Region/Countries: Asia, Malaysia Industry: Other Date: September 2017

Why this is important to Wisconsin businesses: Fast-moving consumer goods companies should take a serious look at this market, which is ranked third in the world according to the Global Retail Development Index.

Asia is home to the top three best retail markets worldwide, according to the 2017 Global Retail Development Index (GRDI), which is published by global management consulting firm A.T. Kearney.

The GRDI ranks the top 30 developing countries for retail investment worldwide, and analyzes 25 macroeconomic and retail-specific variables such as market attractiveness, country risks, market saturation and time pressure. The report aims to identify where the currently attractive markets are and where future potential lies.

For two consecutive years, Malaysia has placed third in the GRDI. The market posted 3.8 percent growth in retail sales in 2016, and despite a slight slowdown in Malaysia's economic growth in 2016, its long-term prospects in retail sales remain strong. This trend is attributed to:

  • Strong performance in tourism due to improved flight accessibility and travel facilitation, and an influx of Chinese tourists, who have been granted visa-free entry since March 2016. There were about 26 million tourist visits to Malaysia in 2016, and the country aims to achieve 36 million visits and 168 billion RM (about $39 billion) in receipts by 2020, according to Malaysia's Tourism Promotion Board.
  • Increasing consumer spending, which is estimated to continue to grow at an annual average of 5.3 percent between 2017 and2021, according to BMI Research, due to increasing disposable income. In fact, according to data from the World Bank, Malaysia's GDP per capita (PPP) has increased from $17,668 in 2006 to $27,681 in 2016, a 60 percent increase within a 10-year period.
  • The Malaysian government's investments in infrastructure to position Malaysia as a hub for cross-border e-commerce. Recent efforts include $280 million (RM 1.2 billion) spent to provide high-speed broadband access to rural areas to increase the reach of e-commerce. The government has also established the world’s first Digital Free Trade Zone in Malaysia, in collaboration with Alibaba Group Holding Ltd. As part of the agreement, Alibaba will set up a regional fulfillment hub in Kuala Lumpur and a one-stop cross-border online trading platform, which will allow Malaysia’s small and midsize businesses to sell online with transactions fulfilled through Alibaba.
  • Just like elsewhere in the world, online retail in Malaysia is growing. In fact, Lazada, Southeast Asia’s largest e-commerce platform, posted 100 percent sales growth in Malaysia in 2016. Online retail in Malaysia is expected to grow at 23 percent per year through 2021, driven by electronics and media, and particularly by a high mobile adoption rate.

With this encouraging trend in the retail sector, foreign companies have put forward aggressive expansion plans for Malaysia, particularly in the convenience segment. 7-Eleven opened its 2,000th store in Malaysia in July 2016, and is set for further expansion. 7-Eleven has been innovative in increasing its local market share by providing reload services, bill payment for utility providers, online purchase payment, point-of-sales activated gift cards, and parcel locker services. Meanwhile, Japan's Family Mart, the world's second-largest convenience store chain, opened its first store in Malaysia in November 2016, and is considering expanding to up to 1,000 stores in Malaysia by 2025. Aeon, also a Japanese retailer, is set to triple its number of stores in Malaysia to 150 within three years. Singaporean chain Guardian Health and Beauty, which had 430 outlets in Malaysia in 2016 and commands a 30 percent market share in the health and beauty segment, plans to open between 25 and 30 new stores in 2017, refurbish 70 stores, close 15 existing low-performing stores, and move aggressively into e-commerce.

An additional testament of a bullish outlook in the market is Swedish fashion label COS, which opened its first store in Malaysia in December 2016, after entering Singapore, Japan, South Korea and China. In addition, in 2017, the Dubai-based Landmark Group, one of the largest retail conglomerates in the Middle East and India, opened its first Max Fashion store in Kuala Lumpur.

These are just a few of the international retail organizations that have expressed confidence in the Malaysian market. Based on statistical indicators as well as retailers’ behavior, it is a favorable time for fast-moving consumer goods brands to take a serious look at positioning themselves in the Malaysian market.