Dato’ Eric See-To
The Mydin owner’s statement that hypermarkets are suffering as people do not seem to have any more money to spend has generated much attention with politicians from Pakatan Harapan jumping on this to spread further mis-truth to run down Malaysia.
As the Director of BN Strategic Communications and Minister for the Economic Planning Unit, Datuk Seri Abdul Rahman Dahlan citing officials figures had said, there is little doubt that the economy of our country has grown, the median household income of our country has grown and that income inequality has improved.
Rahman also pointed out that domestic demand and consumption continues to increase but there is a change in shifting habit with Hypermarkets now comprising a smaller share of Malaysian consumers’ spending habits.
His statement was actually backed up by a veteran of our Malaysia retail industry who said in April last year that the days of having large grocery stores and retail shops are over.
“CEO of Tesco Stores (Malaysia) Sdn Bhd Paul Ritchie said that due to intensifying competition in the industry, including from online retail sales, large hypermarkets were no longer feasible and grocery stores were becoming smaller.
“Grocery stores that are larger than 60,000sq m are challenging to sustain.
“Instead, the optimal solution, which we are implementing in some of our stores, is to use space better by putting a wider and improved range of products in a smaller floor space,” he said then.
Other retail analysts also note that the smaller grocery stores are ironically, now taking back market share from the hypermarkets which the hypermarkets had taken from these smaller shops before.
This observation is backed up by the explosive growth of smaller and more nimble competitors.
For example, NSK Trade City outlets which has a reputation for cheaper prices have embarked on an aggressive expansion plan in recent years.
Last month, NSK opened its 19th and 20th outlet in Kota Damansara and Jalan Peel respectively and is scheduled to open at least 2 more new outlets this year.
The mini-market chain 99 Speedmart’s growth is even more explosive. http://www.99speedmart.com.my/history.htm
Between the years 2000 to to 2008, 99Speedmart opened 100 mini-markets but in the two years from 2008 to 2010, they opened another 100 shops – totaling 200 shops.
By the end of 2013, the number of outlets more than doubled to 500 shops.
They then hit 600 in 2014, 700 in 2015, 800 in 2016, 900 in early 2017 and had 1000 stores by the middle of 2017.
Further up-market is Jaya Grocers who has a name in premium groceries. The increasing disposable income of our middle class saw Jaya Grocer growing from almost nothing in the year 2008 to hit 22 outlets by January 2018 with the latest outlet opening in Sunway Iskandar Citrine Hub in Johor 3 weeks ago.
Jaya Grocer is also opening another 5 outlets this year – Eco Ardence at Setia Alam in February; Kuala Lumpur Eco City (KLEC) at Bangsar in June; Empire City Damansara in July; Kiara 163 at Mont Kiara in September, and Kuala Lumpur East at Taman Melati in December.
Malaysia is not in crisis today unlike during the many recessions experienced during Tun Mahathir’s time as PM where well-knowns chains then such as Kimisawa, Yaohan, Hankyu Jaya disappeared
If the overall disposable income of Malaysians have declined as badly as what the Mydin owner and certain opposition members allege then it would not be possible for the 3 grocery chains I mentioned above to expand so rapidly over the past few years.
As other indicators such as Malaysians traveling on holidays, car sales – especially for middle-end brands such as Honda and Toyota, average manufacturing wages and other macro economic indicators show, consumer spending and disposable income has indeed increased.
In his widely followed interview, the Mydin owner had also remarked that the the weakness in the Ringgit over the past two years have also caused prices to increase and discouraging shoppers from buying more.
With the recent 13% strengthening of the Ringgit, perhaps it is also time for Mydin to consider reducing their prices to attract more shoppers to their outlets?
Changes in consumers preferences in the retail grocery industry is not unheard of. Perhaps Mydin, which also opened another outlet in Kuching last month, has been affected by this change for smaller, nimbler and more conveniently located stores?
Also, the continued growth in online shopping – including online grocery shoppng is a trend that must be monitored too. Lazada continues to experience triple digit growth while Jaya Grocers themselves say that their online grocery sales have increased 30% in recent years.
As the retail industry has grown increasingly competitive and complex with consumers shifting habits changing rapidly, it would be unfair to draw conclusions on the overall health of Malaysia’s economy based on the performance of just one retail chain or retail segment.
Barisan Nasional Strategic Communications
Source: Eric See-To