THE end of the bank loan moratorium last month would be one of the reasons for consumers to be more cautious about spending.
Retrenchments and pay cuts have their shares in affecting spending as well.
Even before the moratorium ended, the Retail Group Malaysia (RGM) reported that the industry registered the worst contraction in 33 years at 30.9 per cent in the second quarter of the year. Retailers and shopping centres are suffering as they are not allowed to operate at full capacity during the Recovery Movement Control Order (RMCO).
Given the current economic conditions, RGM has revised its retail growth projection for this year from a contraction of 8.7 per cent to a worse outcome of -9.3 per cent growth.
To make the situation worse, the series of Covid-19 infections detected at shopping malls since late last month, particularly in the Klang Valley, which account for part of the retail sector, have intensified the fears among shoppers.
It was reported that the shift in retail landscape since the Covid-19 pandemic is expected to lead to the closure of more than 51,000 retail stores in the next four to five months.
All economic sectors in the Klang Valley are allowed to operate as usual as long as they adhere to the standard operating procedure but after being placed under the Conditional MCO (CMCO), the performance of retail stores there would eventually depend on consumer behaviour.
Rising Covid-19 infections and less spending at brick-and-mortar stores will undeniably affect many livelihoods in the sector. According to the Preliminary Report on Wholesale and Retail Trade Census released by the Statistics Department, there are 870,814 full-time and part-time employees engaged in the retail trade sector up to 2018.
The revival of the retail sector pretty much relies on the responsibility of each individual in society to mitigate the number of infections by following the SOP strictly as our actions affect one another.
Up until the current status, new Covid-19 cases have been at three digits and should this continue, the cautiousness among consumers to be out and visit the shopping malls will remain, hence dampening the recovery of the retail sector.
Besides that, it is important for businesses to leverage on technology, that is, e-commerce because most people have adapted better to the new habits of shopping online and it does not require consumers to be physically at the retail stores all the time.
Based on EMIR Research's poll for the third quarter, respondents agreed that Covid-19 has resulted in the emergence of an economy that is reliant on technology.
A respondent said: "Now it seems that in the surrounding suburban areas, with the onset of Covid-19, we see a lot of these kind of businesses; suddenly many entrepreneurs have appeared. This means that (Covid-19) has created an economic opportunity and we now see a lot of online businesses and these online businesses are doing very well."
Another respondent said: "This MCO has made Malaysians more creative, for people to do online business, especially pasar malam operators. People sell online and delivery is arranged online."
The government, through the Economic Recovery Plan (Penjana), has allocated funds to businesses, particularly small and medium enterprises, to encourage onboarding to e-commerce platforms in collaboration with the e-wallet companies.
Various benefits have been made available to the businesses such as training programmes, seller subsidy and sales support, matching grants and automation grants, as well as loans for businesses to digitalise their services. E-commerce discount vouchers were also provided to consumers via e-wallet companies to boost online consumption.
However, the benefits lasted only until last month. So in order to prop up online businesses and consumption further, given the uncertain outlook for retail sector, the incentives should be open or extended at least until the end of the year.
New norms are emerging across all parts of the world and technology is driving the process. Thus, going online should be made the new norm for businesses to weather the unprecedented crisis and to survive.
The writer is a research analyst at EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research