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Malaysia's retail sector surges with 7.8pc growth in Q1 2024 amidst consumer challenges

The performance across retail sub-sectors varied significantly during the period as department stores combined with supermarkets saw a robust growth of 12.3 per cent, while standalone department stores recorded a 9.7 per cent increase.


Malaysia’s retail sector recorded a better-than-expected growth rate of 7.8 per cent in retail sales, as compared to the same period in 2023, according to the latest report from Retail Group Malaysia (RGM) released today.


It said members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) had projected the third quarter growth at 1.7 per cent.


The robust growth was fuelled by various factors including the Chinese New Year festivities, extended school holidays from February to March, and the beginning of Ramadan on March 12.


These events boosted consumer spending, alongside the distribution of Sumbangan Tunai Rahmah (STR) Phase 1 to 8.2 million Malaysians and increased tourist arrivals attracted by favourable exchange rates and visa-free entry for Chinese visitors.


However, challenges persisted due to rising food prices and global geopolitical tensions, which led to boycotts of certain international brands, affecting market dynamics.


Economically, Malaysia saw a 4.2 per cent growth overall in the first quarter, with retail sales climbing by 7.8 per cent.


This growth was supported by strong consumer spending, increased investments, a stable labour market, and a rise in tourist numbers.


Key sectors such as services and construction expanded by 4.7 per cent and 11.9 per cent respectively, while inflation averaged 1.7 per cent, driven mainly by higher costs for dining out and utilities.


In March alone, dining out expenses rose by 3.5 per cent, and costs for restaurants, accommodation services, housing, and utilities increased by 3.0 per cent.


Private consumption grew by 4.7 per cent during the quarter, driven by sustained spending on both essential and discretionary items.


Despite these positive indicators, consumer sentiment – as measured by the Consumer Sentiment Index by the Malaysian Institute of Economic Research – dipped to 87.1 points in the first quarter due to concerns over rising living costs and future job prospects.


Unemployment rate held steady at 3.3 per cent, with labour force participation reaching a record high of 70.2 per cent.


The performance across retail sub-sectors varied significantly during the period as department stores combined with supermarkets saw a robust growth of 12.3 per cent, while standalone department stores recorded a 9.7 per cent increase.


Supermarkets and hypermarkets grew by 2.0 per cent, and mini markets, convenience stores, and cooperatives expanded by 5.6 per cent.


Fashion and fashion accessories led the charge with a 12.6 per cent growth, while children and baby products saw a 4.8 per cent increase and pharmacies grew by 8.2 per cent.


Personal care products grew by only 0.4 per cent, and furniture & furnishings, home improvement, and electrical & electronics declined by 2.1 per cent.


Other specialty stores, however, achieved a growth of 4.6 per cent.


The food and beverage (F&B) sector continued to perform well in the first quarter of 2024, driven by festive celebrations and school holidays.


However, higher food prices increased costs for F&B operators as the ongoing Israel-Palestine conflict led to boycotts of certain international F&B franchises, affecting their operations.


F&B outlets, including cafes and restaurants, grew by 7.4 per cent while take-away outlets saw a 9.7 per cent increase.


This boycott is expected to continue in the medium term, impacting business operations.


Looking ahead, cafe and restaurant operators anticipate a 7.3 per cent growth in sales for the upcoming quarter, while food and beverage kiosks and stalls foresee a slower 5.5 per cent increase.


RGM initially projected a 4.0 per cent