How to Improve Hypermarkets in Malaysia

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Nottingham University Business School

MBA Programme

N14M79 Business Economics

Shift in consumer preference in food retail sector from hypermarket to small format and how hypermarkets can hold its market share in Malaysia

Kala Premarani Perumal

Student ID: UNIMKL 010085

COPY 1
Executive Summary

This study is undertaken to analyse the shift in consumer preference in food shopping from hypermarkets to small formats such as supermarkets and convenience stores. Arising from this shift, this study evaluates the penetration of hypermarkets in the Malaysian market and concludes by recommending how hypermarkets could counter the shift in this consumer preference.

The information included in this study was sourced from journals, business magazines, conference papers and electronic sources relating to retail industry in Malaysia.

Results from this study reveal that small formats have the comparative advantage in various areas namely: - convenience locations, low set up costs, simple operations and government support for future expansions. However, hypermarkets being major players in the country’s economy could utilise the weakness and threats faced by the small formats to its advantage and hold its place in the retail race of Malaysian market.

Word count: 2113 words
Table of Contents

Executive Summary ii
1. Introduction 1 2. Development of food retail sector 2 3. SWOT analysis on smaller format 3 4. How will hypermarket hold its market share 10 5. Conclusion 12 References 14

1. Introduction

Malaysia is moving towards a mature retail market. The industry showed a tremendous growth in the 80s due to changing consumer lifestyle and became globalised with the introduction of supermarket and hypermarket concept (Lim et al., 2003). At first, consumers responded positively to the new entrants with different formats but of late, a shift in consumer behavior is seen from bigger players towards supermarket /convenience (hereafter will be referred as ‘small format’). Table 1 below further illustrates, the sales growth gap between hypermarket and small format is declining in Malaysia.

Sales Growth in Grocery Retailing| 2010| 2011 f| 2012 f| Hypermarkets| 15.0%| 8.5%| 6.5%|
Supermarket & convenience| 12.7%| 7.7%| 6.2%|
Others (incl. specialist stores, wet markets & traditional stores)| -1.2%| -0.6%| -0.6%| TOTAL GROCERY RETAIL INDUSTRY | 7.6%| 4.7%| 3.7%|
(Table 1 - Source: Euromonitor International, January 2011)

Small format growth in Malaysia is driven by change in consumers’ lifestyle, disposable income and preference place to purchase (N. Chamhuri and P.J. Batt, 2009). The following section aims to analyse the shift of consumer preference in food retail from hypermarkets to small formats and the strategies that hypermarket could apply for their market share.

2. Development of the food retail sector

Traditionally, conventional markets such as provision stores, wet market and night markets were the main food retailers. Consumers could buy almost everything there including chicken, meat, seafood, vegetables and household supplies such as bread, dry food, toys. With the change of Malaysia’s consumer lifestyle due to growing education level and increasing affluence, retailers such as mini market and small formats gradually participated in the economy. In the 90s, development of hypermarkets, departmental stores and other large retail formats progressed (M.N.Shamsudin and J.Selamat, 2005). The key...
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