40% Drop In Sales Due To GST And Ringgit Slump

raya shopping

The recent implementation of the Goods and Services Tax (GST) and the weakening Ringgit has hit retailers in the country hard, with some registering more than 40% decline in sales over festive periods in second half of the year.

Most retailers blame the decline on GST, which was implemented in April 2015, and the sliding Ringgit against the US dollar, said Datuk Shamsuddin Bardan, executive director of the Malaysian Employers’ Federation (MEF).

Due to these factors, consumers are more prudent with their spending, resulting in a slow down in sales during the Hari Raya and Deepavali seasons.

The cost of goods were “seemingly” higher because the tax and the exchange rate had also affected all players in the retail sector, both big and small companies, he added.

“The challenges are very high for the retail sector. The sector has very much to do with domestic market outlook, especially when the rakyat is very careful with their spending and choosy with their purchases. As such, the retail sector will be affected very much,” he told The Malaysian Insider.

Due to the poor consumer sentiment, retailers are impacted with a drop of more the 40% than the usual spending during the last two festive seasons in July and November.

“You look at Hari Raya and Deepavali. Many retailers are saying that their sales were affected, some by more than 40%.

“In this kind of revenue outlook, this sector has no choice but to actually restructure their manpower and, unfortunately, when they talk about restructuring, they are talking about retrenchment.”

Though many retailers were said to be struggling, Shamsudin said, MEF had yet to receive any reports on closures or retrenchments.

Retail Group Malaysia (RGM), an independent retail research firm, cut its forecast for retail sales this year for the fifth time due to poor figures in the second and third quarters of the year, The Edge Financial Daily reported.

This decision to revise its forecast to a more conservative figure was due to the weakening Ringgit in the last few months, which led to higher cost of import.

However, RGM’s report of 3.8% year-on-year growth in Q4 (October to December) is higher than what was reported by Malaysia Retailers Association’s (MRA) at 1.3% growth.

RGM believed that the higher cost of overseas travel would encourage domestic spending in the last quarter.

MRA also said it did not expect its businesses to recover strongly for the period as they expected a 2.6% contraction in sales.

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