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Cheap sales will spur growth, boost economy, say analysts

KUALA LUMPUR: THE government’s initiative to allow traders hold unlimited cheap sales, paving the way for increased consumer spending, will be a platform to further boost the country’s economy.

Sunway University Business School of Economics Professor Dr Yeah Kim Leng said such a move could spur growth and improve the country’s economy given the share of Gross Domestic Product, which rose to 62 per cent in the first quarter of this year from 59 per cent last year.

“The normalisation of consumer spending is crucial to the country’s sustained economic recovery. It is especially important during the current Covid-19-induced downturn in reviving the domestic economy, especially in the affected industries such as hospitality, restaurant, food, retail and tourism that sustain the livelihood of a large number of employees and small businesses.

“The ministry’s move to encourage Malaysians to support local businesses and increase consumption of local products and services is laudable as stronger consumer demand will enable the affected local industries and businesses to recover more quickly.

“The positive spillover effects of stronger demand and rising business volume would in turn feed into stronger consumer and investor confidence as income, job and business prospects improve,” he told the New Straits Times on Tuesday.

Yeah was commenting on the Domestic Trade and Consumer Affairs Ministry (KPDNHEP) move to allow traders to organise cheap sales, according to its suitability and affordability, without quotas compared to a limit of four times a year previously — thrice stipulated by the government and another period and date chosen by the business operators.

KPDNHEP enforcement director Datuk Iskandar Halim Sulaiman said this followed the gazetting of amendments to the Trade Descriptions (Cheap Sale Price) (Amendment) Regulations 2019 effective Jan 2.

According to the KPDNHEP website, the definition of cheap sale prices are when traders offer goods at a lower price than previously offered. They are to show the comparison of pre- and post-discount prices, where the expressions such as “sale”, “discount”, “reduction”, “best buy”, “best price”, “special price” or “half-price offer” can be used.

Last year, the date and period permitted by the ministry’s Control of Trade Descriptions to hold cheap sales was the Early Year Sale from Jan 1 to Feb 28; 1Malaysia Mega Sale Carnival from May 1 to July 31 as well as Year End Sale from Oct 1 to Dec 1.

Commenting further, Yeah said strong consumer purchases would help traders clear existing stock and raise the operating capacity of farms and factories in turn, the suppliers and supporting industries will also benefit from higher demand of intermediate goods and services.

This, he said, contributed to increased velocity or circulation of money and subsequently led to a sustained recovery of the economy.

Malaysians, he said, would be attracted to cheap sales amid the Covid-19 pandemic, which had seen spending power decrease, with many losing their jobs in the recent months and were struggling financially.

Yeah said while the overall spending would fall in proportion to the income decline or losses, there was nevertheless a wide range of price-elastic goods and services, where consumer demand or purchases would rise when prices are lowered.

“Moreover, the cash handouts and other incentives provided by the government in the various stimulus packages are intended to spur spending in the domestic economy.

“Bargain prices or added benefits through sales promotions will entice consumers to open their pocket books, especially for goods and services that they have delayed in purchasing.

“Price discounts and benefits-in-kind, including free delivery costs, redeemable coupons and bonus points are widely used to increase sales.

“Other marketing strategies include bulk discounts, enhanced loyalty programmes and loss leaders (a product sold at a loss) are employed by marketers to push sales,” he said.

While allowing such sales, KPDNHEP, he said, should ensure that sales were genuine and not gimmicks, as well as monitor the range of products and minimum quantity of stocks offered in the promotion.

Yeah said traders would benefit from holding cheap sales, which gives the chance to liquidate stocks or reduce inventory build- up as it is one way to improve liquidity and cash positions.

“Traders would benefit from stronger buying interest if the slow moving goods are priced more attractively. They would also be able to refresh their stocks more quickly and offer customers newer products, designs or models,” he added.

Echoing Yeah was Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid, who said consumer spending had always been the major driver for growth, which accounted for more than 50 per cent of the economy and its boom could be seen from May.

He said when the Covid-19 crisis struck Malaysia, the impact to the economy was very acute as the Movement Control Order (MCO) enforced on March 18 had placed a limit to human mobility and, by extension, spending ability.

In addition, Afzanizam said there were job losses, which saw the unemployment rate shoot up to 5.3 per cent in May, leading to income loss, which also hampered the spending momentum among consumers.

However, Afzanizam said the improvement in economic activities could be seen since May when the restrictions were relaxed and the economy was reopened.

At the same time, the government had been proactive in prescribing fiscal stimulus to pump prime the economy, he said.

He gave an example of the total industry volume (TIV) for the automotive industry, which was at all time low of 141 units in April and has since gone up to 22,960 units in May and 44,695 units in June.

“In that sense, private consumption has returned albeit guarded as the job market remained fairly unstable. Therefore, the government’s move to allow cheap sales should help to steer consumer spending more steadily.

“The proliferation of e-commerce could also facilitate the transition of the new normal and this would have positive effect on other aspects, such as logistics and warehousing.

“I believe cheap sales and the Buy Malaysian Products campaign should, in principle, help to promote household spending. We have seen the indication as demonstrated by the sharp rise in TIV.

“So in the second half of this year, the economic recovery would be more pronounced, provided there is no sudden surge in Covid-19 cases,” he said.

Economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said the cheap sales had set the tone for a speedier economic recovery and it should ideally be focused on Malaysian products in line with the Buy Malaysian Products campaign.

The campaign was launched by Prime Minister Tan Sri Muhyiddin Yassin last month. He had reportedly said that every ringgit spent, especially on locally made products, would help to ensure the country’s economy will recover and remain competitive.

“Regardless if a business is offline or online, Malaysian products must be given the push and priority. If possible, in the next budget, the government could consider coming up with an incentive for income tax deduction if we buy Malaysian products and this will encourage people to buy our own (locally made products),” he said.

Source: NST