Retail sector hit as Malaysians cut spending to cope with rising prices

by Ida Lim
The Malay Mail Online
December 14, 2015

KUALA LUMPUR, Dec 14 — Retail outlets here are reporting a drop in business as Malaysians cut spending to cope with the rising cost of living.

For many of those who spoke to Malay Mail Online about their lifestyle changes, cutting out unnecessary purchases and making prudent spending choices are the order of the day.

Fadzilla Hernani, 29, a post-graduate student whose monthly household spending has gone up by around 20 per cent after the introduction of the Goods and Services Tax (GST), said she has switched to hypermarkets’ house brands to get non-food items of equal quality at a cheaper price.

“Milk has no price controls, I choose the cheapest (baby) milk powder. Last time, I chose Anmum, but now it has increased by RM5, RM6, one week one box is RM60, but because it is expensive, I am forced to find a cheaper brand… Dutch Lady at RM25, the quality is slightly lower,” said Fadzilla, who has a three-year-old toddler.

Every sen saved counts for Fadzilla who now buys paper of slightly lower quality at 70gsm just to save RM1 and purchases pens in bulk without caring for the brand.

Fadzilla, who also works as a business assistant, notes that savings have gone down, as wages remain largely stagnant.

With the GST forcing her to think twice before parting with her money, Fadzilla said she has turned to online shopping for cheaper clothes, cut down eating out at restaurants to twice a month and also trimmed her twice-a-month visits to the cinema, opting instead for free video-streaming site YouTube for entertainment.

Even her businessman husband Mohd Anar, 29, has started selling his pre-loved clothing online to generate extra income.

A manager at an investment bank, who only wished to be known as Joe, said he now has to practise smart spending and budget his expenses, instead of spending freely or shopping for his family as he wished.

The 44-year-old, who has three children, said his family’s lifestyle has changed, with holiday trips now only to local destinations with a carefully-budgeted itinerary and fewer weekend outings to malls and more home-cooked meals.

“Last time, I would say, if we go to the shopping complex, we go at the weekend, we go out maybe two or three times a month. Now quite some time already we don’t go for movies, now everything can be downloaded.

“I told them we have to just cut down. It’s not that I don’t want to bring them, I think it’s expensive,” the manager said, noting that such outings typically cost around RM250 inclusive of five movie tickets of around RM50, eating out and the purchase of toys and clothing for the children that cost around RM100 respectively.

Joe said his family would not be enticed by the year-end sales unless they are looking for a good deal for an item that they need to buy.

IT professional Revathy, 30, said she puts in extra hours at work to get additional income and wants to find part-time work for the weekends, adding that the first thing that she cut was entertainment, movies and eating out.

Her 30-year-old colleague Shantiya said she only manages to save less than RM200 per month despite tightening her belt through measures like bringing a packed lunch to work.

“I can’t even manage, that’s why I am searching for another job, part-time,” she said, noting that she has to pay RM50 more for highway tolls now and recently paid a hefty RM20 in GST to get her car tyre changed.

Retiree Halwa HS, 62, said she goes online and uses smartphone apps to check where the offers of the day are and switches between supermarkets depending on the deals offered.

She also related that she cut down on imported goods and stopped annual trips abroad to Indonesia, as the ringgit remains weak.

“Well, I have to eat humbly and spend humbly and be smart. I have been reading a lot on how to reduce expenditure, things like that we have to really read up and know how to live with this,” she said, adding that her daughter’s mother-in-law buys items in bulk before splitting it with her three daughters-in-law.

Tan Hai Hsin, the managing director of research firm Retail Group Malaysia, said the GST has affected all the retail sub-sectors since its introduction in April, with many retailers seeing a plunge of between 20 per cent and 50 per cent in business.

Weak consumer spending has hit sub-sectors like grocery, fashion and fashion accessories, electrical & electronics, food and beverage and overseas travel.

“The current political situation is affecting the consumer sentiment level and buying mood of Malaysian consumers.

“They are frustrated, they are confused and they are uncertain of their future in this country. As a result, they are less willing to buy more,” he told Malay Mail Online recently in an email interview, noting that consumers’ spending has yet to recover to levels before the GST was imposed.

Tan said the weak ringgit value has bumped up import costs and resulted in higher retail prices that have now become more apparent since the beginning of this year’s fourth quarter, predicting that living costs will go up even more.

“We expect Malaysian consumers’ purchasing power will decline further. The recent toll hikes will lead to another round of price increases in the next few months,” he said, also pointing out that Budget 2016 did not provide incentives that will spur consumers’ spending in next year’s first half.

“At this moment, the prospect for next year is still poor,” he said when confirming a downward trend this year in sales generated by shopping malls and the retail industry that is not expected to improve significantly in the first half of next year.

Retail Group Malaysia is predicting an estimated overall growth in retail sales of 3.1 per cent this year, the lowest figure when compared against the past five years’ growth rate that has been on a declining trend — with 2010 recording 8.4 per cent, 2011 (8.1 per cent), 2012 (5.5 per cent), 2013 (4.5 per cent), 2014 (3.4 per cent).

The retail growth rate for the past 10 years before that has generally fluctuated, with the research group’s data showing 2000 (10.4 per cent), 2001 (1.7 per cent), 2002 (3.0 per cent), 2003 (3.6 per cent), 2004 (8.0 per cent), 2005 (6.2 per cent), 2006 (8.4 per cent), 2007 (12.8 per cent), 2008 (5.0 per cent) and 2009 (0.8 per cent).

With Christmas shopping only starting the second week of this month, Tan said it is “still too early to tell if Malaysians will return to shop as compared to last year.” But all indicators seem to say that will not be so.