Nielsen
Aug 18, 2014

Malaysia's evolving shoppers face inflation, sales tax: Nielsen

The Malaysian economy hit is highest point in over a year recently, and consumer confidence is strong. But rising inflation is hitting spending, and a 2015 general sales tax is likely cause more caution around spending.

Malaysia's evolving shoppers face inflation, sales tax: Nielsen

Following soft economic performance in 2013 with annual GDP growth of 4.7 percent, the equatorial nation of Malaysia saw its economy grow by 6.2 percent in the first quarter of 2014, its highest GDP growth in five quarters. The positive growth experienced in the first quarter of the year, which convincingly exceeded the forecast 5.8 percent growth, was underpinned by strengthening exports and increases in Government spending, according to the Malaysia Department of Statistics.

Malaysia’s consumer price index (CPI) has also been rising in 2014, with April inflation up 3.5 percent versus the same period a year ago, due in large part to changes in Government subsidies which have seen fuel and electricity prices increase. Rising inflation is having a negative impact on consumer confidence, with Malaysia having posted quarter-on-quarter decreases in consumer confidence levels for the past four quarters. In the first quarter of 2014 Nielsen’s global Consumer Confidence Index recorded an index of 92 for Malaysia, two points below the global average of 94 and 15 points lower than Malaysia’s Consumer Confidence Index in the same quarter a year ago.

Rising inflation is also impacting consumer spending. More than eight in 10 (83%) Malaysian consumers have adjusted their spending to save on household expenses in the past year, with fashion, out-of-home entertainment and utilities being the most common areas for consumer spending cuts (The Nielsen Global Survey of Consumer Confidence, Q1 2014). With a new general sales tax due to be introduced in Malaysia in 2015, the contraction in consumer spending is likely to continue.

Asia's Top 1000 Brands 2014
Asia's Top 1000 Brands 2014:
Top 1000 ranking
Adspend for Top 100
Rankings back to 2004
Top 100 in 13 specific markets
Interactive comparisons
Analysis and commentary
Explore now >> 

Malaysians’ shopping habits are evolving, particularly within the grocery retail sector where the expanding number of supermarkets and minimarkets are growing in popularity. The popularity of smaller format stores is also increasing, which is encouraging hypermarket retailers to venture into this channel. Thanks to Malaysia’s relatively high internet and smartphone penetration (62% and 80% respectively), online retailing represents a key opportunity and a number of major retailers have launched online offerings in recent years (Nielsen Smartphone Insights and On-device Metering, 2013).

Brands have substantially increased their advertising investment in Malaysia in the year to date, with Nielsen’s advertising expenditure services recording a 13.6 percent uplift in advertising spend in the first half of 2014 compared to the same period in 2013. While television maintains the largest proportion of advertising expenditure (60.4%), the increase in advertising spending is attributed in large part to additional spending on cinema and movie trailer advertising which increased 33.1 percent in the first half of 2014 compared to the same period in 2013.

In the coming years it is critical that companies take into account the polarized nature of Malaysia’s consumer segments when considering the make-up of their product offerings. The lower income population is increasing, both through immigration and a large number of students transitioning to salary earners over the next few years. The number of affluent consumers, while still relatively small, is also increasing and these higher income earners are enjoying high ticket items. Therefore, while there is growing demand for premium product offerings among Malaysia’s affluent community, it is important to note that these consumers still make up a small proportion of Malaysia’s overall population, and brands must also look to provide a range of affordable items which caters to the emerging middle class.

 
 
 

 

Related Articles

Just Published

5 hours ago

Mid-level female creatives don't feel 'heard'

This International Women's Day, we ask mid-level female creatives in the region what their biggest pain points are working in a male-dominated field.

5 hours ago

It's past time to eliminate gender biases in design

From surgical instruments to crash test dummies and virtual assistants, gender biases and stereotypes have been built-into products causing real harm, says the co-founder of Elephant Design.

5 hours ago

IWD campaigns: Angry, funny, clever and inspirationa...

See how organisations and agencies from around APAC have chosen to mark International Womens Day 2021.