The Covid-19 crisis has put the retail industry in limbo, affecting businesses ranging from food and beverage (F&B) to services.

Since the outbreak, most retail outlets are dealing with significant challenges brought on by a sharp decline in customer numbers and disrupted supply chains.

However, with the transition from the Movement Control Order (MCO) to the Recovery MCO, the situation has begun to improve.

Under the RMCO, Malaysians are free to move about and visit physical shops again, albeit with certain SOPs in place.

According to global market research platform Ipsos Sdn Bhd, almost half (48%) of Malaysians have increased online purchases during the pandemic, especially for food and grocery deliveries.

In general, malls are looking at a return of 75% of footfall, a good indicator that they are still playing a major role in the community as a place where people congregate to socialise, said Sunway Malls and Theme Parks CEO HC Chan.

“Family entertainment outlets and restaurants have been seeing a good recovery as more people become more comfortable with the new SOPs under the new normal.

“Sales at the shops are slowly recovering, although they have been impacted by more cautious consumer sentiment. The end of the loan moratorium will contribute to a slight dip in disposable income as well,” he told Property Advisor.

Nevertheless, Chan said the challenge is the capacity reduction and, in certain cases, content for cinemas.

Selangor State Development Corp investment arm, PKNS Real Estate Sdn Bhd (PREC) CEO Fakru Radzi Ab Ghani said most businesses are gradually picking up in the recovery phase, at up to 70% to date.

“Demand for retail is on the rise, it is just that shopping behaviour has changed. People are no longer spending too much in a mall, they are going to targeted outlets with a purpose. Good eateries are the main catalyst for people to visit a mall,” he said.

Fakru said there are limitations on mall operators in terms of organising events and promotions to pull in the crowds due to government restrictions. This is also one of the reasons operators have been unable to attract optimum footfall.

Secret Recipe Group business development director Patrick Sim Chee Hong noted that due to stringent SOPs, its F&B outlets are losing customers due to limited seating.

“Most restaurants are looking to improve sales by getting into takeaway and deliveries. Secret Recipe is doing alright, considering the situation, and the demand for our 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 and Mid Valley Megamall are still going strong. However, most new malls are unable to fill up their tenant spaces.”

Killer Gourmet Burgers (KGB) co-founder Leow Joe Yee agrees that Covid-19 has shifted its business from dining in to delivery-based. “Certain malls are recovering better with more footfall. Customers are still cautious about dining at the restaurant, but business has improved. However, the situation is uncertain as it will depend on the number of Covid-19 cases.”

Recovery phase

Chan said Sunway’s occupancy rate has been largely unaffected, remaining at 92% to 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 are seeing 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 footfall by end-2020, and tenants’ sales are projected to recover by 50% to 60%.

He said Sunway has invested RM30 million in staff retraining, technology, and health and safety fittings to ensure employees, tenants and visitors are safe within its premises.

Chan also said retailers have adapted quickly 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 strategies in reaching out to consumers. In fact, this is how to translate the experiential factor into digital and drive customers back to bricks and mortar stores.”

However, according to Fakru, the retail industry was experiencing tough times even before Covid-19, particularly its physical stores.

“This is due to the migration of people to online shopping. And unemployment is also on the rise, compromising buying power. The rise in the inflation rate is also causing unaffordability.

“The merchants that started doing business online are amazed by how much they are able to sell. This pandemic has made people understand 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 agrees that tourism-centric and office areas are suffering, including one of its outlets that relies largely on tourists.

“One of the issues with Kuala Lumpur and even locations like Johor is that there was an over-saturation of malls and retail space even before the MCO. The current situation has made it worse.”

However, Sim said things are starting to fall into place as SOPs are enforced and customers are more confident about dining out.

He said Secret Recipe’s deliveries have increased in terms of percentage, with a higher demand for desserts such as cakes. “At this juncture, value-driven promotions and incentives have become more important, our digital and online presence has taken precedence.”

Assistance from mall operators and owners

According to Sim, there has been mixed reaction from mall operators to the Covid-19 situation.

“Some are very supportive but many are taking a wait-and-see approach — it took them three to four months since the MCO to decide about rental rebates.

PREC’s Fakru said some mall operators have been saddled with restrictions in regard to organising lifestyle-related events or promotions. “This is why operators are unable to pull as much traffic as possible into the mall.

“As for rental rebates, there is no standard formula for how much of a rebate an operator gives to its merchants. What is important is the need for a balance between incentives given to the merchants and availability of funds to operate the mall.”

This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.