Factors that will impact the future of Kuala Lumpur’s retail market

Retailers continue to face increasing competition and pressure to innovate.

According to a Savills report, the retail market in Kuala Lumpur is poised to remain highly competitive as it adjusts to meet evolving consumer demands and expectations. 

Malls are transforming into experiential centres, integrating entertainment and leisure components to attract sustained footfall amid the pressures of e-commerce. The report said that retailers are under increasing pressure to innovate and differentiate themselves in response to changing consumer preferences and technological advancements. 

Here’s more from Savills:

The prevailing market sentiment suggests a softer outlook for this year, driven by Malaysians grappling with a persistent increase in the cost of living. The increase in the Sales and Service Tax (SST) from 6% to 8%, effective 1 March 2024, is expected to impact consumer spending. 

The government’s plan to rationalise subsidy schemes in the second half of 2024 may further trigger another round of inflation and reduce household expenditure. Indeed, Malaysia has been experiencing a gradual slowdown in retail spending since 2023, with total retail sales momentum shifting after a strong start in the first half of 2023. 

However, the government has announced a salary hike for civil servants by the end of 2024, amounting to approximately RM10 billion annually, which may provide some support to the retail market. Besides that, the restructuring of the Employee Provident Fund (EPF) into three accounts: Retirement (Account 1), Sejahtera (Account 2), and Flexible (Account 3) will allow members a one-time transfer of savings to the Flexible Account for unrestricted withdrawals from May to August 2024. This initiative is anticipated to positively impact retail activity, though not to the same extent as the economic boost during COVID-19.