Fitch Solutions: Malaysian retail still reeling from Covid-19 but slowly recovering

Fitch Solutions noted that the Covid-19 pandemic has resulted in significant changes in consumer behaviour that retailers must adapt to in order to capitalise on this resurgent demand. — Picture by Shafwan Zaidon
Fitch Solutions noted that the Covid-19 pandemic has resulted in significant changes in consumer behaviour that retailers must adapt to in order to capitalise on this resurgent demand. — Picture by Shafwan Zaidon

KUALA LUMPUR, Aug 20 ― The retail industry shrank 9.2 per cent in June compared to the same period last year but the contraction was markedly smaller than preceding months, according to Fitch Solutions Country Risk & Industry Research.

The Fitch Group unit said the June performance represented signs of recovery as it came after a 32.4 per cent contraction recorded in April or the height of the movement control order.

However, the research house noted that the Covid-19 pandemic has resulted in significant changes in consumer behaviour that retailers must adapt to in order to capitalise on this resurgent demand.

“We believe this continued preference for remaining at home, even when lockdown has eased and retail has re-opened is being driven by four demand side risk trends, that we are witnessing play out in other nations globally,” Fitch Solutions said in a note today.

The trends were the bitter economic reality for most consumers amid a world-stopping pandemic, fewer purchasing triggers as most remain home-bound, a distaste for physical retail due to the “new normal” of screenings and registrations, and the residual fear of infection.

Fitch Solutions said these trends as well as a preference to remain home even after movement controls have largely been lifted meant retailers have to adapt in order to lure consumers back.

Among changing patterns that could be exploited were a growing preference for specialty stores over supermarkets, based on the earlier mentioned concern about possible Covid-19 infections.

While non-specialty retail saw a 1.2 per cent decline in June year-on-year, specialty outlets enjoyed a 3.4 per cent increase, it said.

“We believe this is Malaysian consumers prioritising their basic essentials, making the conscious choice to avoid crowded supermarkets (where goods may be relatively cheaper) and choosing specialty grocery stores to do their shopping,” the firm said.

Fitch Solutions also repeated its prediction that the pandemic would expedite e-commerce adoption here, and firms that choose to embrace online sales would be better placed to take advantage of the new consumer trends.

Among others, it said the need to shop online due to the lockdown has helped mitigate some of the prevailing mistrust about digital transactions, leading to a sharp growth in online sales.

In April, the online retail sector reported a growth of 28 per cent compared to the same period last year.

Rather than fall after the lockdown was eased, online retail growth continued to climb across May and June, expanding 39.3 and 35.5 per cent, respectively.

“This bolsters our view that the Covid-19 pandemic will function as an accelerator for e-commerce adoption globally.”

Fitch Solutions noted that the government has also acted on this, launching a “Shop Malaysia Online” e-commerce campaign as part of the National Economic Recovery Plan.

Source

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