This article first appeared in City & Country, The Edge Malaysia Weekly on December 12, 2022 - December 18, 2022

Retail Group Malaysia (RGM) forecasts a growth rate of 3.5% for the retail industry in 2023, according to its latest Malaysia Retail Industry Report (November 2022).

Nevertheless, the biggest challenge for Malaysia’s retail industry in 2023 will be the rising cost of living, according to RGM managing director Tan Hai Hsin. “Prices of necessities have risen since the beginning of the year. The prices of many consumer goods have also increased. In fact, the prices of many foods and consumer goods increased by double digits within a short period of time,” he pointed out.

“Higher retail prices lead to a higher cost of living. This means less money to buy non-essential goods and services.

“The shopping behaviour and patterns of B40 and M40 households have changed in recent months. They cook more at home, delay buying high-value goods, pay greater attention to offers and discounts given by retailers, as well as make fewer trips to cafés and restaurants.”

Members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) were interviewed on their retail sales performance in 2H2022 for the report.

Several monetary incentives were announced during the tabling of Budget 2023 in October, in a bid to help subsidise the higher prices of basic necessities for the B40 and M40 households, according to RGM.

Among the incentives announced was a reduction in personal income tax contribution by two percentage points next year. “This would encourage Malaysian workers to channel the extra money to retail spending,” said Tan.

The report highlighted that in Budget 2023, the government allocated RM55 billion for subsidies, aid and incentives to alleviate the rising cost of living.

“This will ensure the cost of fuel, rice, flour, chicken, cooking oil and many other basic necessities remain affordable to Malaysians. Nevertheless, the incentives and allocations may be changed because a new federal government was formed after the recent general election,” he added.

The retail industry recorded an impressive sales growth of 96% in 3Q2022, compared with the same period in 2021. The quarterly results exceeded market expectations. Members of the MRA and MRCA had projected a growth rate of 61.7% while RGM had forecast an increase of 50%. The members of MRA and MRCA project an average growth rate of 13.9% in 4Q2022 from the preceding quarter.

According to the report, department store/supermarket operators are expecting sales to normalise with a growth rate of 4.8% in the final quarter of 2022. Department store operators also expect their business to grow moderately at 10% in the last three months of the year.

“The supermarket and hypermarket sub-sector remains resilient with [an expected] growth rate of 4.5% in 4Q2022,” said Tan.

Meanwhile, operators of mini-markets, convenience stores and cooperatives are anticipating a sustainable growth rate of 19% in the fourth quarter of this year.

Retailers in the fashion and accessories sub-sector expect business to climb 34% year on year in 4Q2022. “This retail sub-sector has the highest estimated growth rate for the last three months of the year,” he noted.

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