Retail activity expands in line with robust economic growth in Myanmar

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The rising disposable incomes of Myanmar’s rapidly growing middle class are changing the make-up of local retail, driving demand for aspirational goods and quality floor space.

Strong retail demand has seen occupancy rates in the commercial capital Yangon rise to 95% as of the beginning of this year, according to a report issued by property consultancy Colliers International.

Even with almost 80,000 sq metres of gross leasable area added to the city’s retail floor space in 2017, the report found that the rising demand increased lease rates by high single digits. This growth rate is expected to moderate somewhat, with Colliers forecasting it will settle between 4% and 5% over the next two to three years.

Rising middle class boosts retail sales and alters consumer trends

Higher disposable incomes are driving a shift in consumer spending habits, with purchasing trends moving away from servicing basic needs and towards lifestyle products, according to a report released in mid-March by market research firm Envirosell.

The report analysed changing demographics and retailing patterns in the major urban centres of Yangon, Mandalay and Naypyidaw. Notably, it forecast that the number of consumers at or above the middle-class salary bracket would reach 10m by 2020.

As a result of this rapid growth, purchasing patterns are set to undergo significant changes. Demand for consumables – such as cleaning, washing and hair care products – is increasing by an average of 14% per annum. There is also substantial growth in the electrical appliances segment, with demand for refrigerators, washing machines and other white goods on the rise.

The entrance of overseas retailers in the marketplace should meet some of this demand, particularly as social status becomes more of a factor in shopping patterns, Envirosell said.

This trend is especially apparent in the food and beverage (F&B) segment, where multiple Western brands are moving to establish a footprint.

At the end of February Singapore Myanmar Investco (SMI) announced it had struck a deal to expand the operations of US franchise The Coffee Bean and Tea Leaf (CBTL). The beverages chain already has three stores in Myanmar, all located at the Yangon airport. The new agreement will see SMI take the brand out into the cities.

CBTL will join a host of other Western F&B franchises, such as Gloria Jean’s Coffees, Kentucky Fried Chicken and Pizza Hut. Major regional F&B outlets, including South Korea’s BBQ Chicken and Malaysia’s Marrybrown, have also set up shop, looking to benefit from the changing tastes and high-growth potential.

Positive GDP growth outlook and buoyant consumer sentiment in 2018

A major contributor to rising incomes has been the robust performance of the broader economy, which should continue to support retail growth in the year ahead.

The nation’s business community is bullish about economic growth prospects for 2018. Some 55% of C-suite executives interviewed in the latest OBG Business Barometer: Myanmar CEO Survey, published in January, stated that they expected the economy to expand by 6% or more this year, and a further 28% predicted growth of 5-6%. The IMF, for its part, forecasts more bullish GDP growth of 7.6%.

This optimism extends to the country’s shoppers, according to the findings of the latest Mastercard Index of Consumer Confidence for the Asia-Pacific region, issued in early January.

The survey rated Myanmar consumers as very optimistic, with confidence levels of 91.7 points in the second ha­­lf of 2017, a solid gain on the 86.8 recorded in the first half of the year. Any score above 50 indicates positive sentiment among consumers.

Myanmar’s ranking placed it behind only the Philippines, China and Cambodia out of the 15 economies surveyed.

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