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Saturday, March 21, 2009

Cash registers still ringing in malls

WHETHER it is foreign or local shoppers who are spending, the cash registers of the Klang Valley’s super high-end malls continue to ring.

It may not ring as frequently as during buoyant times, but malls like Starhill, The Gardens and Pavilion continue to enjoy fairly good overall sales, says Regroup Associates and Henry Butcher Retail Sdn Bhd.

Henry Butcher Retail says low shopping traffic in some malls does not mean they are not doing well. “High-end brands do not need high traffic to remain profitable because they have high profit margins,” says its managing director Tan Hai Hsin.

“The Gardens and Pavilion are very different from ordinary malls like 1 Utama and Mid Valley Megamall. They are of a different class, offering a different set of products and services,” he says.

Over at Regroup, managing director Allan Soo says it is the foreigners who are buying, not the locals. “How many rich (people) do we actually have? Will they not go to London, Milan or Singapore?” Soo asks.

He says a third of shoppers at KLCC are foreigners. Over at Pavilion, 40% of the shoppers are foreigners, while The Gardens will need a lot of time to adjust to the environment.

It does seem rather unfair to tie the current low-traffic scenario at The Gardens and Starhill to the global crisis. Starhill has generally lacked the masses seen at KLCC or Mid Valley Megamall. The Gardens is fairly new and its prices are rather prohibitive.

But this does not mean there is no market for it. It is, after all, pandering to the whims of a small group of people, whose pockets are well lined.

“The current purchasing power of Malaysians is still not high enough to support these upmarket malls at the moment. But with time, they will be fine. The other issue is market saturation,” Soo says.

Both Soo and Tan agree that there are too many malls in the Klang Valley. Ideally, there should be between 30 and 40 malls compared with the 120 big and small ones today.

Says Soo: “Many of us are creatures of habit. We tend to like and enjoy certain malls and we make it a point to go to these places to shop. However, for the day-to-day needs, we would probably hop over to the community malls close by.”

Because of the different categories of malls, the downturn is affecting different players in different ways. By and large, retail sales are not as bad today compared with the Asian financial crisis in 1997/98, both of them say.

At the upper end of the retail spectrum, some top brands are still enjoying good sales due to customer loyalty.

Although sales of some high-profile international brands have dipped between 10% and 40%, it started to happen even before the crisis hit in late September.

“It is market saturation more than anything else,” says Tan, who categorises malls such as The Gardens, Pavilion, Starhill, Bangsar Shopping Centre, and Bangsar Village as attracting mostly upper-income Malaysians and tourists.

The AEON shopping centres are mostly located in residential areas and cater to the community they are located in, regardless of income group. Tesco, Carrefour, Giant and Mydin hypermarkets, meanwhile, offer grocery shopping which attracts families.

By The Star (by Thean Lee Cheng)

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