MALLS and retailers are still reeling from the Covid-19 pandemic as the country grapples with the third wave of the coronavirus.

Survival is now their key concern as the government continues to initiate the conditional movement-control order (CMCO) to stem the spread of the virus.

Seven states are in partial lockdown until December 6. 

Due to the prolonged nature to the CMCO, these businesses are expecting more closures in the next six months.

However, they continue to reassure shoppers that they are constantly following all the standard operating procedure (SOP) to make the malls safe for all visitors.

Malaysia Shopping Malls Association president Teo Chiang Kok said they were on the positive up till August with shoppers regaining confidence resulting in foot traffic reaching 70% -90%.

“It is most unfortunate that the third wave of infections started to hit our country after that.

“Footfall to malls started to decrease and fell drastically to 10%-25% of pre-MCO levels when the second CMCO was imposed in October,” he said.

It is estimated that the layoffs of direct employment in malls and retailer staff, excluding head office and supply chains, may amount to 68,000 employees.

Teo said with the prolonged economic downturn and continuing uncertainty because of Covid-19 on household incomes, purchasing power and livelihoods have resulted in low sales turnover to now only 20%-30% nationwide and 10%-15% in CMCO areas.

“This is largely due to wary shoppers and the current CMCO which limits movement of the people amid reports of hefty fines due to unclear SOP.

“The government’s current directives to work from home and the limitation of office hours meant the office crowd that sustain the footfall during weekdays are missing.”

Teo said the imposition of the CMCO was devastating on the economy and compounded by the expansion to other states. 

“This has sent a message of the severity of the situation and removed all confidence of the public causing undue panic and fear.

“We hope the Health Ministry will broadcast more detailed specific locations of cases and not have broad-brushed figures that cover wide regions when only very specific locations have multiple cases.”

No full recovery

Teo said the impact of the current CMCO is worse now than in March.

“This is because we have never fully recovered to pre-MCO levels, so the drop in shopping malls footfalls and sales turnover is more impactful and painful. 

“As in the normal shopping mall trading cycles, we foresee some closures and changes to our trade mix but we will probably now see more closures over the next six months.”

While it has been 10 months since the MCO, Teo said most operations have depleted their reserves and are surviving on day-by-day business volume. 

“The retail and shopping industry, along with practically all other businesses in need of critical assistance, has not been addressed in the recent Budget 2021.

“Any assistance to increase and preserve cash flow is of paramount importance as this is now the lifeline for survival.”

Apart from extending the moratorium on business loans, extension of electricity rebates would be necessary as it forms a chunk of operating costs.

At present only SME tenants and rental reductions of up to 30% qualify for tax relief, he said, while all tenants, big or small, are struggling.

The 30% threshold is also hampering landlords’ ability to lower rentals on a case-by-case basis.

“The current tax relief should be changed to tax rebate to encourage and make it more affordable for landlords to grant rental reductions. Other avenues to preserve cash flow have to be introduced quickly.”

The association has proposed a waiver of all licences, permits, application fees, quit rent, assessment and entertainment tax in 2021 and all such permits extended automatically without the need for renewal application.

The survival of malls depends on further government assistance, he said.

“Already some major retailers have closed, notably the Robinsons department store, cinemas and some franchise chains, and increasingly local brands and F&B outlets. 

“We conservatively foresee an additional 5%-10% vacancies in the next 12 months. The more severe fallout will definitely result in a domino effect – tens of thousands of layoffs with closures of businesses and affiliated businesses.”

Scraping by

Malaysia Retail Chain Association president Shirley Tay said retailers are feeling the impact of the CMCO as footfalls have decreased.

“Retailers at the malls very much depend on footfalls to their outlets. But we can see that even the big malls are quiet.

“If we can sum it up, it’s just really bad right now. This has resulted in some retailers closing down.”

MRCA comprises more than 500 leading retail chain stores operators, as well as franchisers covering more than 30,000 outlets throughout Malaysia.

Tay said in order to survive, some retailers are streamlining their business and concentrating on better performing branches rather than having too many to handle.

“We don’t have the numbers of how many have closed down. But we know that they are downsizing their business.”

Tay said what they need now to survive is funding to help retailers out.

“But how much can the retailers depend on funding? The wage subsidy has helped but it is only temporary.

“The retailers still have to pay rental and salary and for supply of goods. The government funding is not enough.”

To cut overheads, many are hiring part-timers and seeking cheaper suppliers.

“They can’t afford full-timers and some staff have also been asked to work on shifts.

“They are also looking for cheaper goods and raw materials. They have to explore all avenues to survive.”

Some of the affected retailers include F&B outlets, accessories, fashion and others.

“A lot of people are not eating out now. The fashion and accessories outlets are also affected as people are staying at home, so the last thing they are thinking about is fashion as it is not a necessity now.”

Salary, rent headache

Tomei group managing director Ng Yih Pyng said the raging Covid-19 pandemic has changed consumers’ spending patterns.

“This has resulted in a drop in customer traffic at our jewellery stores in November by 30% to 40%,” he told The Malaysian Insight.

“Business for us recovered from July to September but from October, it started to drop due to the CMCO. This is continuing in November.

“Although we have 54 jewellery stores across the country, we have not laid off any staff. We have adjusted our staffing to do online sales during this restriction period.”

Business is bad because there are no wedding ceremonies, he said, and they are now depending on birthdays and gifts. 

“It would be great if tax relief could be extended to affected retailers until the situation is over as well as contribution to EPF and Socso should be frozen to help ease cash flow.”

Sakura Kristal Group director Chong Weng Wah said footfalls to their outlets have reduced by 90% since the CMCO was announced.

“Salaries that we have to bear are also a major pain. Though we did receive subsidies from the government, they were inconsistent and during some period, it reduced by 40-50%.”

Sports outlet Al-Ikhsan chief operating officer Vach Pillutla agreed that CMCO has resulted in loss of business for them.

“Despite this, we still have to pay rentals and overheads,” said Vach.

“We will keep our stores open as long as possible and as long as there is business.” – November 20, 2020.