There is an old joke about a snail that gets mugged by two turtles. The police ask the snail what happened and the snail replies: “I don’t know, it all happened so fast.” And so it was with retail right across Southeast Asia at the outset of the second half of the year. After a period of months where it looked like sales were slowly but surely building a head of steam, governments suddenly slapped them down again with some of the tightest restrictions the world has endured during the past
st 18 months. And it didn’t end there, because when the first round of orders to close stores and shopping centres didn’t seem to help, governments doubled down with even more stringent restrictions. Vietnam was the most extreme example, where at one point in August, people were barred from leaving their homes and even food delivery from apps was suspended. One indicator of how difficult things became for retailers and retail property operators was that even their trade associations began to squeal, an almost unprecedented event in the history of the pandemic. Sales numbers are not yet in for the entire third quarter, but trends should not be expected to change when the results do come out. The effects on food and beverage retailers have been particularly bloody, although two positives have rescued the sector from a more comprehensive disaster: online delivery and the flowering of pop-up street retail. Thailand In Thailand, the bounceback in the first half had been uneven but nonetheless discernible. A good bellwether for the recovery was the department store sector, which according to data from the Bank of Thailand, had at times been experiencing year-on-year sales growth that more than offset the steep declines during the same months of 2020. That occurred despite the continued absence of tourism. But in early July, the government imposed heavy restrictions on trading that began in the capital, Bangkok, were extended quickly throughout the rest of the country, and were still in place in September. Vietnam Meanwhile, in Vietnam, retail sales were down a calamitous 33.7 per cent in August on a year-over-year basis. The definition of retail sales in Vietnam includes both accommodation and food and beverage, which experienced sales declines of 66.9 per cent and 53.8 per cent respectively. The results in August followed a 19.8 per cent drop in retail sales in July. In all, there have been four straight months of declines starting in May. September will not interrupt the trend, despite the fact that some restrictions on trading have been removed in the major commercial areas of the country, and more are likely to follow. In Malaysia, things started to go pear-shaped when the government issued lockdown orders in June after what was shaping up to be a solid recovery at the outset of the second quarter. Retail sales in the country were down 8.1 per cent year-on-year in July, the latest month to be reported. Singapore Restrictions in Singapore have also dampened the mood of retailers, who were cheered by a strong second quarter. The latest data month is July and it has been a mixed bag, netting out to flat year-over-year sales. Consumer basics, electronics and jewelry did well, while department stores, recreational goods and optical goods stores experienced sharp declines. A higher base for comparison in the second half of the year could mean a pretty nasty string of numbers coming out over the next few months if Southeast Asian countries continue with lockdowns and restrictions on retail activities. At the moment, the official narrative in most countries is still a public health story, namely that rising vaccination rates hold the key to relaxation of restrictions. In reality though, the lockdown game is up for a different reason: the damage to economies has become so great that vaccination is, more than anything, simply providing the political cover that governments need to change course. The restrictions across the region have had a predictably weakening effect on rent and store site inspections. If anything, the events of the past three months point in one direction: another round of store portfolio rationalisations and intensified adoption by retailers and property operators of technological solutions. An offsetting factor will be the eventual easing of travel restrictions, which will likely make site inspections more viable and bring global retailers in particular back into the game. The unpredictability of lockdown orders by government has been as much of a problem as the measures themselves. The influence of trade groups has been weak and often they are not consulted by governments at all, leading to reactive public statements by retail and real estate leaders after their members have suddenly seen their operations curtailed, suspended or otherwise operationally hampered. A good example is in Thailand, where the Thai Retailers Association said that up to 100,000 Thai retailers would close permanently this year because of lockdown restrictions. The Association also predicted retail sales for the year would experience a 12 per cent fall. Both statements are correct in their direction but may underestimate the true extent of the carnage, particularly if one broadens the definition of retailers to include dining, personal services and entertainment. This raises an important question: has the political influence of the retail and shopping centre industries been irreparably damaged by the pandemic? These are ‘old economy’ industries that once wielded enormous influence in the corridors of power, but which have been sat down and shut up by governments since March 2020. In effect, they have been marginalised in the same manner as the airline and hospitality industries. The trade groups themselves will argue that is not the case and certainly they will be hoping so, but there is no mistaking that industries such as technology and pharmaceuticals have taken their place as the principal influencers of government policy.