By Sofea Azahar,
Luck seems to not be on retail sector’s side this year since the struck of the Covid-19 pandemic as various unfortunate circumstances in the country have resulted in downturns for this particular sector. Therefore, more e-commerce perks should be given to help revive the sector, perhaps in Budget 2021.
The end of bank loan moratorium in end-September would be one of the reasons for the consumers to be more cautious of their spending habits and tighten their belt. The series of retrenchments and pay-cuts have their shares in affecting spending as well.
Even before loan moratorium ends, the Retail Group Malaysia (RGM) reported that the industry registered the worst contraction in 33 years at 30.9 per cent in the second quarter of the year (2Q20). The group also said the market has turned into a “bloodbath” due to the pandemic.
This came with a reason that the retailers and shopping centres are not allowed to operate at full capacity during the Recovery Movement Control Order (RMCO) as part of the SOPs which has affected their performances.
Given the current economic conditions, the RGM has revised its retail growth projection for this year from a contraction of 8.7 per cent to a worse outcome of -9.3 per cent.
To make the situation worse than it already is, the recent series of Covid-19 infections detected at shopping malls since late September particularly in Klang Valley which account for part of the retail sector, have intensified the fears amongst shoppers to visit such places which normally gather huge crowds.
Some of the malls involved with positive Covid-19 cases in the beginning include Sunway Pyramid, NU Sentral, Suria KLCC, The Linc KL, AEON Mall Nilai, Paradigm Mall, 1 Utama, and Setia City Mall. Then the list continues on to other common shopping centres such as The Gardens and Mid Valley Megamall.
Due to this, most of the affected retail stores are asked to be shut down for appropriate preventive measures to be taken.
It was reported by the Malaysian Reserve that the shift in retail landscape since the Covid-19 pandemic is expected to lead to the closure of more than 51,000 retail stores in the next four to five months.
Although all economic sectors in Klang district are allowed to operate as usual as long as they adhere to the SOPs despite being put under Conditional MCO (CMCO), the performance of retail stores there would eventually depend on consumer behaviour.
These unfortunate situations – rising Covid-19 infections, dampened spending at brick-and-mortar stores – will undeniably affect many livelihoods who are involved in the sector – the employers and the employees.
According to the Preliminary Report on Wholesale and Retail Trade Census released by the Department of Statistics Malaysia, there are a total of 870,814 full-time and part-time employees engaged in the retail trade sector as of 2018.
It is indeed a positive and encouraging move made by the managements of shopping malls to ensure the safety of shoppers by undertaking preventive measures such as complete sanitisation, proper disinfection and deep cleaning of areas infected by Covid-19.
The Malaysia Shopping Mall Association said measures such as contact tracing, temperature monitoring, wearing of face masks, provision of hand sanitizers at mall and stores entrances are also emphasized to combat the infection spread.
First thing first, a smooth revival of retail sector pretty much relies heavily on the responsibility of each individual in the society to mitigate the number of infections by following the SOPs strictly as our actions do affect one another.
Up until the current status, new Covid-19 cases have been at three-digit and should this continue, the cautiousness amongst consumers to be out and visit the shopping malls will remain, hence, dampen the recovery for retail sector.
Besides that, it is important for businesses to leverage on technology, i.e. e-commerce because most people have adapted better to the new habits of shopping online and it does not require consumers to be physically at the retail stores all the time.
Based on EMIR Research poll for the third quarter, the discussants agreed to the fact that Covid-19 has resulted in the emergence of an economy that is reliant on technology.
In their own words, a discussant highlighted: “Now it seems the surrounding suburban areas, with the start of Covid-19, we see a lot of these kind of businesses, suddenly a lot of entrepreneurs appeared. Meaning to say that (Covid-19) has created an economic opportunity and we even now see a lot of online businesses and these many online businesses are doing very well, as they say”.
Another discussant also said: “This MCO has made Malaysians to be more creative, for people to do online business, especially for pasar malam. People sell online and delivery is also arranged online”.
From the Penjana package, the government has allocated its expenditure for the businesses particularly the SMEs to encourage onboarding to e-commerce platforms in collaboration with the participating e-wallet companies.
Various benefits are made available for the businesses such as training programmes, seller subsidy and sales support, matching grants and automation grants, as well as loans for businesses to digitalise their services.
E-commerce discount vouchers were also provided to consumers via participating e-wallet companies in attempt to boost online consumption.
However, the benefits only lasted until September. So, in order to prop up online businesses and consumption further given the uncertain outlook for retail sector, the incentives should be open or extended at least until the end of the year.
New norm is emerging across all parts of the world and technology is driving the process. Thus, going online should be made the new norm for businesses in order to weather through the unprecedented crisis and to survive.
Sofea Azahar is Research Analyst at EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research.