This article first appeared in The Edge Malaysia Weekly on September 27, 2021 - October 3, 2021

COMMUNITY mobility reports tracked by Google seem to point to a tepid return to normalcy in consumer spending, as the data shows the number of visits to retail centres did not chart a manifold increase despite the recent easing of movement restrictions in the country.

This is also in spite of 81.8% of the adult population — those aged 18 and above — being fully vaccinated against Covid-19.

Rising cases in the country at the beginning of the year led the government to impose a second Movement Control Order (MCO 2.0) in a select few states beginning Jan 13, and when the number of cases did not decline a nationwide total lockdown was imposed from June 1.

However, in July, Malaysia achieved one of the fastest vaccination rates in the world with more than 400,000 doses administered a day — prompting the government to introduce a four-phase National Recovery Plan (NRP) — which allowed the gradual reopening of certain sectors of the economy such as the retail sector.

Google’s mobility data shows how visits and lengths of stay at different places change compared with a baseline. The baseline here refers to the median value for the corresponding day of the week during the five-week period from Jan 3 to Feb 6, 2020, at a time before the Covid-19 outbreak became a global pandemic.

Data is divided into six categories — retail and recreation, grocery and pharmacy, parks, transit stations, workplace and residential — and shows how visits to these places are changing in each geographic region. Data is tracked based on the number of visits per se to these places, with the exception of the residential category, which tracks the duration of time spent at places of residence.

For the purpose of this article, we are taking a closer look at the retail and recreation category for Malaysia, which tracks mobility trends for places such as restaurants, cafés, shopping centres and cinemas, and the grocery and pharmacy category, which tracks places like grocery stores and pharmacies.

The retail and recreation category saw a decline of 41% on Sept 16 from the baseline. This is an improvement compared with a decline of 63% on June 6 when the country was in total lockdown, but it also indicates a fewer number of visits for the retail category compared with Jan 3 — before MCO 2.0 was imposed — which charted a decline of 30% from the baseline.

The grocery sector fared better, charting an increase of 15% from the baseline on Sept 16, and compared with a decline of 12% on Jan 3.

So, why has shopping traffic for the retail category been returning at a gradual pace instead of having a V-shaped recovery? Retail Group Malaysia managing director Tan Hai Hsin says conditions of shopping have changed.

“Different states moved into different phases at different times under NRP. Previously, all states were opened at the same time. Therefore, the shopping traffic count has varied across Malaysia under NRP.

“Secondly, non-essential retailers were allowed to reopen at different stages. Previously, most of the retail trades were allowed to open at the same time. For example, cinemas were only opened from Sept 16.

“The conditions for entry [into retail centres] have also changed. Now, only fully vaccinated individuals can enter the majority of the retail stores. Thus, it affects shopping traffic to a certain extent. [Also] not all retail staff have been fully vaccinated. For example, dine-in is still not allowed in many of the McDonald’s outlets (at the time of writing). Many other restaurants are still serving customers for takeaways only,” says Tan.

He adds that as many retail stores and shopping malls have discouraged parents from visiting the stores with young children, this has also impacted footfall at these places.

Savills Malaysia associate director for retail services Murli Menon says things are definitely improving for the retail sector — but at a slower pace as most retailers and even shoppers are still a bit apprehensive.

“Many of the retailers did not even jump in and open up when the new opening guidelines were announced, simply because they were not sure of actual SOPs (standard operating procedures) and also because of the fear of penalties and so on.

“What is also quite obvious is that the visits to retail centres are becoming more purposeful rather than ‘just hanging out’. This is also reflected in the higher conversion rate seen by retailers based on actual walk-ins,” he tells The Edge.

Hours spent at home are also still relatively high compared with the baseline, despite the easing of movement restrictions. Mobility data for the residential category shows that hours spent at home on Sept 16 had increased 29% from the baseline, which is lower than the 30% increase recorded on June 6.

However, it is higher than the 10% rise recorded on Jan 3, indicating that Malaysians are still choosing to spend more time at home instead of being outdoors.

Tan believes that Malaysian consumers are still staying at home rather than going out shopping because the full opening of the retail sector was delayed longer in this round compared with previous MCOs.

Moreover, retail shops were allowed to open over different periods, depending on the type of business. Thus, it also took longer for shoppers to return to the shops — an example being toy stores, which were only allowed to open from Sept 17.

The historical high daily positive cases and death rates seen in the past months have not helped.

“Despite the high vaccination rate, this situation is worrisome. The danger of another total lockdown in the near future haunts Malaysian retailers as well as consumers,” Tan remarks.

With more people staying at home, could bricks-and-mortar retail centres be at risk of being replaced by online shopping platforms such as Lazada and Shopee? Not quite, says Savills’ Menon.

“While online shopping offers significant convenience as well as attractive offers, it also comes with its own pitfalls of delayed deliveries, inferior products, wrong sizes and so on. Given the additional time being spent on computers, mobile devices and social media, there is also a constant bombardment of products and brands as well as offers, leading to a lot of impulse purchases of items that are not necessarily needed.

“While online shopping is expected — and will continue — to grow, bricks-and-mortar retail is here to stay as people would gravitate back to retail stores for ‘real or serious’ shopping,” says Menon.

Tan concurs, saying that the pandemic has forced many retailers to pay attention to greater digitisation of their businesses. “Online shopping has become another major channel of distribution for retail goods and services in Malaysia. However, it will not replace physical stores,” he says.

Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre executive director Lee Heng Guie points out that recovery in consumer spending will not only depend on the attitude and behaviour of consumers, but also labour market conditions and the state of disposable income post-pandemic.

As the vaccination rate has reached 81% of the total adult population, it has paved the way for a safer reopening of businesses, he says, noting that there will be some impulse purchases and desire for experiences on the back of pent-up savings, but cautions that any return to pre-pandemic spending patterns could take some time, especially since the pandemic has pushed 580,000 M40 households down to the B40 category.

“As some households have depleted their savings, including tapping into their retirement savings, they are likely to rebuild savings and pare down their debt in anticipation of another downturn.

“Besides that, once the loan moratorium ends for those borrowers who have opted in, they have to normalise their finances to balance between repaying their loans and discretionary spending. Pay cuts and reduced income [translate into] a gradual recovery in consumer spending,” says Lee, who expects private consumption to grow by 1.2% in 2021, compared with a decline of 4.3% in 2020. However, he has maintained his gross domestic product growth forecast for the year at 4%.

Sunway University economics professor Dr Yeah Kim Leng believes that consumers, especially those in the higher-income and middle-class brackets, will likely adopt a wait-and-see attitude until the daily new infection and infectivity rates fall to a safer level.

“We see the fourth quarter as a gradual and tentative transition of consumer spending towards less-than-full normalcy expected next year due to the lingering pandemic. Hence, the expected growth of private consumption, which contributes to around 60% of GDP, is between 5% and 6% for 2021 despite the low base last year.

“This means that the consumer spending level after declining last year will rise to around the 2019 level. The mild recovery in consumption is anticipated to underpin this year’s revised real GDP growth of 3.4% due to the prolonged pandemic restrictions, amid the high daily new cases of infections and fatalities,” he says.

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