Retailers Feeling The Pinch As Malaysians Spend Less

The Malaysian Retailers Association (MRA) have lowered the projected retail sales growth rate in 2015 for the third time from 4.9% to 4.0% as consumers hold back on spending due to higher living costs, a weaker currency and higher cost of business transactions.

In a report issued on Thursday, MRA revealed that retail sales grew 4.6% in the first quarter of 2015 (Q1, 2015) but turned negative to -3% in Q2.

However, it expects a recovery in Q3 with a growth of 4.8% and pick up to 6.9% in the final quarter.

The trade body said that many Malaysians have cut back on spending since the end of 2014 in anticipation of the Goods and Services Tax (GST), which came into effect on April 1.

However, they are confident that consumers will get used to the GST by the last quarter of 2015 and retail spending is expected to return to normal again by the period.

Which sectors are taking a hit?

According to the report, the specialty stores subsector reported a -7.8% decline in business in Q1, 2015 compared to a year ago. These stores include retailers selling photographic equipment, health and fitness equipment, second-hand goods and children-related goods.

Department stores cum supermarkets reported a 14.7% growth in Q1, 2015 from 7.9% in Q4, 2014, and a 6.8% growth from Q1, 2014. However, it sees a slower growth of just 3.7% for Q2, 2015.

Department stores operators expect business to return to red of -14.9% in Q2, 2015 after a short recovery of 7.9% growth in Q1, 2015.

The supermarkets and hypermarkets segment (selling basic goods and necessities) recorded a growth of 5.1% in Q1, 2015, a 1% growth from Q4, 2014. However, MRA sees this sector reversing into red with a contraction of -1% in Q2, 2015.

Retailers in the fashion accessories sector reported a 4.5% rebound in Q1, 2015 following a 2.2% decline in Q4, 2014. However, they are bracing for a projected -2.1% decline in Q2, 2015.

Finally, the furniture and electrical and electronics sector saw a 24.5% growth in Q1, 2015 ahead of the GST implementation. MRA expects growth to decline to 7.1% in Q2, 2015.

[Source]