KUALA LUMPUR, March 9 — Malaysia’s retail industry is expected to finally have positive overall growth in sales for 2022 with a projected 6.3 per cent rate, after having seen its business shrink for the past two years during the Covid-19 pandemic, retail research firm Retail Group Malaysia predicted.

With the local retail industry looking forward to a strong recovery for 2022, Retail Group Malaysia revised its previous estimate made in November 2021 of 6.0 per cent growth for the year 2022, and gave a more optimistic forecast of 6.3 per cent.

This is in comparison to Malaysia’s retailers’ business having contracted year-on-year by 16.3 per cent for the year 2020, and shrunk by 2.3 per cent for the year 2021.

In its latest report on Malaysia’s retail industry, Retail Group Malaysia expects retailers’ performance this year to be buoyed by a strong growth of 16.5 per cent in sales in the first quarter of 2022 due to the Chinese New Year festival and the further relaxation of Covid-19 restrictions or standard operating procedures.

This would be followed by an expected growth in retail sales in Malaysia at 4.2 per cent during the second quarter of 2022 with the Hari Raya festival to be a main contributor, and an estimated 3.4 per cent growth rate in the third quarter due to a low base in the same period in 2021, and with Malaysia’s retailers hopeful of a 3.6 per cent growth rate for the fourth quarter of 2022.

Particularly for the first quarter of 2022 or January to March period, eight of the 10 retail subsectors are expecting to have positive growth in business, namely fashion and fashion accessories retailers (34 per cent), department store operators (29.9 per cent), department store cum supermarket operators (28.2 per cent), personal care retailers (20.5 per cent), retailers of children and baby products including apparel, accessories, equipment, school uniforms and toys (14.3 per cent), furniture and furnishing, home improvement, electrical and electronics retailers (14 per cent), pharmacies (12.3 per cent), and mini-markets, convenience stores and cooperatives (9.5 per cent).

The only two retail sub-sectors predicting shrinking business for the first quarter of 2022 are supermarkets and hypermarkets (-6.0 per cent) and other specialty retail stores (including photo shop, fitness equipment store, second-hand goods’ store, musical instruments store and TV shopping) expected to be the worst-performing sub-sector with a predicted slide of -19.2 per cent in sales.

A woman shops for groceries at a supermarket in Kuala Lumpur January 9, 2021. — Picture by Yusof Mat Isa

What are the challenges ahead for Malaysia’s retailers

Retail Group Malaysia however outlined the many challenges that still remain for Malaysia’s retail industry this year, including the wave of new Covid-19 cases due to the Omicron variant which had disrupted the pace of recovery for the industry.

The research firm said prospects for the retail market has become uncertain again as Malaysian consumers turn cautious, noting that major shopping malls remain crowded on both weekdays and weekends but with car traffic having dropped gradually when the daily number of new Covid-19 cases remain above the 20,000 mark.

The research firm also said retail businesses dependent on overseas travellers on leisure trips had also been affected by the current "troublesome” entry requirements for foreign tourists into Malaysia due to its discouraging effect on tourism.

While noting that Malaysia’s international borders would likely reopen from the second quarter of this year, the firm said the delay in reopening had affected the arrivals of foreign tourists in Malaysia.

The report also noted that the prices of basic necessities and many consumer goods had risen since the end of 2021 and many foods and beverages outlets had also increased their prices, and said this would pose a challenge for retail sales.

"Rising prices are expected to continue during the first half of 2022. In addition, oil prices have been rising in recent weeks. Higher cost of living will affect the purchasing power of Malaysian households in the new year. Likely interest rate hikes in near term will also have negative impact on buying power of Malaysian consumers,” it said.

It also said the war in Ukraine would affect the supply chain for goods worldwide, with oil prices and commodity prices expected to increase further.

The Retail Group Malaysia report was based on interviews with members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) on their retail sales performance for the entire year of 2021 and their projections for the first quarter of 2022.