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Saturday, 14 January 2017

(The Star) Improving outlook for online shopping

More shoppers seen migrating to virtual stores as economy slows down
As consumers hold on tighter to their wallets and purses amid a slowing economy, online shopping is expected to be more prominent in the Malaysian retail scene with more brick-and-mortar retailers offering online shopping facilities to customers.
As in many other countries around the world, the trend of online shopping is gaining a sizeable market share in the Malaysian retail space, according to leading retail consulting firm Retail Group Malaysia (RGM).
Commenting on this trend for 2017, its managing director Tan Hai Hsin tells StarBizWeek that although this trend is fast catching up in the country, it is not expected to replace physical stores anytime soon.
“Malaysians are active in online shopping.
“But the transaction amount is still low compared to the entire retail industry.
“Online retail sales only account for less than 2% of total retail sales in Malaysia.
“Services like telecom services, banking services, movie tickets, government services, etc account for the largest portion of online shopping.
“More and more brick-and-mortar retailers in Malaysia offer online shopping facilities.
“This trend covers almost all retail sectors - international luxury brands, clothes, fashion accessories, gifts, toys and books, etc.
“At the same time, more online retailers in Malaysia are setting up physical stores. Zalora.com.my has a permanent (shop) at Mitsui Outlet Park,” he adds.
The popular Christy Ng Shoes has set up a showroom in Damansara Utama.
Popular Facebook Fatbaby has also set up an ice cream parlour in Subang Jaya.
F Block and Aurora are two good examples of retailers offering both physical stores and online shopping sites at the same time, Tan notes.
RGM provides retail research and shopping centre consultancy services to retailers, shopping centre developers and shopping centre managers in Malaysia as well as in the region.
RGM is projecting a 5% growth rate in retail sales this year and has revised downwards the growth rate from 3.5% to 3% for last year or to RM 99.1bil in retail sales value.
This year will remain a challenging year for Malaysian retailers as significant recovery will only be expected during the second half of 2017, according to the firm.
As the economy is not expected to recover strongly in the immediate term, Malaysian consumers are expected to hold back on their spending during the first half of this year.
The continued weakening of the ringgit will impact the costs of retail goods, RGM says, adding that retailers may be forced to raise prices again during the first six months of this year.
Meanwhile, Malaysia Retail Chain Association (MRCA) president Datuk Garry Chua agrees e-commerce will be the trend to watch out for in the retail space with the government’s initiative to diversify the country’s economy in the e-commerce domain via the setting up of the Digital Free Trade Zone.
This will help the retail industry in Malaysia to grow and towards this end, he adds MRCA has formed a committee to work closely with the Government pertaining to the Digital Free Trade Zone.
Alibaba founder Jack Ma has been appointed as the digital economy adviser to the Government for this initiative.
MRCA is forecasting retail sales growth to improve this year at 5% to 6% compared with about 4% growth for 2016.
Chua says the higher growth rate in retail sales for this year can be partly attributed to arrival of tourists, especially from China.
“This year about one million Chinese tourists are expected to arrive in Malaysia which is a boon to the retail industry.
“Each trip to the country, RM3,500 to RM4,000 will be spent by each individual during shopping. This will lift retail sales amid some challenges in the retail arena,’’ he says.
Chua says one of the major challenges which may impact the growth of the retail sector is the requirement for employers to pay the levies of their foreign workers under the newly introduced Employer Mandatory Commitment.
He feels the government should do away with the payment of the levy as it will affect the cost of production and pricing.
Another challenge for the sector is the escalation of rental rates in prime areas which has put pressure on retailers operational costs, he notes.
Tan reckons the retail sales performance in 2017 will have a direct impact on the occupancy rates of shopping centres. Many shopping centre owners have introduced rental rebates or reduce rental rates in order to retain existing tenants, he says.

“Shopping centres that suffered from low occupancy rates in 2016 will still face the same challenges this year. In addition, many new shopping centres will still face difficulty to secure new tenants to take up their retail shops if the purchasing power of Malaysians do not improve by the second half of this year. Numerous shopping centres in Klang Valley scheduled for opening last year have been delayed to this year,” he says.