This article first appeared in The Edge Financial Daily, on April 1, 2016.

KUALA LUMPUR: Tesco Stores (Malaysia) Sdn Bhd, a joint venture between Sime Darby Bhd and UK-based Tesco plc, plans to reorganise its business in Malaysia by downsizing six of its outlets on the back of a slowdown in the retail sector and a shift in customers’ buying behaviour.

“In 2016, we are looking at resizing six stores. We hope to get the store with the right fit for our customers, giving them the best shopping experience. We will start with the Cheras outlet,” Tesco Malaysia chief executive officer (CEO) Paul Ritchie told reporters after the launch of the CIMB Tesco Strategic Partnership here yesterday.

“The retail industry is shifting towards online purchases. More people are making purchases on the Internet [as they seek] more convenience.

“But they also have less disposable income. This means people are looking for smart shopping offers, and no longer does anybody really need stores measuring 10,000 sq m because there are so many other ways to shop,” he said.

As such, Ritchie said, Tesco Malaysia plans to also refurbish some of its outlets. “There are still many challenges ahead for consumers in terms of increased transportation costs. I think it will be another tough year [in 2016], but people will be more [informed about] their disposable incomes as they have adjusted to the goods and services tax,” he said.

CIMB Bank Bhd group consumer banking CEO Renzo Viegas said while the current marketplace remains tough for the retail business, [those from the] affluent community will continue to invest.

“It’s a tough environment. Loan growth will be slower than last year for sure. People are really concerned about the global and Malaysian economies. [There is] a lot of volatility, so people are holding back their investments, but the affluent will still invest, so the growth pace in the second half of the year should pick up a bit,” he said.

“In the second half [of 2016], the whole [economic] environment should improve, as it becomes more stable and predictable. Investments by consumers should also grow, and therefore our wealth management will do well,” he said.

Viegas said CIMB Bank is also monitoring its credit quality closely to avoid any deterioration in the group’s consumer portfolio.

“All in all, there will still be slower growth. We are watching credit quality. So far, there is no deterioration in our credit quality in the consumer portfolio. But there are still challenges, and there are still going to be opportunities like the launch today (yesterday),” he said.

Earlier at the launch, Viegas said the partnership will allow CIMB Bank to benefit from Tesco Malaysia’s three million weekly customers with increased accessibility to other products offered by the bank.

“In the next two years, we hope we can garner half a million new [credit] card customers,” he said.

Under the five-year partnership, CIMB Bank will set up its consumer banking kiosks in 38 Tesco stores nationwide. Tesco Malaysia currently operates 55 stores, with about 8,000 employees.