The Growth Of Department Store Operators In Malaysia In The Next Decade
By Tan Hai Hsin, Managing Director, Retail Group Malaysia
Major department store operators in Malaysia include AEON, Parkson, The Store, Isetan, Sogo, Billion, UO, Metrojaya, Tangs, Robinsons, Marks & Spencer, Debenhams, etc. Regional players are also found in all parts of Malaysia. There are Sunshine, Gama and C Mart in in the northern region. MasLee, Pasaraya KINI and TF Value Mart are found in the southern region. Everrise, Parkwell and Milimewa are operating in East Malaysia.
The two oldest surviving department stores in Malaysia are The Store and Metrojaya. The Store first outlet was opened at Bukit Mertajam, Penang in 1968. The first Metrojaya department store was opened in September 1976 at Kompleks Pertama in Kuala Lumpur city centre.
In 1990, there were 218 department stores in Malaysia. In 2016, there was an estimated total of 770 department stores in this country. However, the average size of department stores in Malaysia has been declining gradually over the years due to intense competition.
During the 1986 recession, we witnessed the closure of Friendship Store, Emporium (Singapore), Chujitsu (Japan) and Printemps (France) in Malaysia.
During the 1998 financial and economic crisis, we saw the demise of Hankyu Jaya (Japan), Yaohan (Japan), Kerry’s, Aktif Lifestyle, SuiWah, La Lai, Globe Silk Store, Ocean and Hiong Kong in Malaysia.
Two shopping centres in Kuala Lumpur that opened in the 1980s went through these changes during the last 30 years.
Cheras Leisure Mall is located at the suburban area of Kuala Lumpur. It was opened in late 1980s. Initially, it was anchored by Kerry’s department store and supermarket. In 1994, due to slow business, Kerry’s closed down and was replaced by Savers-In that retailed cheaper goods. Savers-In shut down subsequently and replaced by Royal Ahold Tops supermarket in 1996. Tops was taken over by Giant supermarket in 2003 when the earlier decided to leave Malaysia after incurring heavy losses.
Despite losing its anchor tenants several times during the last 30 years, Cheras Leisure Mall managed to transform itself successfully by reconfiguring former anchor space into exciting retail zones. Today, it attracts shoppers beyond 10 minutes’ driving distance, enhancing its status from a neighbourhood shopping centre to a suburban mall.
Another example is Atria in another suburban area of Kuala Lumpur. Atria was a 4-storey shopping centre opened in mid 1980s. It was anchored by Printemps department store from France and Kimisawa supermarket from Japan. It was the favourite shopping destination for many residents living in Kuala Lumpur. During the recession in 1986, both of them closed down due to poor business. Parkson took over the empty space vacated by both of them. During the 1998 economic crisis, Parkson sold its supermarket operation to Royal Ahold Tops. In 2005, Giant took over Tops.
Parkson closed down during mid 2000s and moved to 1 Utama. Giant remained open until the shopping centre shut down for redevelopment. On 2015, a bigger Atria was opened with Village Grocer as the supermarket anchor.
The problem is today’s consumers are getting very price-conscious.They are no longer loyal to one department store brand. They will switch according to the discounts and special offers introduced by the different operators. These same consumers, with their reduced spending power, will spend their saving on outdoor dining (nice cafes and restaurants), services (health & beauty) and travelling (overseas travel).
Local and international fashion brands, that have been concessionaires in traditional department stores in Malaysia, open specialty stores since the Asian financial and economic crisis in 1998. The rapid growth of modern shopping malls also lead to the growth of specialty stores. Department stores, especially those located in the cities, have been losing market share to specialty stores (including specialty fashion, fast fashion and discount fashion stores)
The hypermarket concept was introduced to Malaysians by Carrefour from France in 1994. During the 2000s period, we witnessed the tremendous growth of this concept in all parts of Malaysia. During the last 15 years, they have also invaded shopping centres. Major hypermarket operators in Malaysia include Giant, Tesco, Econsave, Mydin, NSK, AEON Big and Pacific. Hypermarkets offer similar categories of retail goods as department stores at cheaper prices. Price-conscious Malaysian consumers changed their shopping preferences on general fashion items, toys, stationeries and household goods from department stores to hypermarkets.
Online shopping is a new threat to traditional department stores. This sector has been growing strongly in the last few years. More and more brick-and-mortar retailers are setting up online channel to get consumers to spend. According to Mr. James Loke, CEO of Tangs Malaysia, ‘Online retailers are always a threat to department stores. Instead of competing, we can also embrace and compliment the online retailers. Customers still prefer the “touch feeling” shopping experiences and the value-added services and facilities’.
In major cosmopolitan cities such as Kuala Lumpur, Selangor and Penang, successful department stores located in the city centres offer high-value retail goods and services to discerning consumers. These include Parkson, Isetan, Robinsons, Sogo, etc.
In China, Japan, South Korea, Taiwan and Hong Kong, department stores continue to play major roles in the retail industry. Isetan Shinjuku, Matsuya Ginza and Mitsukoshi Nihonbashi in Tokyo are must-visit attractions for tourists from around the world.
In Europe, many department stores that were founded more than 100 years ago remain an institution for both locals and tourists. They include Galeries Lafayette and Le Bon Marche in Paris; Selfridges, Liberty and Harrods in London; GUM in Moscow, 10 Corso Como in Milan, Kadewe in Berlin, IIlums Boughus in Copenhagen and Nordiska Kompaniet (NK) in Stockholm.
To meet changing lifestyles of Malaysian consumers, department stores in the city centres are offering greater depth in goods and services. In addition to its department store and gourmet food hall, Isetan The Japan Store in Lot 10, Kuala Lumpur has 9 dining bars, 4 cafes, 6 restaurants, a specialty bookstore, a hair salon and a classroom. Parkson Pavilion KL in Bukit Bintang, Kuala Lumpur has 3 specialty stores (MIXXO, Spao and Who.A.U), a hair salon (A Cut Above) and 2 cafes (West 57th Street Cafe by Zang Toi and Hogan Bakery from Taiwan), Sogo KL in the city centre of Kuala Lumpur has a fitness centre and a karaoke centre at the top floor.
Department store in Malaysia continues to play an important role in the retail industry for many years ahead. In small towns where shopping centre is not viable, they provide mass-market and affordable retail goods to the general population. In the city centres, they offer branded retail goods and exclusive services to brand-conscious consumers.
Department stores are not disappearing soon, not in the near future. Today’s retail industry is about serving customers through multi-channels. Shopping experience can be elevated through new technologies.
The next generation of department stores in Malaysia will be those that are able to integrate modern technology, provide a unique physical environment as well as offer public facilities to keep shoppers in them longer.
B.E. Law, COO of Parkson Malaysia summarises the future of department stores in Malaysia: “It will be very interesting to see the transformation of the new shopping experience in the next decade. We are already witnessing the changes in shopping habits from hardcore shopping to lifestyle and leisure. The future should see the inclusion of services and entertainment as part of the product and service mix in the departmental stores. Technological development cannot be ignored. We are also witnessing the rapid development of cashless payment tools like the Alipay, Wechat, etc. and the buzz word today, online shopping.”
- TAN HAI HSIN is the managing director of Retail Group Malaysia and Henry Butcher Retail. Tan has been involved in research, planning, marketing and management of numerous retail centres and commercial developments in 5 countries (Singapore, Malaysia, Indonesia, Libya and China) for the past 27 years. He holds a BBA from National University of Singapore and MBA in Retail from University of Stirling, United Kingdom.
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