KUCHING: Analysts are generally neutral on the new Trade Descriptions (Cheap Sale Price) (Amendment) Regulations 2016.
Furthermore, analysts believe that consumer sentiments are expected to remain subdued in 2017, on the back of the rising cost of living, concerns over the economy, and more.
Although competition is expected to intensify owing to the narrower window of cheap sales opportunities for traders to compete for a shrinking market share, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) believed major retailers such as Aeon Corporation (Malaysia) Bhd (Aeon) and Parkson Holdings Bhd (Parkson) will not likely to be significantly affected as these retailers have the alternative to exercise more aggressive sales and promotional incentives in the form of members privileged days.
“In addition, multi-level marketing businesses such as Amway (Malaysia) Holdings Bhd and Hai-O Enterprise Bhd’s promotions are generally focused on their distributors instead of retail sales.”
“That being said, we maintain our view on a challenging 2017 as consumer sentiment is likely to stay subdued in 2017 in view of the continuing concerns on the state of economy, job market as well as rising cost of living.”
It pointed out that the cost advantage enjoyed by food and beverage (F&B) players from the soft commodity market is diminishing, aggravated by the weakening local currency.
“On the flipside, we have not turned bearish on the sector as we believe it is resilient and defensive enough, supported by the healthy private consumption, further evidenced by the recovery in sentiment from the low in end-2015,” it opined.
On the new regulations, Kenanga Research noted that the new gazette would succeed the Trade Descriptions (Cheap Sale Price) (Amendment) Regulations 2015, which was made as part of the government’s initiative to ensure that sales are conducted in a more efficient and effective manner.
The implementation of the amendment would reduce the number of special sales allowed to partake by traders to four times a year from five times, previously.
The new regulations include several restrictions for discounting, primarily, the base price set for items before discount must be based on the lowest price of the respective product over a three-month period before the sales.
It also pointed out that the offered discount must not be lower than 10 per cent and retailers are required to display at least 50 per cent of their goods for discount during the cheap sales.
The new regulations, however, do not apply to the conditional sale of purchase with purchase (PWP), coupons, discount vouchers and retail membership cardholders.
“With the streamlining of special sales timeframe by the ministry, retailers may be at a difficulty to clear the stock within their own discretion and may lose out on opportunities to conduct sales during certain strategic periods (such as festive seasons).
“Though the market could negatively react with a decline in general demand, we believe there could be improvements in operating margins as fewer sales events may lead to a reduction in promotional costs by the retail players.
“Furthermore, the streamlining of the special sales may be beneficial for consumers in the long-run as consumers are able to plan out their spending during these pre-determined cheap sales periods,” Kenanga Research said.