Retail Industry Needs Bigger Pie

Selection text from NST, Biz News, 2 Jan 2008, pg 38.

2008 Outlook by Toh Peng Koon, President of Malaysia Retailers Association

Q1. Challenges for local retail industry this year.

Too many shopping complexes that have just been completed or under construction or being planned.

Increased by 20% with the opening of 6 malls and expansion of one mall in Kuala Lumpur.

The retail industry could not expand in tandem to support this sudden explosion of retail space.

Explosion of retail space, shortage of staff is worsening. This would add pessure to salary and costs of operations to the retailers.

Growth in the the retail industry would be capped by the higher cost of living which has been escalating.

With oil prices touching the US$100 (RM 331) per barrel mark, the worsening rising cost of living expenses would post a major challenge to the industry.

Q2. Ways to overcome these challenges?

To enlarge the retial pie via tourism.

To extend the Visit Malaysia Year 2007 to 2008 as 25% of total tourists receipts is from shopping. So far, VMY 2007 has been successful.

For Malaysia to be as a preferred shopping destination in the region, it is mandatory that retailers should keep up with the latest development in store layout, design, materials, concept, fixtures, current hot brands of merchandise (that would require realignment of layout) as well as appropriate maintenance to keep the store fresh and presentable.

Hope the Government through Inland Revenue Department would help to reduce costs of operations by allowing full cost of refurbishment to be tax-deductible.

Q3. Trends that could shape the retail industry this year.

Increase interest from the Malaysian and foreign institutional investors and property funds in commercial properties. Sell and lease-back activities were also common. This would help improve the overall complex management standard.

Hypermarkets are on aggressive trail and department stores rae making significant tenancy commitment as anchor tenants in the major shopping complexes. This could add pressure to productivities.

Q4. Prospects for the Retail Industry 2008

Average rate for past 3 years had been 8% and 2006 retail sales growing 8.4% year-on-year.

Positive factors that can sustain growth rate for 2007 include salary adjustment for civil servants, increased public spending and a bouyant stock market.

Hypermarkets topped the value sales growth in 2006 due to authorities' relaxation in the ruling governing the opening of hypermarkets.

Non-grocery sectors are also expected to perform better for 2007. So the year end prediction is expected to be 8%.

For 2008, it is not so optimistic. Retail are expected to perform more or less in tandem with the country's Gross Domestic Product growth.