Last year was a challenging one for the retail industry, more so for mall tenants as most faced slower sales despite steady footfalls.
However, there are some signs to be optimistic for this year as the economy is expected to stabilise and may see some uptake, going towards year-end, next year and beyond.
The country’s current gross domestic product (GDP) growth forecast of 4.5% to 5% for this year is by all means a decent figure and with fiscal policies coupled with the ongoing measures taken to boost tourism by the relevant authorities, there is certainly room for optimism.
Tourism arrivals last year have shown signs of recovery with a 4% growth over 2015. In tandem, tourist receipts increased by 18.8% over 2015 and there has been an increase of more than 20% on tourists’ spending on shopping compared to the previous year, indicating that tourists are now shopping more.
In fact, some of the food and beverage (F&B) retail outlets housed in malls have been enjoying roaring business. There are actual examples like a particular crab restaurant which is doing well despite the price of crabs doubling last year.
Another example is a sportswear store in Mitsui Outlet Park KLIA in Sepang, Selangor which fared well last year despite a cut in its profit margins. It was also understood that some fashion retailers performed well and even outpaced a major department store, with most of their customers being males.
For malls to remain relevant under the current demanding environment, mall management must embrace the changes within challenges.
It is this very challenge and competition which are crucial to mall marketing, and become a stimulus to develop unique selling points for individual malls.
For malls which are successful and remain successful, they must innovate to stay relevant to shopping trends and target markets, and to rewind and reboot with the times.
As observed recently at the 10th Malaysian Property Summit in Kuala Lumpur on Retail Market Performance and Outlook, developers should try new and different formats of retail and entertainment outlets.
This applies to those running F&B businesses in malls, which have been impacted when the disposable income of its consumers were reduced as a result of the weakening ringgit, high household debts and rising cost of living.
Nevertheless, the popular coffee culture adopted by many retail outlets in malls is gaining traction amidst the more well-established ones.
According to Malaysia Shopping Malls Association’s (PPK) 2014 survey on shopping mall retail space, Malaysia has reached 13.3 sq ft per capita nationally, with several megamalls which have a net lettable area (NLA) of one million sq ft and above.
It is noted that these megamalls have not only performed well but also outgrew the rest of the pack. They also tend to attract more local and foreign tourists.
Of the prominent malls, Suria KLCC was the grand launch venue of the National Sales Campaign for the 1Malaysia Super Sale 2017. As announced during the launch, Malaysia’s shopping branding is based on “Experiential Shopping”, complemented by entertainment and recreation as well as adventures in F&B.
This is the norm amongst most shopping malls in the Bukit Bintang shopping hub in the Golden Triangle, including Pavilion Kuala Lumpur which works with strategic partners to offer shopping ambience with a distinctive edge.
The performance of Mid Valley Megamall in Kuala Lumpur and 1 Utama Shopping Centre has also been very consistent.
Likewise, Sunway Pyramid in Petaling Jaya is very solid while the relatively new IOI City Mall in Putrajaya is doing well, embarking on its Phase Two extension plan. It has even managed to attract the crowd from the southern part of Greater Kuala Lumpur to shop there.
Sunway Velocity and MyTown have recently opened its doors to the Cheras community and beyond. Both with one million sq ft of NLA and located close to one another, it only serves to show that differentiation is crucial for the developers of new malls if they want to attract newer, more branded and major retailers to join them as well to attract and retain loyal patrons.
With the advent of so many new malls in the Klang Valley, including KL Gateway and MyTown which opened last month, competition has been upped several notches. It is imperative that malls have to be creative and offer a diversified merchandise mix to build market share and local patronage.
The forthcoming developer of the 6.8ha Tun Razak Exchange (TRX) Lifestyle Quarter, Lend Lease, is fast in signing up new tenants such as the Seibu department store.
It recognised that there may not be many distinctive good tenants in the market so it is up to the owners and management to work very hard to get singular merchandise and themed offerings to prevail under a very competitive mall environment.
Although tough times have been forecast ahead for retail players and with new malls commanding lower rents as a result of the crowded market, changes in the average occupancy rate has not been drastic across the board.
Malls in the city centre stood at 89.1% last year, down from 89.9% in 2015 while malls in the city suburbs dropped slightly from 90.3% in 2015 to 90.2%. In Greater Kuala Lumpur, the drop was also minimal, from 89.5% in 2015 to 89.2% last year.
To those who question why more malls are still being approved by the authorities, it is essentially up to the developers to be aware of the prevailing market conditions, be more meticulous and up their due diligence in their market research before they embark on any new malls.
It is of utmost importance that potential developers do their strategic roadmaps as malls need several years in the planning and building stages, particularly for the more sophisticated and mixed use developments where a wrong plan can be economically crippling.
Given the country’s growing population and increasing affluence, and despite the current slowdown, we are optimistic the shopping malls industry will not only thrive but bring again a higher level of experiential shopping.
But for the short term and given the current challenging times and uncertainties in the global market, creative and innovative malls will continue to yield good returns to their owners.
Here lies the challenge for all mall owners to rise above these difficulties and not only stay relevant but to prosper.
Tan Sri Eddy Chen is the president of the Malaysia Shopping Malls Association