Retailers brace for stricter measures to fight pandemic

Low-key: Chinese New Year (CNY) decorations seen at the Sunway Velocity Mall. CNY is one of the peak seasons for the retail sector during the first quarter.

THE implementation of the latest movement control order (MCO 2.0) is forcing mall operators and retail associations to employ provisional measures to mitigate any impact to their businesses.

Sunway Malls and Theme Parks chief executive officer HC Chan says since malls are still allowed to operate, Sunway Malls will remain open from 10am to 8pm daily.

“Given our footprint is across seven malls across the Klang Valley, Penang and Johor, it is important to enable communities within a 10km catchment to have continued access to products and services.

“Focus is generally concentrated on key accessibility points to enable smoother, faster, safe and convenient access. Presently, around 40% to 50% of our tenants in Sunway Malls are open to serve these needs, ” he tells StarBizWeek.

Malaysia Shopping Malls Association president Tan Sri Teo Chiang Kok says the first MCO in March 2020 has prepared its members to operate as efficiently as possible now.

Tan: Tan: "The only priority now is to reduce the number of daily infected cases."

“We have had the unfortunate experience of the MCO lockdown previously and are ready with any contingency plans, given the knowledge of the severe downturn in business.”

Retail Group Malaysia (RGM) managing director Tan Hai Hsin says 2021 has not gotten off to a good start for the local retail industry.“Barely a month into 2021, we have witnessed several closures from both international retailers and local players. The implementation of MCO 2.0 will lead to some retailers giving up their businesses.

“This is because the government has not announced any monetary incentives and banks have not given any loan moratorium for this period of closure.

At the moment, landlords have not made any announcements on rental waivers.”

Tan believes that more retailers will shut down permanently in the event that the MCO 2.0 is extended to four weeks or more.

There is no doubt that retail sales performance for the current quarter will see some impact even if the lockdown will be for only two weeks.

Chan says the MCO 2.0 will have an impact on sales during the current quarter as the Chinese New Year (CNY) is one of the peak seasons for the retail sector.

“Despite that, we still foresee festive buying in our malls albeit on a lower scale, depending on the duration of the MCO 2.0.

“One year into the pandemic, we all have learned to co-exist with the virus.

“Though festive celebrations might be scaled down, the significance and cheer of the season has not dampened.”

Chan says “celebrations” will be skewed towards being family-centric from community-centric.

“The positive development is that vaccinations will begin next month and by the second half of 2021, half the population will be vaccinated and that will allow normalcy to return.”

Teo says the retail industry is bracing for a slow business environment even without the lockdown.“With the increasing costs of doing business, weak sales and poor cash flow as well as many players having exhausted whatever reserves they had over the past eight months, businesses are in precarious positions to survive.

Teo: Whatever sales spike anticipated for the CNY period is now doused with this lockdownTeo: Whatever sales spike anticipated for the CNY period is now doused with this lockdown

“From the consumers’ perspective, similarly, most depleted their savings and due to the uncertain times, are understandably cautious, which is compounded by the fear of salary cuts and retrenchments.”

Teo adds that most retail sector employees are resigned to the fact that there will be, at best, no salary increment or bonuses.

“Whatever sales spike anticipated for the CNY period is now doused with the lockdown.”

Tan says RGM has yet to make any projections for the first quarter of 2021.

“RGM projects a 4.9% positive growth rate in retail sales for 2021. However, that projection was made in November last year.

“The projection may now be lower due to the latest development of the Covid-19 pandemic in Malaysia. We will not revise the projection at the moment as things are changing every week.”

“This is both in terms of the number of positive cases being reported daily, as well as reports of temporary closures of grocery stores and retail outlets because employees are being infected.

“We are also seeing frequent changes in government policies and guidelines. Thus, it is difficult to revise the projection.”

Should the current MCO be extended another two weeks, Tan says it will affect retail sales during the CNY period.

“Nevertheless, the only priority now is to reduce the number of daily infected cases.

“To do this, we have no choice but to reduce shopping traffic around the country for a limited period. The current MCO is important for us to reduce daily cases. “Strict standard operating procedures should be enforced and everyone needs to abide by it.”

Tan emphasises that there is no point for all retailers to remain open if there are no customers in the first place.

“When the first MCO was introduced in March 2020, non-essential retailers were asked to close.

“At the time, landlords waived rentals, banks delayed loan repayments and the government gave subsidies to retail employers. Thus, many retailers managed to survive during that period.

“When the second conditional MCO (CMCO) started from Dec 7,2020, most retailers stayed open but with low shopping traffic. At the time, retailers still needed to pay rental, loan repayments, salaries and utilities. Their situation during the second CMCO was worse than the first MCO in March 2020.”

The MCO 2.0 was reinstated on Wednesday in Selangor, Johor, Penang, Melaka, Sabah and the federal territories of Kuala Lumpur, Putrajaya and Labuan, following a sharp increase in Covid-19 cases.

Meanwhile, the Malaysian Retail Chain Association (MRCA), in a statement, says the reintroduction of the MCO is expected to significantly affect the majority of retail businesses, particularly the food and beverage businesses in the affected states.

“That said, the other states may experience a significant spillover effect due to the immediate interstate travel ban which would impede domestic tourism activities.

“Although many retailers have still not recovered from the first MCO, the MCO 2,0 may just be the last nail in the coffin for small enterprises, as cost-cutting measures alone, including salary reduction or downsizing will not be sufficient to sustain their operations.

Chan: Chan: "We still foresee festive buying in our malls remaining, albeit at a lower scale, depending on the duration of the MCO 2.0."

“In fact, pivoting to e-commerce or an online food delivery platform has not provided retailers with the minimum revenue required to cover the basic business expenses.”

The association adds that the initial MCO was extended three times and was not helpful for retailers in making business contingency plans.

“Although retailers are more prepared now for this second round of MCO, further extensions are likely to erode the likelihood of business recovery or survival in some cases.

“Therefore, we urge the government to formulate and roll out immediate financial assistance packages not limited to loan moratorium and wage subsidies for retailers to save businesses and jobs moving forward.

“The Covid-19 Act should be also revised to afford protection from undue legal harassment due to the retailers’ inability to meet their financial or non-financial obligations throughout the MCO period.”

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