Closures ALWAYS point to ‘tough outlook’ ….

I worked at an office within walking distance to Maju Junction for over 4 years. On a weekly basis, I would drop by Maju Junction once and perhaps spending up to RM25 per visit. (Lunch, including one Boost Juice after lunch). SOGO mall is meanwhile much further away than Maju Junction from my office but most of my colleagues would be in SOGO mall more often than Maju Junction. The typical spending is usually higher than RM25 because of lunch as well as some grocery shopping. Somehow, SOGO’s themed and ‘never ending sales’ on the ground floor (Women, Kids, Handbags etc etc etc…) would tempt people to part with their money. I seriously think within those 4 years plus, I would have easily spent many thousand of ringgit in SOGO. Beyond just the ground floor, within the supermarket would be cut-fruits, offer for some 3-in-1 coffee powders and even some special offer for milk powders. It is for this reason that there are always queues at all the cashier counters every time I am there. Maju Junction and SOGO are two malls on the same stretch of road but with totally different results.

Actually, it is not just these retail centres. Many would quickly associate closures of some supermarket chains with a tough outlook. Yet, they refuse to acknowledge that there are many more new brands opening up. Many of these new brands do not just provide better choices and layout but many times, their special offers are exactly what the consumers were looking for! Of course, when they (consumers) go and buy one item of the special offer, they ended up buying many more items in the supermarket too. It’s called ‘loss leader pricing’ This is the brief: “Loss leader pricing is an aggressive pricing strategy in which a store sells selected goods below cost in order to attract customers who will, according to the loss leader philosophy, make up for the losses on highlighted products with additional purchases of profitable goods.”  Yes, it means all these supermarkets MUST understand their customers and that’s how they open more stores or close more stores….

Now let’s look at a news article in TheStar: Parkson’s exit a sign of tough times for retail stores?  This is the first sentence, “The sudden exit of the Parkson departmental store as a tenant from the Maju Junction Mall in Kuala Lumpur is another sign of challenging times for retail stores in Malaysia.”  Anyway, within the same article, it was pointed out that SOGO was doing extremely well and they are on the same stretch of road. This is what a property consultant said of SOGO, “Sogo is the most successful department store in the country, with an annual total sales turnover exceeding RM800mil. Most retailers there do very well, with some having their best performing outlet in Sogo. Rents can exceed RM25 per sq ft in Sogo and along Jalan Tuanku Abdul Rahman, it is also above RM15 per sq ft.” This is what it said of Maju Junction, “Maju Junction Mall doesn’t excite with its merchandise either. Sogo is relatively mass market in pricing and merchandising with lots of regular sales – and that captures the market well.”  This is what the Parkson spokesperson said, ““Parkson has just opened a new store in M Square, Puchong as well as in Paradigm Mall in Johor Baru and Kuantan City Mall in November last year. Upcoming stores will be opened soon in Bangi and Bintulu.” Full article in TheStar here for your reading. 

I think the article shows very clearly the real situation. When a business is less competitive, it loses customers and subsequently suffer losses. As for retail, this sector will get ever more competitive because the online ones are really strong. However, let’s be savvy to the fact that even Alibaba is opening REAL and physical stores and Amazon too with its Amazon GO.  By the way, both brands have lots of expansion plans too. So, is the retail really doing badly? Or has competition will help separate the good ones from the mediocre and bad ones? Happy shopping everyone.

written on 3 Feb 2018

Next suggested article:  Online shopping to kill malls? Not during my generation, for sure


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