Emily Tan
Dec 2, 2014

Coping with Malaysia’s shrinking wallets: PHD

KUALA LUMPUR – Malaysians have long been dealing with artificially depressed salaries, but a cut in fuel subsidies and worry over the pending 6 per cent GST rollout next year have led concerned consumers to pinch pennies.

Coping with Malaysia’s shrinking wallets: PHD

A study by PHD Malaysia, in partnership with Epinion and Media Prima Group, has found that 92 per cent of the Malaysian Malays and Chinese surveyed are more worried about their financial status now than they were a year ago.

Many have started aggressive measures to cut down on expenses, and 46 per cent plan on switching to a higher-paying job.

The online study surveyed 500 Malay and Chinese consumers aged 15 and above in October 2014 as the first leg of PHD Malaysia’s ongoing ‘Tomorrow Now’ thought-leadership series. Jimmy Lin, GM of PHD Malaysia explained that the study opted to leave out Malaysia’s Indians as they only represent 7 per cent of the population and marketers tend to focus more on the Malays and the Chinese.

The research paper also reported that 42 per cent of respondents have started to scrutinise purchases on a cost-per-unit basis. Furthermore, nearly a quarter (24 per cent) have stopped eating fast food, 41 per cent are eating out less frequently and 25 per cent are choosing cheaper options.

While the 2009 downturn saw similar coping strategies among Malaysian consumers, reactions were mixed, as many believed that the situation would improve.

“Today, anxiety hits all walks of life because consumers are dealing with a slew of rising prices,” observed Lim. Unlike during the downturn, weak purchasing power and certainty about future additional price hikes are curbing consumer spending.

As a result, said the paper, this change in behaviour will likely be permanent until Malaysians regain purchasing power.

On average, Malaysian households have a monthly income of only RM 5,900 (US$1,700), according to the government’s 2014 Household Income Survey, reported the Malaysian Insider. The study also found that half of Malaysia’s 7 million households earned less than RM 4,258 (US$1,243) a month.

Malaysia’s pending GST

In April next year, the Malaysian government plans to introduce a Goods and Services Tax of 6 per cent. The study found that while Malaysian consumers don’t fully understand the ramifications and impact of the GST, 71 per cent expect prices to soar. Nine in 10 are convinced costs will get higher and higher and there’s nothing to do but live with it.

“The general perception is that prices will rise, mostly due to the growing cost of petrol which is a large chunk of ingredient costs,” said Lim. “The GST adds another layer of uncertainty.”

So on top of the ‘refrain and avoid’ approach many Malaysians adopted during the downturn, many will now start to ‘deduct and reduce’, the researchers reported.

Impact on product categories


The first sector Malaysians will be cutting back on is FMGC goods such as groceries, fast food, snacks and personal care. In this sector, the Malays and Chinese differ in coping strategies as overall, the Chinese would rather buy less and eat less fast food while the Malays opt to down-trade for cheaper brands.

On average, more Malaysians are eating home-cooked meals compared with a year ago.

“This is the opportunity for different brands to enter more consumer households," commented Aske Ostergaard, managing director of Epinion Asia. "It could be a battle of multiple brand usage at first, but eventually consumers will settle down with brands that offer the greatest value.” 

Recommendations for brands: The gravitation towards cheaper options means an opportunity for in-house brands to take centre stage. Loyalty cards also come to the fore here.

“Other consumer studies have also shown that Malaysians are more motivated by promotions than most, so deals, vouchers and promotions will be a good way to get them in-store,” said Cassandra Ng, research manager for Omnicom Media Group Malaysia.

Technology & Home Appliances

The study’s researchers recommend a cautious approach for brands in this sector as consumers will be torn between delaying their purchase and trading down.

Although mobile phones are still a must-have item, consumers will look for performance levels they need at an ever-lower prices versus the chase of ever-increasing performance.

Recommendations for brands: Brands need to offer ways to ease the initial investment or spread out the financial commitment.


While Malay consumers are prepared to put travel on hold, the Chinese have no plans to do so. They will, however, opt for cheaper, shorter, no-frills travel plans.

“Budget airlines with domestic flights will do well,” said Lim. “Hotels should start putting together staycation packages and theme parks will become an attractive destination.”

Recommendations for brands: Cheaper doesn’t mean no-fun. Determined budgeting will incline consumers towards needing a treat. Products that enable escapism, such as vacations and gadgetry could provide the answer. Brands that organise free out-of-home activities and entertainment are also likely to draw consumer attention, added Lim.

Home entertainment

To save money, consumers will be staying at home. So home entertainment, traditional media and broadband subscriptions should be relatively immune to the drop in consumer spending. The internet economy is expected to boom as 89 per cent of consumers will be online and 27 per cent at least will be shopping.

“Cocooning [staying at home] used to be a trend among the social media-engulfed Millennials, but we are seeing more consumers of other age groups joining the club,” said Marzina Ahmad, general manager research of Media Prima Berhad.  “There are plenty of opportunities for the advertisers to capitalise on this trend”.

Recommendations for brands: Make in-home entertainment fun and look for opportunities to reach consumers in the home, recommends the report.

“One fast food brand in New Zealand, Hell’s Pizza, managed to cut through the reluctance to eat out in the downturn by launching ‘Pizza Roulette’ - one slice would be crazy spicy but you wouldn’t know which,” said Lim. “It became very popular because people just wanted the entertainment."


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