DESPITE the almost back-to-back festivities of Christmas and Chinese New Year, retailers are bracing for slow business because of the prolonged Covid-19 pandemic.

Spending will be subdued for at least the first four months of the year, with the arrival of a coronavirus vaccine bringing only a little glimmer of hope.

Consumer spending was already cautious during Christmas and Chinese New Year will not be much different, retail associations said, after reporting a drop in shopping mall traffic by nearly 70% year-on-year.

Malaysia Shopping Malls’ Association president Teo Chiang Kok expects the cautious mood to extend into Chinese New Year, especially with the announcement of the second movement control order until January 26.

The MCO 2.0 is applies to six states – Penang, Selangor, Federal Territories (Kuala Lumpur, Putrajaya and Labuan), Malacca, Johor and Sabah starting tomorrow, while the conditional MCO (CMCO) will be introduced in six states – Pahang, Perak, Negri Sembilan, Kedah, Terengganu and Kelantan.

The psychological impact of the extensions and economic uncertainty is still a damper on overall consumer sentiment.

“Our quick poll found that the retail traffic in December fell by 50% to 70% compared to the same period in 2019,” said Teo.

“There is some positive news with the vaccine forthcoming but provided the MCO is not extended again, then we can hope that sales will pick up for Chinese New Year,” he said of the festival that will fall on February 12 and 13.

Teo said some malls are working with retailers and being proactive to boost sales through promotions and vouchers.

“The government has also chipped in with shopping vouchers and the buy Malaysian campaign.”

Malaysia Retail Chain Association (MRCA) deputy president Liew Bin said retailers should try to offer more discounts to boost sales.

He also welcomes the Domestic Trade and Consumer Affairs Ministry’s leniency when approving applications for malls to hold promotions.

Many retailers are reviewing their old practice of relying on “heavy assets” for expansions, such as opening new stores in other malls nationwide, said Liew.

With the pandemic, the new approach is lean and light.

“One chain store decided to open nearly 70 outlets in various malls across the country. It was a great shock when the pandemic struck and malls became empty. Losses ran into thousands of ringgit a day,” Liew said.

Many international brands, such as Zara, H&M, have announced store closures, affecting Malaysian outlets as well. H&M will close 250 stores worldwide, while Zara will shutter 1,200 outlets.

Liew said big brands may be waiting to make a comeback and rebuild in the future, while observing how the pandemic unfolds.

At the same time, as big names exit, new brands will enter the market.

Logistics competition

But brick-and mortar-retailers, whether established or new, face another threat – online shopping and home delivery.

Alibaba Group’s Cainiao Global, the global logistics firm which began operations in Malaysia late last year, will be a force for domestic retailers to contend with, Liew said.

Its logistics and warehousing centre – the Cainiao Aeropolis eWTP hub – based near the Kuala Lumpur International Airport, has a KPI to deliver goods in under 24 hours within Malaysia, and within 72 hours for other countries.

Popular online shopping site, Lazada, is already among the first of e-commerce firms to use Cainiao’s services at the KLIA hub, which is a joint venture between Malaysia Airports Holdings Bhd (MAHB) and the Alibaba Group.

This will bring a new wave of challenges for physical store owners, Liew said.

“The Chinese said they wanted to do this and now they have really done it, and the local retail industry is still not sure how to deal with it.”

While retail outlets in malls suffer, Liew said the brick-and-mortar stores that supported the overall retail industry in 2020 were convenience stores, such as KK Mart, FamilyMart, Speedmart 99 and 7-Eleven. – January 13, 2021.