Cover Story: Retailers face bleak year, some likely to fold

This article first appeared in The Edge Malaysia Weekly, on May 18, 2020 - May 24, 2020.

An estimated 51,000 retail stores are expected to shut down permanently

Photo by Kenny Yap/The Edge

Tan says resort islands will also be affected

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A third of every ringgit spent by foreign tourists visiting Malaysia goes towards shopping. This means that, based on the original target of RM100 billion in foreign exchange earnings from tourism in 2020, retailers had been expected to ring up sales of about RM33 billion. But now, a large chunk is likely to be wiped out as our borders remain closed to arrivals of foreign nationals.

Last year, the 26.1 million tourists who came to our shores spent RM28.94 billion on shopping, representing 33.6% of their total spend. The second-biggest item that tourists — described as those who stay at least one night — spent their money on was accommodation, at 24%, or RM20.67 billion, of total spend.

Malaysia expects to see the first retail sales contraction since the Asian financial crisis in 1998, by 5.5%. An estimated 51,000 retail stores are expected to shut down permanently, including those catering to tourists.

“Retailers who have been dependent on foreign tourists will not be able to recover this year. Thus, we expect many to close down. These retailers include those operating in major shopping districts such as the KLCC area, Bukit Bintang and Chinatown,” Retail Group Malaysia managing director Tan Hai Hsin tells The Edge.

For example, at the Pavilion Kuala Lumpur in Jalan Bukit Bintang, tourists made up 30% of the shopper demographics before the Movement Control Order.

Tan says other areas likely to be affected include resort islands such as Penang and Langkawi, as well as those in Sabah and Sarawak.

While all retailers in malls have been allowed to operate since the Conditional Movement Control Order came into effect on May 4, theme parks and attractions have still not been allowed to open.

This means retailers within theme parks are likely to be hit hard by the lack of visitors, as in the case of Genting Highlands. It remains unclear when these attractions will be allowed to open.

It is worth nothing that Shanghai Disneyland closed on Jan 25 and reopened more than three months later on May 11, but allows only 30% capacity. Tan expects retailers operating in such venues to be drastically affected as well.

With borders remaining closed, it is a similar story for retailers operating within international airports. Tan says some retailers at KLIA, klia2, Penang International Airport and Kota Kinabalu International Airport could shutter their stores for good.

He explains that luxury brands tend to rely on the foreign tourist business and projects that it will take time to see the return of high-spending visitors from abroad.

Statistics from Tourism Malaysia’s strategic planning division show that the most visited shopping destinations for tourists are Bukit Bintang-KLCC, Johor Baru, Petaling Street, Jalan Tunku Abdul Rahman, Melaka, and KLIA and klia2.

The top items purchased are handicrafts/souvenirs, apparel/clothes, foodstuff, cosmetics, household goods and chocolates.

 

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