Outlet malls: A growing concept in Malaysia

The outlet mall concept is growing popular in Malaysia thanks to the increasing demand for retailers to put offseason merchandise in a separate channel.

An outlet store, factory outlet or factory shop is a brick and mortar or online store in which manufacturers sell their stock directly to the public, cutting out the middle-men.

Traditionally, a factory outlet was a store attached to a factory or warehouse. In modern times, outlet stores are typically manufacturer-branded store grouped together in outlet malls.

The research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said these outlet malls provided a secondary platform for retailers to have better inventory management by rechannelling products and lower operating costs as well as to create brand awareness.

“Apart from that, the fashion and fashion accessories segment growth in Malaysia is quite healthy with 3.9 per cent yearonyear growth recorded in 2017 in comparison to the subdued overall Malaysia’s retail sales growth of two per cent.

“This is partly attributed to the luxury apparels and accessories segment which has experience double digit sales growth yearonyear where 85 per cent of the luxury retail sales growth was fuelled by Gen Y and Z.

“In addition, the stronger ringgit also contributed to better affordability of luxury brand.”

New government, new policies?

Policy from newly elected government, if implemented successfully should result in higher Consumer Sentiment Index.

According to the latest publication from Malaysian Institute of Economic Research (MIER), Consumer Sentiment Index in the first quarter of 2018 has improved to 91.0 from 4Q17’s 82.6 and 3Q17’s 77.1.

In addition, the newly elected government has pledged to increase consumer disposable income through initiatives such as higher minimum wages as well as the abolishment of GST.

“We also gather that current prospect of job and financial expectations has improved postelection.

“Therefore, we believe that consumer sentiment is on an upward trajectory to pass the 100 optimistic threshold level,” said MIDF Research.

Also, the projected increase in Chinese tourists will have a spilled over effect to outlet malls. Globally, consumer confidence is improving particularly in major economies such as China, US and Europe underpinned by stable job market.

For instance, China unemployment rate has touched 3.9 per cent in the previous quarter, the lowest ever recorded. Looking further into the consumer confidence index, China has breached 120 points – a level not seen for 24 years.

“This favourable atmosphere augurs well with the tourism industry as Chinese tourist represented a notablepercentage of international tourists in Malaysia,” it added.

As a result, Tourism Malaysia forecasted the number of Chinese tourists will reach eight million by the year 2020, a compound annual growth rate (CAGR) of approximately 28 per cent from the number recorded in 2017.

“We believe that the increase in Chinese tourists have a spilled over effect to outlet malls given the fact that they are located in major tourist attraction and tourists normally spent a third of their budget on shopping.

“Due to the aforementioned factors, we project that the Malaysia’s retail sales growth will recover in 2018 and to be better than the two per cent year-on-year growth recorded in 2017. This is in line with the Retail Group Malaysia (RGM)’s forecast of 4.7 per cent in 2018.

“As the prospect for Malaysia retail industry is improving going forward, we expect that it will benefit outlet malls as well.”