Spending spree: People shopping at a year-end sale at a mall in Kuala Lumpur. — ART CHEN/The Star
PETALING JAYA: As retailers and SMEs get ready for a number of festivities, from Christmas and New Year’s Day to Chinese New Year and the forthcoming Hari Raya Aidilfitri in 2025, the country’s retail sector is facing both opportunity and challenges.
The prospect of many festivities within a year presents a positive outlook for businesses that anticipate a surge in sales from the year-end shopping period, including the Malaysia Year End Sale 2024, combined with an upturn in the global economy and the government’s proposed pay rise for civil servants.
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However, the proximity of the festivities presents logistical and financial hurdles for both retailers and consumers, say leaders of business groups.
Malaysia Retailers Association (MRA) president Datuk Andrew Lim highlighted both opportunities and challenges facing Malaysia’s retail sector as the nation enters a prolonged festive season stretching from November this year up to April 2025.
“The closeness of all the festivities is presenting our retailers with a challenge in the peak season.
“The problem lies in the limited time between these celebrations for salaried consumers to accumulate sufficient disposable income to participate fully in each festivity,” he said when contacted.
Malaysians are gearing up for a vibrant festive season in 2025, beginning with the New Year celebration, followed by Chinese New Year at the end of January, Ramadan month in March and culminating with Hari Raya Aidilfitri in April.
This “condensed” annual festive schedule is creating logistical and financial challenges for both retailers and consumers, Lim added.
“For retailers, if we have the festive period spread over the entire year, it would be more sustainable and easier for us to serve our customers.
“If you were to go back to our tourism data before 2019, during the good years before the Covid-19 pandemic, we are not yet back to those levels,” he said.
He urged the government to carry out more tourism campaigns to attract international visitors.
SME Malaysia president Chin Chee Seong said typically, the festive season bolsters businesses, with both retailers and the food and beverage (F&B) sector witnessing a significant sales surge.
However, for this year, the subsequent slowdown seems to be more pronounced and protracted, with businesses experiencing slower-than-expected growth, he added.
“It’s a common cycle – businesses revel in a festive season surge, only to experience a slowdown thereafter. This year, calculating demand has proven to be particularly challenging,” he added.
Retailers and F&B outlets, known to see an uptick in spending during festive celebrations, are navigating a difficult environment as these activities have not fully picked up this year.
Chin underlines the double-edged sword of back-to-back celebrations like Chinese New Year and Hari Raya Aidilfitri.
“Whilst these festivities offer the prospect of increased cash flow, they present challenges in inventory and demand planning.
“The uncertainty of demand during such dense festive periods often leaves business owners fretting over stock levels,” he said.
Chin foresees retail apparel, F&B and hospitality sectors that are likely to benefit the most from the festive season.
“People typically spend on essentials like new clothing and festive food. The hospitality sector also sees increased activity with domestic and foreign tourist travel,” he said.
However, he noted that SME revenues still predominantly rely on domestic consumers over tourists, with supply chains also indirectly benefiting from increased activity.
Comparing purchasing power in 2024 to the previous year, Chin said consumer spending has been noticeably slower this year.
Survey reports from the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) revealed uneven retail sales performances in the second half of 2024.
Despite a steady average inflation rate of 1.9%, sector performances varied.
The Restaurant & Accommodation Services and Personal Care sectors saw the largest growth at 3.3% and 3.2% respectively.
However, the Clothing and Footwear sector contracted, with a -0.2% growth rate compared to the first two quarters.
In the retail sector, the Department Store cum Supermarket sub-sector saw a sales increase of 6.7% in Q3 2024, but the Department Store sub-sector faced a 4.7% decline.
The Fashion and Fashion Accessories sub-sector grew by 5.7%, but the Children and Baby Products sub-sector declined by 2.0%. The Pharmacy sub-sector grew by 6.3%, but the Personal Care sub-sector underperformed, with only a 4.7% growth, significantly lower than the projected 23.5%.
The Furniture, Home Improvement, and Electrical & Electronics sub-sector reported a -3.3% growth rate for the third consecutive quarter, and the Other Specialty Stores sub-sector saw a substantial drop with a growth rate of -5.5%.
The survey’s expected year-end shopping traffic is projected to match 2023 levels, boosted by the Malaysia Year End Sale 2024 and the planned salary increase for civil servants.
However, the survey said rising prices of food and consumer services may pose challenges to consumer spending trends.
