From 2015 to 2019, household income and expenditure in Malaysia increased steadily but remained below the rate of GDP growth. All categories of expenditure saw increases, with notable growths in housing-related expenditures such as furniture, household goods and home maintenance as well as spending on restaurants and hotels. Expenditure on food items also showed steady growth.

Despite the changing circumstances surrounding the Goods and Services Tax (GST) being abolished (after it was introduced in 2015) and replaced with the Sales and Services Tax (SST) in 2018, Malaysia’s retail market continued to grow in tandem with the increase in household spending. Between 2014 and 2019, the mixed merchandised channels grew at a CAGR of 12.1% while the category specialist channels grew 9.9%.

Within the steadily advancing retail market was a major growth of small store channels. The growth of mini markets and traditional provision shops has been particularly significant, indicating a rising demand for neighbourhood stores to cater for everyday shopping needs in place of one-stop-shopping at big retail stores.

The COVID-19 pandemic has impacted sales largely in category specialist channels. Sales in mixed merchandise channels declined by 9.3% year-on-year in April 2020 due to the Movement Control Order (MCO) issued on March 18, but sales started to show signs of recovery with much smaller decreases of minus 3.2% in May and minus 1.2% in June.

Although the government’s restrictions on foreign capital in the retail sector have been relaxed for both small and large store channels, there are not many new foreign retail investments. Foreign retailers operating large stores continue to struggle with their business. At the same time, several foreign investment funds are actively supporting supermarket operators’ moves to develop premium supermarkets in metropolitan areas.