This article first appeared in The Edge Financial Daily, on June 10, 2016.

KUALA LUMPUR: Retailers across the country did not ring their cash registers as much as they had hoped to in the January to March 2016 quarter (1Q16) compared with a year ago, prompting a downward revision in the full-year sales forecast to 3.5% from 4%, wiping out some RM500 million in retail sales value.

Retail Group Malaysia (RGM) managing director Tan Hai Hsin said a 3.5% growth will see total retail sales in 2016 touching RM99.5 billion, because a 0.5% reduction will see retailers losing RM481 million in sales. These numbers take into account items ranging from jewellery to clothing and grocery to furniture, but does not include big-ticket items such as cars and housing.

Malaysian retailers were prepared for a slower 1Q16 and had braced for a 0.4% contraction, following the high-base effect in the corresponding period in 2015, when shoppers stocked up before the implementation of the goods and services tax (GST). But what the retailers had not prepared for was the steep 4.4% contraction.

“The larger-than-expected decline in retail sales during the first quarter of this year contributed to this revision,” RGM said in the latest Malaysia Retail Industry Report dated June 2016. RGM collects and tabulates data for and on behalf of Malaysia Retailer Association (MRA).

The drag in 1Q16 came from almost all retail sub-sectors, which are made up of department stores (-15%), department store-cum-supermarkets (-7.3%), supermarkets and hypermarkets (-4.2%), fashion and fashion accessories (-1.3%), pharmacy and personal care segment (-7.2%), and specialty stores (1.1%).

MRA members, who are department store operators, include brands like Parkson and Metrojaya, while department store -cum-supermarket players include Aeon and Isetan.

Meanwhile, retailers are expecting growth in 2Q16 to be at 9.9%, 3Q16 at 5% and 4Q16 at 5.5%.

Initially, the impact of the GST was expected to be felt for about six months after which consumers were expected to get used to it.

“Now, we can’t even tell whether we have recovered or not from GST because several other factors have come in — mainly the weaker ringgit. Others include political issues, major retrenchments especially in finance and manufacturing sectors and the unexpected drop in oil prices,” Tan told The Edge Financial Daily.

Every year, retailers look forward to certain festivals and events when they anticipate a spike in sales, such as during Chinese New Year, Hari Raya Aidilfitri and the year end with school holidays, Christmas and back-to-school shopping. Overall, pre-Chinese New Year shopping remained sluggish this year.

Consumers have also become very price sensitive. “Prices of retail goods and services have been increasing gradually since the beginning of this year, partly due to our weak Malaysian currency,” Tan said, adding that this had deteriorated the spending power of Malaysian consumers in 1Q16.

Further, retailers have had to turn to heavy price discounts to attract consumers to buy, resulting in pressured margins.

Will this Hari Raya season give retailers the much-needed sales boost? Tan thinks it is too early to tell, even though it is just less than a month away. Only one thing’s clear for now: There is no strong “feel good factor” at this moment.

In 2015, retail sales grew 1.4%, with a total retail turnover of RM96.2 billion. Tourists typically spend about 12% to 13% of annual retail sales.