This article first appeared in Forum, The Edge Malaysia Weekly on May 25, 2020 - May 31, 2020

Economic recovery in a post-Covid-19 world will undoubtedly be challenging, yet Malaysian consumers reveal cautious optimism for the future inspired by fresh areas of potential growth. The immediate impacts of the coronavirus pandemic have resulted in significant changes in the nation’s day-to-day spend, but the rebound will be spurred by increased consumption in select consumer categories, supported further by evolving sales channels.

Research from Boston Consulting Group’s (BCG) Centre for Consumer Insight reveals that 53% of Malaysians believe the nation’s economy will improve in the next 12 months. Weaving together insight from over 1,000 respondents in over 45 categories, this study focuses on changing consumer behaviour and the implications for a rebound in a post-Covid-19 world.

Consumer response

The immediate impact of Covid-19 in Malaysia is framed by the nation’s Movement Control Order (MCO), where 91% of respondents reduced their day-to-day in-store purchases, and 97% reduced spend on categories such as restaurant outings, leisure activities and domestic travel.

Fifty per cent of Malaysian respondents admit caution around rising costs as the economic impact of the pandemic bites deeper, higher than the Philippines (44%), Indonesia (30%) and Thailand (37%). Yet Malaysian consumer sentiment compares positively with Europe and the US, evidencing more categories of expected growth than their counterparts in these countries. This cautiously encouraging sentiment will be an important driver in reinvigorating Malaysia’s economy during the rebound to come.

Future financing and spend

Questions of consumer sentiment for the future inevitably come tied with considerations of savings and financial products. Covid-19 has inspired a renewed focus on future planning for those who are able. More than one-third (35%) of Malaysians intend to spend more on savings [products] in the coming six months, while a similar number expect to save less (35%). While the ability to save will largely depend on individual means, these findings reveal a strong intention to invest in long-term financial health for many.

The post-Covid-19 world is also likely to reflect a generational shift in financial attitudes. Three per cent of Gen Z (18-25) expect to spend more on savings accounts in the next six months, 25% expect to spend more on investment accounts, 24% more on health insurance and 18% more on life insurance. The knock-on impact of the crisis may result in a more embedded adoption of traditional financial products in younger generations.

Equally pivotal will be the ongoing transition in how Malaysians spend. Consumer sentiment towards e-wallets reveals a remarkable shift across all categories, with more than 47% of millennials (26-40), 22% of Gen Z and 31% of those 40+ expecting to spend more through this medium over the next month. That represents a significant increase from the previous month. The established success of offerings such as GrabPay, Boost and Touch ’n Go reveals growing penetration of these platforms, and one which this study implies will grow deeper in the post-Covid-19 recovery.

This could catapult forward the expected US$23 trillion (RM100 trillion) transition of global payments projected to shift online over the next decade.

Fresh growth in groceries

The closure of food establishments has led to a resurgence of home cooking in Malaysia, with pictures of sumptuous home-cooked feasts now a common part of the nation’s social media. These trends are highlighted in BCG’s consumer sentiment study, which shows fresh food and groceries set to become a growing focus of consumer spending in the new normal. Packaged, canned, frozen food and beverages lead the way, with 33% of Malaysians expecting to spend more on these categories in the next six months.

These easily-stored goods are not alone, with 35% of Malaysians expecting to spend more on fresh foods and 23% more on groceries and staples in the coming six months. Fresh food engaged the strongest response, with 17% expecting to spend a lot more on this area over this period. As Malaysia moves into the economic rebound stage, all signs seem to indicate that this passion for home cooking is set to continue, offering a welcome boost to consumer spending.

A positive sign for the nation’s celebrated food industry is that 20% of Malaysians also expect to spend more on deliveries from restaurants. If Malaysians are unable go out to makan, they will pay for the makanan to come to them.

Driving digital connectivity

Digital opportunity remains a significant driver for consumer sentiment. Covid-19 has created a world of social distancing in which digital technologies provide the foundation for everything from business operations to virtual family relationships. Twelve per cent of Malaysians expect to spend more on mobile services in the coming six months.

There is an interesting gap in generational attitudes towards connectivity. Gen Z shows greater inclination towards mobile data, with 8% expecting to expand spending in this area. Those over 40 tend to lean more towards fixed broadband, with 30% expecting to increase spending here. Millennials are more balanced, with 10% and 6% expected to increase spending on mobile and fixed broadband services respectively. A significant number of older consumers expect to spend more on connectivity compared with their younger counterparts.

Remote working is the primary driver across both mobile and fixed broadband spending. Social value provides the secondary driver, with an expectation that connectivity will be vital to digitally maintain personal relationships.

Channelling demand via digital

This health crisis has created an environment of uncertainty, in which traditional channels and industries have been disrupted. Analysis by BCG indicates average total household expenditure has dropped 55% during the MCO. While consumer sentiment will play a critical role in the nation’s recovery, markets will also need to adapt to leverage growth demand channels.

Access to traditional offline channels is widely restricted during the MCO, and caution around public spaces looks likely to continue for the foreseeable future. Digital channels will be vital in bridging this gap. Of five major consumer channels analysed in Malaysia, online retailers represent the only channel with a net growth in expected spend, with 22% of respondents expecting to spend more on this channel over the next month.

Supporting digital channel growth will be an essential catalyst for the government and business moving forward. This should include support to transition traditional markets and micro, small and medium enterprises towards e-commerce platforms, as well as established measures such as enhancing access to internet and data connectivity.

There has never been a crisis quite like this, where a singular global health threat hits a globally connected world. A cautious yet optimistic outlook by Malaysian consumers offers a solid foundation for the rebound. Digital channels will prove pivotal in enabling that consumer sentiment to bridge the supply-demand gap. While the future is filled with challenges, there are fresh areas of opportunity that hint at resilience to underpin the rebound to come.

Ching-Fong Ong is managing director and senior partner at Boston Consulting Group, the Southeast Asian leader for DigitalBCG and head of Malaysia’s public sector practice. Aparna Bharadwaj is managing director and partner at Boston Consulting Group and global leader of BCG’s Center for Customer Insight.

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