Time to rethink, re-plan and reinvent retail Time to rethink, re-plan and reinvent retail
Share this on WhatsAppKUALA LUMPUR — Shopping malls are in trouble. For the past few years, new shopping centres in the Klang Valley have... Time to rethink, re-plan and reinvent retail

KUALA LUMPUR — Shopping malls are in trouble. For the past few years, new shopping centres in the Klang Valley have been finding it difficult to fill their majority quota (at least 80% of available units) upon opening. Malls are also finding it tough to land the right anchor tenant – be it a hypermarket, supermarket, department store, cineplex or bowling alley – say retail experts.

Ironically, many developers are still planning to build shopping centres. According to the deputy director general of valuation (Technical) of the Valuation and Property Services Department, Dr Rahah Ismail, the incoming and planned supply of shopping malls in the Klang Valley will likely contribute another 29 million square feet of space in the near future, adding to the existing 56 million square feet in the Klang Valley.

Alarmingly, market analysts have classified just 45 to 50 of these malls as “successful”, in terms of annual footfall and revenue generated as well as rent collected.

A great many are, in fact, underperforming. On the fate of incoming supply of retail space, Savills (Malaysia) Sdn Bhd managing director Allan Soo told Real Spaces that existing new malls are going to find it difficult to attract tenants as retailers shelve their expansion plans.

On the need for so much retail space, Soo said that there is certainly segmentation happening now, where malls are positioning themselves to bring in specific retailers to attract specific income levels.

“However, the impact of all this [surplus] space is that the retailers are finding it difficult to survive as shoppers are spoilt for choice and will automatically choose malls that have more things to offer, either in terms of more shops, merchandise, convenience (closer to home) or a better ambience.

“So for mall operators, size does matter; bigger malls draw bigger crowds. Smaller malls have to be niched or be very special in terms of the experience they provide,” Soo said.

He added that shoppers are also quite different now in terms of profile, as we are seeing a new Gen Y and increasingly Gen Z segment of the consumers determining industry standards and behavioural patterns.

Certainly, these younger groups prefer online shopping and “indies” (independent retail outlets/brands) within nicer boutique type malls like the Curve and Publika and pop up shops.

“But in terms of numbers of malls, the simple answer is that we do not need so many. We just need better malls,” Soo stressed.

He also said that online shopping could pose a serious threat to malls here, as online retailing is fast taking over from the traditional brick and mortar shops.

He believes that this year will be challenging to the retail sector as headwinds are strong against the Malaysian economy, but Johor and Penang will fare better because of tourism. There will also be a rise in online retail options as well as a growing preference among the middle income segment to buy at discounters.

Soo explained that 2014 was a bad year, where sales turnover dropped 20%, and 2015 was worse with the implementation of the Goods and Service Tax (GST) and the drastic drop of the ringgit.

Upon GST implementation, there was a further reduction of 50% in sales for many categories, including food and beverages. In May 2015, sales normalised until there was a sharp fall again in September as the ringgit weakened.

However, Soo believes there are two beneficiaries of the weakened ringgit, Johor and Malacca, where sales shot up by more than 20% because Singaporeans regularly frequent these cities and spend more from September onwards.

“GST and the weakened ringgit prompted many retailers to shut down, especially in the older and weaker malls, some of which cannot cope with the changing trends as newer and better retailers shun these malls.

“There was also a consolidation in numbers of shops, where big brands and cosmetic counters began to reduce their number of outlets in order to improve their overall performance,” he said.

One example of changing times is the RM100 million (US$237 million) department store operator Parkson, which has invested in rebranding and repositioning itself. It intends to enter new categories — such as gourmet food, supermarkets and beauty — and import new fast-fashion brands.

Variations of this reform will be introduced into its operations in other countries such as Vietnam, Indonesia, China, Myanmar and Cambodia.

Parkson Retail Asia director Datuk Magic Lee said the group’s sales could fall by as much as 15%. He said the poor result was not just due to GST implementation, but also the ringgit’s heavy devaluation.

Hence, it plans to launch three affordable fast-fashion brands from Korea soon. The brands are Spao, Mixxo and Who.A.U. Parkson aims to build a portfolio of about 100 brands (expanding from its existing 35 brands) in its apparel segment while continuing to open new stores throughout the region.

Also in its plans are four stores in Malaysia, three to five outlets in Indonesia, two in Myanmar and one in Cambodia this year.

While consumer sentiment is expected to remain weak in Malaysia, Lee hopes the rebranding campaign will fuel at least a 50% increase in sales year-on-year.

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