2004 Jan Issue
Cover Story
Retail Outlook 2004 - Singapore: Retailers tread cautiously
Other Stories
Retail Outlook 2004 - India: Organised retailing set for rapid growth
Retail Outlook 2004 - The Philippines: Coming up roses
Retail Outlook 2004 - Malaysia: A better but more challenging year ahead
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Retail Outlook 2004
Malaysia: A better but more challenging year ahead

With new players and more stores coming on stream, retailers in Kuala Lumpur and Malaysia’s other key cities are gearing up for greater competition. Chow Chui Lin finds out more from Ramli Idris, president of the Malaysian Retailers Association.

Malaysian retailers can expect to an improved business climate this year but will face stiffer competition for the consumer dollar with the advent of more stores and players in the market.

According to Malaysian Retailers Association's (MRA) president, Ramli Idris, retailers are highly confident that 2004 will be better than last year, which he described as “tough but smooth”.

Idris added: “The second half of last year was challenging for retailers. There was not much increase in performance in what was already a dismaying year but, fortunately for us, at least we didn't fall back further.

“The transition of power went smoothly, and with all the anxiety associated with it behind us now, confidence is improving in the consumer and business communities. We expect business to be better in the new year.”

Last year's weak consumer sentiments were attributed to several factors, including the SARS (severe acute respiratory syndrome) outbreak, the Iraq war and Malaysia's premiership change. Abdullah Ahmad Badawi took over as Prime Minister last ­October from Tun Seri Dr Mahathir Mohamad, who held the reins for 22 years.

The first quarter last year registered a 0.1% slide, reported the September issue of MRA's Retail Biz. The pharmaceutical/personal-care sub-sector was the worst performer, plunging 10.7%, while the department store-cum-supermarket sub-sector declined 0.9%.

In contrast, the department- and speciality-store sub-sectors grew 4.3% and 19.2%, respectively, in the same ­period. These two sub-sectors are also expected to boost retail growth in 2004, said Ramli.

He elaborated: “Speciality shops like the newly-opened Debenham at Times Square Kuala Lumpur, and stores that focus on lifestyle goods like furniture, books, clothes and shoes will see a good demand for their products.

“The customer base in Malaysia is young — the average age is 28 and 40% of the population is in the 18-30 age group. Thus, demand for lifestyle ­pro­ducts is very high. The favourable ringgit exchange rate has also made it attractive for tourists to shop in Malaysia.

“Souvenir shops will also do well as the visitor count now is about 13 million and tourist receipts show that 28% of their expenditure is on shopping, second only to [spending on] hotel rooms.”

The MRA chief also expects 2004 to be a year of reckoning for the retail trade, as players will be competing in a more vibrant environment and feeling the heat of competition at their doorsteps.

“There are many new developments on the retail front. Bigger players are expanding, with Tesco opening new outlets in Sungei Petani and Penang, and Jusco in Kepong (Kuala Lumpur) and Johor.

“Retailers will have to learn to compete in the now globalised environment. Smaller retailers with a niche market can still survive. It's the medium-sized retailers (120,000sqf category) that ... will suffer if they do not have the power to change or be very focused in what they do, if and when a big player moves into their neighbourhood.”

Ramli contends that a particularly interesting development to watch in 2004 is the expansion of what is known in Malaysian retailing as the Golden Mile — a swathe of properties stretching from the relatively new and upmarket suburbs of Damansara Jaya and Taman Tun Dr Ismail to the industrial and once-lowly suburbs of Sungei Buloh and Kepong on the outskirts of Kuala Lumpur.

The One Utama complex, a pioneer in the area which opened in the mid-1990s, was a huge success, inspiring other developers and retailers to set up shop nearby.

Last year saw the opening of several major complexes and stores in this area. Most notable was the RM125-million (US$32.8-million) Ikano Power Centre. Touted as the country's first mammoth-concept mall, it is expected to attract about a million visitors, monthly.

Ikano Corporation is the franchise owner of home-furnishing store Ikea. A former One Utama anchor tenant, Ikea now occupies 360,000sqf of Ikano Power Centre's 420,000sqf of net lettable space, making it the largest Ikea store in Asia. It is one of 12 major tenants at the centre which will also house 60 other retailers.

The centre is part of a larger complex, known as Curve, developed by Mutiara Rini and slated to open in October 2004. A Tesco hypermarket has already started there. Food and beverage purveyors, expected to occupy about 30% of Curve's lettable space, will turn it into a “lifestyle centre”, as other Malaysian shopping centres usually allot only about 15% to such operators.

Not to be outdone by its new neighbours, One Utama's recently-opened phase two counts an interesting pletho­ra of retailers among its tenants. A short drive away in Kepong, Jaya Jusco will be opening another outlet soon.

French hypermarket Carrefour is also rekindling its interest to set up shop in the Damansara area, which already has several established supermarkets and department stores like Tops, Fajar and Giant.

“All these stores have created a lot of interest in the area. With so many major players vying for business in the same neighbourhood, it will be very interesting to see how the retail trade will evolve,” Ramli said.

On keeping up with the competition, he said: “Prices are already depressed by the prolonged recession. If these stores are forced to further cut prices, it will be the consumers who will benefit more.”

Ramli revealed that MRA would embark on several projects to raise the professionalism standard in the industry. Among these is benchmarking, done in collaboration with the Malay­sian Productivity Centre, which will eventually allow retailers to measure their own performance against industry standards. About 16 companies have agreed to participate and the project is expected to roll this month.

The MRA is also planning to open a retail training centre on its premises next year.

And reflecting the market's positive sentiments, the second Malaysian International Retail Convention and Exchange is scheduled to be held at the Putra World Trade Centre, Kuala Lumpur, on 6 and 7 July 2004. First held in 2000, the bi-annual event was postponed for various reasons.

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