Real challenges facing brick and mortar shops

  • Letters
  • Monday, 07 Oct 2019

I REFER to the article “Can’t beat the brick and mortar stores” (The Star, Oct 4).

Having been in the garments’ wholesale business and dealt with hundreds of retailers established in malls and also in shophouses over the past 30 years, I have some views on this issue.

Firstly, just because we have a large number of shopping malls (and new ones in the pipeline as well), it does not mean the brick and mortar model is thriving. Although many malls may have high foot traffic (especially on weekends), it does not mean people actually go there for shopping. The quickest way to judge (although not 100% foolproof) is by using what we in the industry call the “plastic bag test”. Look at the people walking around in the mall and count how many are holding shopping bags. The fact is although there are lots of people in the mall, most of them are at the food and beverage (F&B) outlets. One needs to compare the crowds at the food court or F&B outlets against the crowds at the retail shops.

Based on my past experience and from conversations with many retailers now, I know that Malaysian shoppers tend to wait for bargains, sales and discounts and then only make their purchases. Hence, actual shopping is concentrated around sales or festive periods. Walk around the malls on weekdays and you would be surprised at the lack of crowds unless it is a school or public holiday.

Also, if one were to study the prices of garments over a 20-year period, one would find that retail prices have actually stagnated. In fact, garments are generally cheaper now compared to 15 to 20 years ago.

This explains why discount chains (offering garments at low prices) are thriving compared to traditional branded outlets. This has forced many branded outlets to seek better costing from their suppliers and also try to offer cheaper prices to consumers while maintaining their product quality and earn enough profits to pay for advertising, promotions and renovation of stores to keep their outlets looking new.

But this situation is causing a major problem to many retailers. While there may be higher footfall (with a rising population), stagnant retail prices and increase in rentals and wages would lead to retail disasters, as can be seen in big name retailers in the United States and Europe. The latest casualty is Forever 21.

As for e-commerce sale, a November 2018 Fitch Solutions report states that e-commerce sales are projected to grow at a steady 14% annual rate from 2018 to 2022 in Asia-Pacific. The report highlighted Malaysia as having the strongest growth in the region and forecast e-commerce sales here to rise to US$12.9bil by 2022. This is definitely going to cause a huge impact on the business of brick and mortar stores.

All in all, brick and mortar stores are facing a gamut of problems including increasing rents, shortage of qualified retail service staff, consumers putting off their shopping to wait for discounts and sales (putting further pressure on the bottom line), online shopping and too many new malls diluting footfall. The problem is already serious in the US and Europe where there are multiple store closures and staff layoffs.

However, all is not lost if retailers and operators start to carefully analyse and fine-tune strategies that would see them through the coming storm.

AAA , Petaling Jaya

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