KUALA LUMPUR: Malaysia has jumped six spots to the third position in the A.T. Kearney 2016 Global Retail Development Index (GRDI) - the highest since the index started in 2001.
Increased investment from regional and international retailers coupled with a booming market for small-format grocers and hypermarkets has helped boost the sector's growth in the country, said the consulting firm in a statement.
The GRDI ranks the top 30 developing countries for retail investment worldwide. The Index analyses 25 macroeconomic and retail-specific variables to help retailers devise successful global strategies to identify emerging market investment opportunities.
"A slowing economy and a depreciating currency would hurt most countries, but Malaysia's retail sector seems to have shrugged off these concerns.
"A large part of this is due to the fact that the country has vast growth potential both in traditional as well as online retail," said Soon Ghee Chua, Partner and Head of Southeast Asia at A.T. Kearney.
Retail sales in Malaysia grew 3.4 per cent in 2015.
"On the traditional retail front, Kuala Lumpur is saturated with modern retail space, prompting modern development in other spots."
In Kuching, for example, ongoing development plans include the six-storey Emporium at Jalan Tun Jugah, a four-story mall in Matang, and the Moyan Square Shopping Mall.
In the internet space, e-commerce players are expanding aggressively, with promotional campaigns commonplace.
Online fashion retailer Zalora has offered to absorb the 6 per cent goods and services tax (GST), and local online marketplace 11street plans to launch a new mobile shopping app.
International firms have been keen to expand in Malaysia. South Korea's CJO Shopping is looking to launch a new TV shopping network in Malaysia in a joint venture with Malaysia's Media Prima, while Chinese outdoor apparel brand Telent is moving into Malaysia as a first step in a broader Southeast Asian push.
UAE-based LuLu announced plans to invest $308 million over the next two years to enter the market.
In terms of convenience stores, 7-Eleven Malaysia announced it would open 200 stores and upgrade 200 more, while Bison Consolidated announced an upcoming IPO along with plans for 150 new convenience store openings by 2017, in a bid to compete with incumbent 7-Eleven. GCH Retail, Dairy Farm's subsidiary in Malaysia, announced plans to open six new Giant hypermarkets and refurbish 28 additional stores.
Malaysia is also one of Southeast Asia's most business friendly nations, ranked 18th in the World Bank's latest Ease of Doing Business Index, making it an attractive market for global players.