RETAILING

UNIVERSITI UTARA MALAYSIA SESSION 2023/2024 (A231) BPMM3133 (A) RETAILING MANAGEMENT INDIVIDUAL ASSIGNMENT TITLE: A STUDY OF IMPACT OF THE OUTBREAK ON THE MALAYSIA RETAIL INDUSTRY PREPARED FOR: PROF. MADYA DR. SELVAN PERUMAL PREPARED FROM: KHAIRINA BINTI KHAIRUDDIN 288221 SUBMISSION DATE: 17TH DECEMBER 2023

A study of impact of the outbreak on the Malaysia retail industry : The transformative shift in the digital era Reported by Khairina binti Khairuddin In recent years, the Malaysian retail industry has undergone a significant transformation, propelled by the digital era. The convergence of technology with traditional retail practices has not only reshaped the way businesses operate but has also redefined consumer interactions and overall business strategies. The ongoing outbreak has added a new layer of complexity, prompting the industry to adapt rapidly to unforeseen challenges. 1.0 Background of the Malaysia retail industry The retail industry in Malaysia holds a pivotal role in the country's economic landscape, constituting a substantial contributor to its GDP and serving as a primary driver of economic growth. The evolution of Malaysia's retail industry is a captivating journey reflecting the changing preferences and lifestyle of consumers. From the bustling traditional markets and street vendors that once defined commerce, the landscape has shifted dramatically. The emergence of modern retail formats, such as expansive shopping malls and hypermarkets, marked a significant transition, providing consumers with diverse choices under one roof. The digital revolution further transformed the industry, with the rise of e-commerce platforms redefining the shopping experience. Government initiatives supporting foreign investment and fostering competitiveness underscore the sector's importance in driving economic activity. Consumer behaviour has adapted to technology, with a growing demand for high-quality products and personalised, seamless shopping experiences. Amidst challenges like increased competition, the industry's ability to innovate and embrace digital trends will shape its continued success, making Malaysia's retail story a dynamic narrative of adaptation and resilience. 2.0 Key Player in Retail Market According to 6Wresearch (n.d.), the retail landscape in Malaysia boasts a dynamic mix of key players, featuring a 1

diverse range from multinational retail powerhouses to local and regional stalwarts. Among the international giants, AEON, Tesco, and IKEA stand out, operating an extensive network of hypermarkets and supermarkets that span the country. These players have become synonymous with offering a comprehensive array of products, ranging from daily essentials to trendy home furnishings, catering to the varied needs of Malaysian consumers. On the home front, Mydin and Parkson emerge as significant contributors, particularly in the department store and hypermarket segments. Mydin, known for its competitive pricing, and Parkson, recognized for its upscale offerings, add distinctive flavours to the retail landscape. These domestic players play a crucial role in shaping local shopping experiences and meeting the diverse preferences of Malaysian consumers. In the realm of digital retail, the emergence of e-commerce platforms like Lazada, Shopee, and Zalora has transformed the way Malaysians shop. These online platforms have gained considerable traction, offering a vast and accessible array of products, a trend further accelerated by shifts in consumer behaviour during the COVID-19 pandemic. The shopping mall scene is not without its major influencers, with Sunway Group and Pavilion Group leading the charge. These entities manage and develop large-scale retail complexes that transcend traditional shopping by seamlessly integrating entertainment and dining experiences. Such innovative approaches contribute to the evolving nature of retail spaces in Malaysia. Furthermore, the Malaysia Retail market share is significantly influenced by these key players who have established themselves as leaders in various segments. Additionally, the retail sector benefits from the presence of numerous local and international fashion and specialty brands, further enriching the consumer experience and ensuring a vibrant market. In essence, the Malaysia retail market is a dynamic ecosystem shaped by a harmonious interplay of international giants, domestic players, e-commerce platforms, and innovative shopping malls. Together, these key players create a rich tapestry of options, ensuring that the retail sector remains responsive to the ever-changing preferences and demands of Malaysian consumers. 2

3.0 Market Size and Growth The Malaysia Retail Sector is poised for substantial growth, with expectations set to increase from USD 84.63 billion in 2023 to USD 112.93 billion by 2028, reflecting a robust CAGR of 5.94% during the forecast period (2023-2028). According to Retail Group Malaysia (RGM) has revised downwards Malaysia's annual retail industry growth rate for 2023 to 2.7% from 4.8%. Historically, the Malaysian retail industry has been a cornerstone of the country's gross domestic product (GDP), contributing significantly over the past decades. The market showcases the presence of numerous national and international brands, operating an extensive network of retail outlets throughout the nation. However, despite continuous store launches and a widespread network, the retail industry faced a notable slowdown during the study period, primarily exacerbated by the profound impact of the COVID-19 pandemic in 2020. The implementation of the movement control order (MCO) constrained public movement, and the initially projected two-week lockdown in March 2020 extended to mid-May 2020, resulting in a significant decline in total revenue generated from the retail sector. The sector witnessed a contraction of approximately 16% in 2020. Various retail segments experienced substantial contractions, notably in apparel, footwear, fashion accessories, and others, with double-digit declines recorded during 2020. Similarly, one of the largest distribution channels, comprising hypermarkets, supermarkets, and convenience stores, witnessed a notable drop in total sales. The trajectory of the Malaysian retail industry, as outlined by the forecast and recent trends, underscores both resilience and challenges. As the sector navigates the aftermath of the pandemic, adaptability and innovation will likely be critical factors influencing its recovery and future growth (Malaysia Retail Sector Insights, n.d.). 4.0 Technological trends in retail Technological advancements play a pivotal role in driving business evolution, enhancing industries, and establishing a 3

competitive edge. In the realm of retail, technology has been a catalyst for growth, efficiency, and cost reduction, contributing to increased profits. Embracing technology is essential for retailers as it revolutionises operations, transforms the shopping experience, and positions businesses as forward-thinking and customer-centric. Early adopters in retail, who leverage technology for convenient shopping experiences, personalised services, and streamlined operations, stand out from competitors and appeal to tech-savvy consumers. According to Sakrabani and Teoh (2019), there are few retail technology trends happening in Malaysia Retail Industry. The technological trends in Malaysia retail industry are Augmented Reality (AR), RFID technology, and smart checkout 1. Augmented reality Image 4.1 : example of AR AR superimposes digital content and information onto a user’s real-life scenario to enhance their virtual experience of the existing physical environment. The improved version of the physical world is attained by leveraging the capabilities of the computer-generated display,visual,sound,text, and graphics which augments the user’s real-world experience. AR will search things visually by simply pointing out mobile cameras toward objects in real-life surroundings. The Live View feature in Google Maps is a leading example of how AR allows users to visualise their destinations in the real world. 2. RFID technology Image 4.2 : example of RFID RFID is the wireless non-contact use of radio frequency waves to transfer data. Tagging items with RFID tags allows users to automatically and uniquely identify and track inventory and assets. RFID takes auto-ID technology to the next level by allowing tags to be read 4

without line of sight and, depending on the type of RFID, having a read range between a few centimetres to over 20+ meters. 3. Smart checkout technology Image 4.3 : example of smart checkout Smart checkout technology is an automated system that streamlines the checkout process in online shopping. It is designed to provide a seamless shopping experience for customers while minimising the time and effort required to complete a purchase. Smart checkout technology uses a variety of tools and features such as machine learning, AI algorithms, and data analysis to enhance the shopping experience for customers. 5.0 Green initiatives and sustainable practice Customers want to spend money on brands they feel good about and brands that contribute towards eco-efforts. There are some activities under program green initiatives and sustainable practices that have been used by retail companies in malaysia. 1. Green retailing Image 5.1 : example of green retailing Green retailing is defined as an environmentally friendly management approach that focuses on providing and delivering goods to consumers without jeopardising the safety of the environment. To put it in other words, green retailing is all about selling products to shoppers while also caring about the environment. Green retailing involves environmental protection to improve the retail chain through the elimination of waste. This leads to improved production and distribution. Of course, 100% green retailing is impossible to achieve, but it is important to try to be “as green as possible”. 5

2. Reusable packaging Image 5.2 : example of refill packaging Reuse looks at packaging in a fundamentally different way. Rather than a ‘throwaway item’ with the sole purpose of protecting a product, packaging could be designed as part of that product, bringing benefits to businesses and consumers that disposable versions cannot. For example Dove launched a 4x concentrated body wash. The smart formulation uses new, patented technology that thickens when mixed with water. The small refill bottle – which is squeezable, so that all the concentrate is easy to get out – is recyclable and made of recycled material. It uses 50% less plastic than a standard bottle after two refills. 3. Eco-Friendly packaging Image 5.3 : example of eco-friendly packaging Eco-friendly packaging is any packaging that’s easy to recycle, safe for individuals and the environment, and is made out of recycled materials. It uses materials and manufacturing practices with minimal impact on energy consumption and natural resources. Research has shown that 92% of consumers would choose paper-based packaging over plastic-based. Therefore, from that it can lessen the amount of product packaging, cut back on packaging that related expenses and also eliminate the use of toxic materials in the production of packaging. 6.0 Future outlook of Malaysia retail Many difficulties have faced brick and mortar stores even before the global coronavirus pandemic struck. For years, the emergence of e-commerce platforms and the Internet have compelled businesses to reassess their 6

retail strategies. That timeline was only shortened by the pandemic.Nevertheless, physical stores continue to have a role in the retail and consumer goods industry. Many will need to change and grow in order to provide novel, out-of-the-ordinary services that will draw in more clients and maintain foot traffic. Therefore, there are some suggestion future look like to follow the retail trend : 1. An artistic escape Physical retailers are now expected to offer a more comprehensive shopping experience in order to build strong customer relationships, as online retail and media channels take over as the preferred contact points for convenience. Today, a store's environment puts a lot of emphasis on colours, materials, graphics, lighting, and wayfinding to create an immersive experience that reflects the brand. Retailers and brands will have the chance to engage customers in the brand's narrative, provide an exceptional and immersive brand and product experience, and ultimately strengthen their bond with customers by opening brick-and-mortar locations. In an interview with Retail Dive, author and business advisor Doug Stephens stated, "A relationship that can then live across multiple buying channels." Consider Celine's inaugural concept store located in Pavilion Kuala Lumpur. The architectural concept, created by creative director Hedi Slimane, contrasts high-quality materials to produce a sculpture-like interior that offers patrons an artistic haven. The brand's minimalist, edgy approach to luxury is embodied by the bespoke brutalist furniture that compliments reclaimed oak, concrete, polished stainless steel, brass, and gold mirrors. These programmes transform physical stores into destinations unto themselves, something internet retail is unable to accomplish. In the long run, the goal is to convert customers into brand disciples rather than to focus solely on conversions. 2. Digital innovations 7

Physical stores should invest in tech and digital innovations even as fashion shows transition to a "phygital" format and brands embrace digital points of sale. Malls and retail establishments have also implemented QR codes and digital billboards (similar to Pavilion's well-known 3D bull animation) to draw in more consumers and provide unique virtual experiences.Using an omni-channel approach, such as click and collect, in-store returns and/or store appointments, is an additional way to put this into practice. This could result in fewer products being sold in stores, freeing up space for experiential ideas and closer interactions between customers and brand representatives. Consider the actual store more of a showroom or living area.Carl Reader, the creator of the fintech company TaxGo and author of The Startup Coach, states:“Apple does really well in combining bricks and clicks. It demonstrated a powerful showrooming concept, where the store is primarily a front face for consumers to see, feel and experience the product. Many companies have followed suit.” 3. Personalised experiences The personal touch that retail offers is a major factor in its continued existence. Even customers will attest that unique concepts and niche product launches are best experienced in person. Customisation services strengthen this benefit by allowing clients to actively participate in the creation of their purchases. "Stores will grow to be destinations we visit, not just to purchase mass-produced goods but also to design and collaborate on unique projects with the help of professionals. Stores will be the hub for customisation and collaboration, whether it's creating the ideal bicycle, tailoring a suit, or creating a one-of-a-kind notebook computer, according to Doug Stephens on the Retail Prophet website. One company that has been leading the way in innovative, customised retail ideas is Adidas, as evidenced by the brand's recently opened Sneaker Collect location in KLCC. The shoe-focused 8

store, which offers a wide selection of Originals and Performance footwear under one roof, is the first of its kind outside of Greater China and caters to sneaker enthusiasts in Malaysia. The area, which combines several components associated with sneaker culture, such as colourful murals, useful fixtures, and roadie displays that breathe life into the movement, is intended to inspire and nourish creative minds. The ability for customers to express themselves through the variety of shoe dubraes, rings and vinyl patches that are only available in-store elevates the Sneaker Collect experience. Additionally, the company intends to launch limited-edition customised items via an impending partnership with Sneakerlah. 9

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Malaysia’s retail growth slashes to 2.7% in 2023. The Star. https://www.thestar.com.my/business/business-news/2023/09/08/malaysia039 s-retail-growth-slashes-to-27-in-2023 RFID in retail | RFID Software | RIOT Insight. (n.d.). RIOT Insight. https://www.riotinsight.com/article-rfid-in-retail#:~:text=RFID%20in%20retail% 20involves%20the,individual%20customer%20purchase%20order%20history. Sakrabani, P., & Ping, T. A. (2020, June). The influence of technology factors on retail 4.0 adoption in Malaysia. In 8th International Conference of Entrepreneurship and Business Management Untar (ICEBM 2019) (pp. 153-157). Atlantis Press. Statista. (n.d.). AR & VR - Malaysia | Statista Market Forecast. https://www.statista.com/outlook/amo/ar-vr/malaysia#analyst-opinion Wresearch. (n.d.). Malaysia Retail Market | Grow at a CAGR of 5.99% till 2029. 6Wresearch. https://www.6wresearch.com/industry-report/malaysia-retail-market-outlook Yiau, C. N. (n.d.). Retail Group Malaysia upgrades 2023 retail growth forecast to 2.8% after strong 3Q sales. Edgeprop.my. https://www.edgeprop.my/content/1907896/retail-group-malaysia-upgrades-20 23-retail-growth-forecast-28-after-strong-3q-sales 11