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Will Malaysian Retail Recover From GST in 2018?

By March 2, 2018 No Comments

NO! The retail sector has been reporting disappointing performances in 2017. Is it the GST that is affecting growth in retail? Arguably, Malaysians have accepted the GST as a necessary evil. And the dust has settled on whatever price ‘adjustments’ retailers had to make to accommodate GST (many taking the opportunity to raise prices beyond the 6%, and blaming their suppliers of course!)

The reality is prices continue to rise way beyond the 6% as income levels are almost stagnant. In Quarter 3 2017, the Consumer Sentiments Index fell to 77.1 (Source: MIER, see Table). MIER commented:

  1. Current household finances deteriorate
  2. Income and job outlook lacklustre
  3. Anxieties over higher prices grow
  4. Burly spending plans amid waning incomes and jobs

WHAT IS CAUSING POOR RETAIL PERFORMANCE?

‘The retail sector is becoming increasingly fragmented,’ says the Marketing Director of a leading retailer. This means that retailers, both off and online, have to fight harder for the share of wallet of a consumer base that is either shrinking and/or becoming extremely price conscious. The consumer base I refer to are the lower and middle class; the high-end consumers continue to spend, in fact, experiential luxury is the new buzz for this group.

Shoppers are becoming very savvy as they look for bargains to stretch their ringgit and maintain lifestyles. There is a proliferation of e-commerce players like Shopback for shopping, Offpeak for entertainment, Lazada, FashionValet, Fave, to name a few.

Hanging out with some millennials, I noticed they were constantly on their smartphones searching for bargains in order to maintain their lifestyles.

Retail Group Malaysia says that the recovery of the Malaysian retail market in 2018 is highly dependent on the general elections, external economic demand and the ringgit’s performance. Really? How will GE14 impact retail?

Consumers HAVE to spend on necessities regardless of election results. Ad agencies say that the 2018 World Cup will help too – sure it will, the media owners obviously.

Is it gloom-and-doom for Malaysian retailers? The eternal optimist in me says NO!

WHAT SHOULD RETAILERS FOCUS ON:

  • Better understanding of their consumers/shoppers’ path to purchase and touchpoints that can trigger sales and build loyalty. With rapid changes in technology, there is no excuse for retailers not to be in constant touch with their consumers. Deep-dive into your database retailers! ‘Talk’ to your customers and make them your advocates. Loyalty programmes have become simpler to execute and maintain; but PLEASE, keep margin-eating promotional messages to a minimum.
  • Maintaining if not increasing advertising spend – make the advertising $$ work harder. Digital marketing is now virtually idiot-proof; the key challenge for retailers is relevant content and constant engagement. Increase User-Generated-Content to strengthen the brand-consumer relationship. Use Facebook targeting to influence existing and new customers. Be innovative and super-creative in social media; a high-end ice-cream retailer had a 3-km queue when they INSTA-d ‘a free scoop between 7-9pm’. The result – they doubled their usual sales by offering an additional scoop for just RM5!

GE14 will definitely be a major impact on the Malaysian economy and consumers.

Regardless of the outcome, the retail sector must persevere.

 

Author: Sita Subramony

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