Brick and mortar retail faces challenging outlook

On a brighter note, a recent study suggested that despite the growth of e-commerce, there is still a need for brick-and-mortar stores as it does not only increase customer’s in-store purchases, but also their online purchases. — Bernama photo

KUCHING: Brick and mortar retail in Malaysia are facing a challenging outlook, analysts observe, amid the gaining prominence of e-commerce in retail.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a recent consumer sector update, the increased supply of retail space and waning demand as ecommerce continues to gain traction would evidently limit strong rental reversions for retail space going forward.

“In order to stay relevant, mall managers would need to adapt to the rapid changes in the retail environment to integrate and animate a shoppers experience with the need for brick and mortar,” it said.

Among retail real estate investment trust (REIT) assets under its coverage, Kenanga Research noticed the trend shifting from the “large anchor tenants” into more themed and concept plays, which create a variety of niche tenants as well as focus on enhancing the consumer experience.

“This helps to address the issue of ‘all malls being the same’ syndrome.”

Over in Peninsular Malaysia, Kenanga Research observed that this is also evident from recent refurbishment and rebranding plans at Capitaland Malaysia Mall Trust’s (CMMT) Sungei Wang Plaza to revamp the retail and food and beverage (F&B) mix as well as include athleisure and family entertainment, and the repositioning of 3 Damansara (previously known as Tropicana City Mall) to a more gourmet shopping destination.

The research arm further noted that most REITs are upping their online presence by beefing up their websites and including mobile phone applications, such as Sunway Pyramid Mall and Sunway Carnival mobile apps, for malls to update shoppers on recent happenings and tenant promotions.

It pointed out that CMMT has also launched CapitaStar mobile application to enhance and strengthen shopper engagement.

“Additionally, there are talks of establishing an in-house online portal that supports tenants to market their products and services to reach a wider market.”

Challenges aside, Kenanga Research highlighted that on a brighter note, a recent study suggested that despite the growth of e-commerce, there is still a need for brick-and-mortar stores as it does not only increase customer’s in-store purchases, but also their online purchases.

“Reason being is that customers prefer to physically evaluate-in-store items prior to purchasing them, provided that convenient physical retail store locations are available, based on research by Dr. Anuj Kumar of the Department of Information Systems and Operations Management at the University of Florida Warrington College of Business.

“All things considered, we believe that in the longer run there would be a lesser need for physical retail spaces, but this research alleviates the daunting doomsday outlook for brick-and-mortar retail.”

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