Crisis cripples, but also creates

Catching up with Shirley Tay, president of the Malaysia Retail Chain Association (MRCA)

In the past year and a half, the twists and turns of Malaysia’s battle against the Covid-19 pandemic spelt both economic and emotional rollercoasters for the retail and SME sectors. The Malaysia Retail Chain Association (MRCA) had unenviable front row seats to shut down businesses, shattered bottom lines, and worsened growth rates. But it also saw silver linings – entrepreneurs and companies displaying unbreakable spirits and upping their game amidst intense adversity.

Asia Connects chats with Shirley Tay, president of MRCA for the term 2020 to 2022, who took on the top role in August last year – in the middle of the pandemic. The Southeast Asia corporate director of Sunrider International (M) Sdn Bhd shares her insights on why the battered retail industry is seeing rays of hope for ReLaunch in the last legs of 2021 and how SMEs can move forward while co-existing with Covid-19 endemic realities.

Asia Connects (AC): What were some of the biggest lessons Malaysian retailers, especially those in the SME sector, learned during the last year and a half of the pandemic?

Tay: COVID-19 has sped up digital transformation among SMEs, especially for traditional offline retailers. Over the past 19 months, we’ve seen year-long digital transformation action plans being compressed into weeks to adapt to the new normal. Every industry has had to identify new ways to communicate and engage with their staff, customers and stakeholders to survive and avoid business disruptions during the crisis.

While a crisis causes a drop-in business, it creates new opportunities as well. For example, KK Group has managed to open more than 110 KK Super Mart Stores and other businesses in the past 19 months. Air Asia also expanded from airlines to other businesses, such as education, F&B, and food delivery services.

With consumers switching to online shopping, a new wave of innovation emerged. For instance, Senheng, the electrical appliance business, has a new digital delivery platform called S-Food. Some of our members have also ventured into profitable sectors such as the production of face masks and sanitisers.  Many F&B operators moved their businesses to shop lots to attract traffic and to ease the take-away delivery arrangement. We believe that Malaysian retailers can sail through tough challenges and emerge stronger and more competitive.

AC: What is the general attitude among retailers and SMEs as the country transitions into the endemic phase?

Tay: After going through different phases of movement control orders (MCOs) in Malaysia, many retailers felt dejected, especially those severely affected, such as the F&B industry, fashion and fashion accessories, hotel and tourism, and the Malaysia Convention and Exhibition (MICE) industry.

However, with the reopening of economic sectors and vaccination progress across Malaysia, retailers are starting to feel more enthusiastic about foot traffic again. In addition, with the interstate travel ban being lifted on 11 October 2021, we believe that domestic tourism will bring more sales to retailers, along with increased spending. The coming year-end festive season is also expected to bring positive growth in sales and consumption in the fourth quarter of 2021.

For the next few months, retailers will be working harder to recover past losses, re-examining their resources, including cash flow, while rehiring new investments and possibly expanding.

AC: How much can the retail landscape recover in the last quarter of 2021, in MRCA’s projection? Do you expect significant improvement in 2022?

Tay: We expect the retail industry to gain momentum on recovery by the end of this year, provided the government continues to relax movement restrictions. This is why strict strict compliance of standard operating procedures (SOPs) are of utmost importance among businesses and individual Malaysians.

MRCA, Malaysia Retailers Association (MRA) and Retail Group Malaysia (RGM) recently published the Malaysia Retail Industry Q2’21 Report. We project more than 10% growth rate in the fourth quarter this year, and the outlook to achieve this remains positive.  Based on the report, the unemployment rate in Q2’21 remained unchanged at 4.8% whereas the consumer price index (CPI) remained positive for the fifth consecutive month since February 2021. Private consumption expanded by 11.6% in Q2’21.

We hope foreign tourists are allowed to arrive next year, which will support quicker business recovery in the year 2022.

AC: What are a few key strategies and policies necessary for SME retailers to make the best of Q4’21?

Tay: Policies and initiatives that support businesses in their recovery and sustainability, both financial or non-financial, must be continued. Examples include the Government Financial Assistance and Wage Subsidy Programme, grants, utilities reduction, deferment of statutory obligations, and incentive to rehire retrenched or terminated employees scheme.

One financial support that the retailers and SMEs much need would be rental relief. In some countries, rental relief is given to tenants and landlords to ease their financial burden and aid sustainability. We hope the government will provide such assistance without delay.

Incentives must be channelled to the right sectors. With the reopening of trade, the priority of assistance should be given to the most affected industries instead of a blanket approach.

Besides that, businesses can arrange for staff to upskill and reskill in digitalisation programmes and embrace automation technology like enterprise resource planning (ERP) software, artificial intelligence (AI), and blockchain. Collaboration with startups can also spark more innovation opportunities.

AC: MRCA supported the appeal for Malaysia to reopen all sectors of the economy and for all fully vaccinated employees to return physically to work. While there are solid economic reasons to do this, it does come with the risks of more Covid-19 outbreaks. How can Malaysia navigate this dilemma?

Tay: We believe that mass vaccination helps make the environment safer for everyone. More than 90% of the Malaysian adult population are doubly vaccinated, which means we have achieved herd immunity for adults against Covid.

Whilst acknowledging the fact that Covid-19 is endemic, it is imperative that the reopening and restarting of all sectors that play an essential role in the economy’s supply chain should be allowed immediately, and for those fully vaccinated to return to work physically in their workplaces.

The MySejahtera app is now the determining factor for the admission of ‘safe’ individuals into all premises, including shopping malls, retail shops and office space, as per the SOPs by the National Security Council (MKN) of Malaysia. This should eliminate people’s fears to go to work and shop. This is absolutely in line with the Vaccination Privilege and Endemic concept for the rapid revival of our country’s economy.

AC: Can you share some of the latest figures from MRCA regarding the impact of the pandemic on the retail landscape in Malaysia since March 2020? If possible, please provide the data by key industries that would be of interest to the SME community.

MRCA, MRA and Retail Group Malaysia (RGM) recently published the Malaysia Retail Industry Q2’21 Report, which has revised its forecast for Malaysia’s 2021 retail industry growth rate downwards to 0.8% from 4.0% projected in June this year. This is considering the lower growth in the second quarter (Q2’21) and the revision of its third-quarter estimate.  For the first six months of this year, the retail sales growth rate contracted by 4.4%, as compared to the same period a year ago.

Affected by a series of lockdowns, Q2’21 saw a growth rate of 3.4% year-on-year (y-o-y) in sales for Malaysia’s retail industry. This was worse than the estimate made by RGM at +5.6% in June 2021.

Based on the Member’s Survey that MRCA recently conducted and ended in June 2021, 55% of the retailers have downsized their retail operations throughout MCOs; 72% reported on workforce reduction; 40% of the respondents had terminated more than 10 staff, and 36% of business owners reported their cash flow position is unable to sustain beyond 3 months.

As such, we project an average growth rate of -15.1% during Q3’21.  Physical stores of the majority of retail trades were shut during the first half of Q3’21. Except for operators of mini-markets, convenience stores and cooperatives, retailers in all retail sub-sectors foresee downward movement in their sales for the next three months.

AC: We know that the pandemic did not hit all businesses equally. Which retail industries were most affected by the lockdowns and which ones thrived?

In reference to RGM’s Q2’21 report, compared with Q1’21, retail sub-sectors that reported year-on-year (y-o-y) in sales positive growth are Department Store at 18.2%; Mini-market, convenience store and cooperative at 2.6%; Fashion & fashion accessories at 17.6%; and pharmacy at 10%.

The department store sub-sector grew 18.2% and was the best performing retail sub-sector during Q2’21. It had been suffering from double-digit sale declines quarterly since the pandemic started.

Fashion & fashion accessories for the first time, recorded a growth rate of 17.6% during Q2’21 since the pandemic started.

For F&B, cafes and restaurants recorded negative growth of 10.9% y-o-y during Q2’21. Cafe and restaurant operators foresee their businesses dipping further for Q3’21 and expect a decline of 30.2% compared with the same period last year.

Business for take-away, kiosk and stall F&B outlets climbed 37.5% during Q2’21, and these operators are anticipating marginal growth of 1.5% during Q3’21.

On the other hand, stores that were closed during Q2’21 suffered a decline in sales. Specialty Stores sub-sector (including photo shops, fitness equipment stores, sporting goods stores, and direct selling firms) suffered large drops at 41.4% and was the worst-performing retail sub-sector during Q2’21.

Retailers in the personal care sub-sector are expecting their business to plummet by 54.3% in Q3’21. This will be the worst performer among retail sub-sectors during this period.