Nielsen provides insights into Malaysia’s economic outlook and retail backdrop.
Malaysia’s economy expanded 4.5 percent at the end of 2016 as wages improved, employment grew, and strong capital spending continued in the manufacturing and services sectors. This was the highest quarterly growth in 2016 and matched the Q4 result in 2015.
The weakening Ringgit and increasing concern over the economy, food prices and political stability saw consumer confidence slip five points to end the year at an index of 84. Despite key economic indicators remaining positive, 85 percent of Malaysians believe the country is in a recession, up 8 percent from Q3 2016. Malaysia now has one of the lowest consumer confidence ratings in Southeast Asia and this augurs poorly for domestic demand. Consumer spending will likely remain flat at best during the first half of 2017. Only one in four (27 percent) Malaysians believe it is a good time to buy considering cost of living and the state of their personal finances.
The devaluation of the Ringgit could also be top of mind for most consumers as the prolonged situation means suppliers will potentially have no choice but to pass on higher import costs to consumers. In addition, as Malaysia enters a potential election year in 2017, concerns about political stability have increased, consistent with the trend seen before the last election.
Grocery shopping and mall culture has always been a mainstay for Malaysians. Throughout the early 2000s, shoppers’ behavior evolved from Traditional stores to Hyper and Supermarkets but now a new shift is occurring as consumers spend increasingly more in smaller format mini-markets and convenience type stores. When it comes to increasing share of wallet, it is important that retailers understand and respond to local consumer needs. Convenience of location (57 percent), good prices (54 percent) and stores that readily availability of desired products and high-quality fresh produce (50 percent) are most desired aspects that Malaysian consumers are seeking from a retail offering.
While low prices or deep promotions may initially offer consumers enough motivation to change allegiance to products, loyalty will not ensue if the product does not deliver on its promise. Getting the price and or value equation right, having products in stock and offering a satisfying shopping experience are vital ways to build long-lasting customer loyalty
Malaysian consumers are increasingly connected with 55 percent of Malaysians stating they feel anxious when their mobile devices are not close at hand. While mobile devices have transformed the way Malaysians communicate and stay connected with each other, it is also revolutionizing the world of retail and banking. To many Malaysians, their mobile devices are indispensable shopping buddies used to: look up product information, compare prices, search for coupons or deals, all to make better shopping decisions and their shopping trip quicker or more efficient.
About one third of Malaysians say they have purchased a product or service on their mobile device in the past six months and they have also used a mobile app to make a purchase in the same period. .Malaysian consumers are active when it comes to engaging in showrooming, the practice of checking prices online and inspecting items and visiting physical stores. They then leverage on this knowledge and demand for discounts that they see online.
As Malaysian households continue to grapple with a higher cost of living, they continue to seek value. Retailers should look to stimulate consumer spending through attractive value propositions, loyalty programs and grapple with the conundrum of Hi-Lo pricing and everyday low pricing strategies.
Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.