Retailers adopting a wait-and-see stance

KUALA LUMPUR: The outlook for the local retail industry is still positive although retailers are becoming more cautious in terms of expansion, said Datuk Nelson Kwok, president of the Malaysian Retailer-Chains Association (MRCA) in an interview with The Edge Financial Daily.

“We are watching these factors every day — sufficient staff, rental costs, forex fluctuations, confidence levels of consumers, before announcing our expansion,” he said.

Kwok is the founder of Nelson’s Franchise, a homegrown brand in the corn and snack food industry as well as honorary consul-general of Mozambique to Malaysia.

The MRCA president said retailers are being squeezed by rising costs: “We have to face many challenges — rising costs (labour and rental) on one hand and requests from the government to not raise selling prices on the other.”  

“We do try our best to assist and to comply with these requests — If we are able to absorb the rising costs, we try to do so,” he said.

He also noted that retailers are slowing down their expansion plans as it is risky to do so at this time.

According to a recent report by the Retail Group Malaysia (RGM), retailers will need to brace themselves for the impact of  the rising cost of living and reduced purchasing power due to the increase in prices of goods and services as well as rising household debt.

RGM has projected a 6% growth rate for the local retail sector in 2014, which is lower than its projection of a 6.2% growth in the current year. Last year, the sector grew 5.5%.

Shirley Tay, director of regional operations in South Asia for Sunrider International, a multi-level marketing firm, at a recent MRCA media briefing, called for the government to resolve manpower issues in the industry and not raise electricity tariffs. She also expressed concern over the impact of the goods and services tax that may curtail consumer spending.

When asked whether the government is doing enough to help retail industry players, which are mostly SMEs, become more competitive, Kwok said:  “The government has tried to help, but it needs to do more to engage with the industry.”

Kwok believes that positive measures by the government should be able to push the retail industry forward.

He advises that although struggling retail players or SMEs require greater support, the government should not neglect growing SMEs that show potential.

“The government might think that it isn’t necessary to support already successful SMEs, but that’s not entirely true — the more successful a SME becomes, the greater the chain impact to the public through increased job opportunities,” he said.

Retailers are reported to be slowing down their expansion plans as it’s risky to do so at this time due to rising operational costs.

This article first appeared in The Edge Financial Daily, on October 07, 2013.


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