
“Amid pre-existing oversupply conditions and changes to consumption behaviour since the pandemic, rental rates in the retail commercial property market are likely to remain depressed in the period ahead, ” the central bank said.
“Industry insights indicate that the recovery in footfalls in malls will be gradual and could take between six to 12 months given continued cautious behaviour and adoption of the new standard operating procedures.”
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