By Sharina Ahmad
The Covid-19 pandemic has put the retail industry in a tailspin, with many businesses closing shop or reducing workforce.
Since the outbreak, many retail operators had to contend with significant challenges brought on by sharp declines in customer numbers and disrupted supply chains.
However, the situation has improved gradually after the transition from the Movement Control Order (MCO) to Recovery MCO. Under the Recovery MCO, Malaysians are free to move about and visit physical shops, with adherence to standard operating procedures (SOP).
According to Sunway Malls and Theme Parks CEO HC Chan, in general, malls are looking at a return of 75% footfall, and this is a good indicator that malls are still a major part of the communities as a place where people congregate to socialise.
“Family entertainment outlets and restaurants have been seeing good recovery as more people become more comfortable with the new SOP under the new normal.
“Outlet sales are slowly recovering although impacted by more cautious consumer sentiment, and the end of the loan moratorium will contribute to a slight dip in disposable income,” he told Property Advisor.
Nevertheless, Chan said the challenge is the capacity reduction and in certain cases, lack of new content for cinemas.
PKNS Real Estate Sdn Bhd (PREC) CEO Fakru Radzi Ab Ghani said most businesses are gradually picking up with up to 70% higher footfall since the recovery phase till now.
“Demand for retail lifestyle is on the rise as always, just that the shopping behaviour has changed.
“People are no longer spending too much in a mall but rather going to targeted outlets with a purpose. Good eateries are the main catalyst for people to visit a mall,” he said.
Fakru said mall operators have limitations in terms of organising crowd-pulling events and promotions due to the restrictions by the government. That is also a cause of not being able to get optimum traffic footfalls.
Secret Recipe Group business development director Patrick Sim Chee Hong noted that due to stringent SOP, its F&B outlets are losing customers due to limited seating space.
“Most F&Bs have resorted to looking into improving sales by getting into more takeaway and deliveries. Secret Recipe is doing alright considering the situation and our demand for cakes is still good.
“A lot of newer malls are struggling to get the required traffic in while the strong ones such as 1 Utama, Sunway Pyramid, Mid Valley still hold strong. However, most new malls are unable to fill up their tenant spaces.”
Killer Gourmet Burgers (KGB) co-founder Leow Joe Yee concurred that the impact of Covid-19 has shifted its business from dining into delivery based.
“Certain malls are recovering better with more footfall. Customers are still cautious about dining at the restaurant, but the business has improved. However, the situation is uncertain as it will depend on the number of cases.
Sunway’s Chan said its occupancy rate has been largely unaffected, remaining at between 92% and 98%.
“Nationwide, across our seven malls, Sunway Pyramid, Sunway Carnival, Sunway Giza Mall, Sunway Putra Mall, Sunway Velocity Mall, Sunway Big Box Retail Park and Sunway Citrine Mall, we see a recovery of up to 75% in footfall and up to 40% in outlet sales.
“This is within a controlled and healthy level for our malls. We are forecasting a recovery of 75% to 85% in a footfall by end-2020, and tenants’ sales are projected to recover 50%-60%.
He shared that Sunway has invested RM30 mil in staff retraining, technology and health and safety fittings to ensure that employees, tenants, and visitors are safe within its premises.
Chan also said that retailers have quickly adapted to the situation by digitising the shopping experience and using social media to intensify the reach of their promotions.
“We have also seen that there is a shift towards content-driven strategy in reaching out to consumers. In fact, it is how to translate the experiential factor into digital and drive back to brick and mortar stores.”
However, according to Fakru, even pre-Covid-19, the retail industry has been tough for the past few years, particularly for physical stores.
“This is due to the migration of people into online shopping. And unemployment is also on the rise, causing a compromised buying power. The rise in the inflation rate is also causing unaffordability.
“Those merchants that started doing business online are amazed by how much they are able to sell. This pandemic has made people believe that technology is readily available to enable the retail business. That’s why some brands have decided to close some of their physical outlets to focus more on online sales.”
Secret Recipe’s Sim concurred that tourist-centric and office areas are suffering, including one of its outlets where the reliance on tourism is high.
“One of the issues with Kuala Lumpur and even locations like Johor is that there has been an over-saturation of malls and retail space even before MCO. The current situation has made it worse.”
However, Sim said things are starting to fall into place currently as SOPs are well taken care of and customers are more confident to dine out.
He noted that Secret Recipe’s delivery has increased as desserts such as cakes have a higher demand.
“At this juncture, value-driven promotions and incentives have become more important, digital and online presence has taken precedence.”
Enough assistance from mall operators/owners?
According to Sim, there are various reactions from the mall operators.
“Some are very supportive, while some could be a lot better. A lot are applying the wait-and-see approach, where it took them three to four months since MCO to decide on rental rebates,” he said.l
For PREC, Fakru said there is no standard formula of how much rebate an operator gives to the merchants.
“What’s important is that there needs to be a balance between incentives given to the merchants and the availability of funds to operate the mall.”
Sharina Ahmad is a writer for PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.