From KL To Paris, Malaysia’s retail challenge
Ravindran Devagunam, Director Wholesale & Retail, National Key Economic Area, PEMANDU
(Advertorial)
Malaysia’s retail scene has grown from strength to strength in the past few years and the country is now ranked among the top shopping destinations in the world – 4
th
by CNN and 9
th
by research house A.T. Kearney.
Shoppers can choose from any number of international brands and more brands are beating a path to our gilded doors as luxury spending, already worth US$1.2 billion annually (RM3.8 billion) is expected to grow faster than developed countries.
Apart from having luxury icons such as Louis Vuitton, Ralph Lauren and Armani, Kuala Lumpur has also in recent years welcomed newcomers such as high end accessory designer Michael Kors and fast fashion giant H&M.
What detracts from the otherwise rosy picture however, is how little of the spending is going to Malaysian pockets as virtually all the brands that occupy prime frontage in the Malaysian capital’s shopping districts and giant malls are foreign.
Not only is the lack of Malaysia-based global retailers a missed opportunity to tap into a vast market worth many billions but when local brands are an almost negligible presence, it also makes it more difficult for Malaysia to develop its own unique design identity.
Make no mistake, the fashion business can be a seriously lucrative one. A Bloomberg article last year noted that American designer accessory company Coach generated a gross margin of more than 72 percent while rival Michael Kors’s margin was 59.9 percent and Ralph Lauren was 59.2 percent.
For “Fast Fashion” heavyweights such as Spain’s Inditex, which owns brands like Zara, they at one point experienced five year growth rates exceeding 50 percent and revenues last year topped 16 billion Euros (RM72 billion). Japan’s Uniqlo meanwhile is aiming for annual revenue of US$50 billion by the end of this decade.
But what is the difference between a Malaysian brand and foreign brand? What convinces Malaysians to open up their wallet and willingly pay over a thousand ringgit for a shirt from a foreign label but not one from a local label? I don’t think Malaysians lack in creativity or craftsmanship. After all, Jimmy Choo who helped start his namesake shoe empire while in London, is Malaysian.
It is against this backdrop that the Economic Transformation Programme’s Wholesale and Retail National Key Economic Area (NKEA) aims to address this lack of major league players in the fashion retail space.
As part of that effort, we are at a preliminary stage of assessing the need to modify one of the Entry Point Projects (EPPs) – which is Facilitating Local Businesses to Acquire Stakes in Foreign Retail Businesses – to one that focuses on fostering homegrown premium Malaysian brands. We want to see more Malaysian brands be in the same class as Ralph Lauren and Gucci.
This entails upgrading existing local retail players so that they can compete on the global stage. This transformation is the only way to grow and expand the Gross National Income (GNI) from Malaysian retailers.
We want our brands to be able to command international respect and international prices. That’s the name of the game – how do we ensure Malaysian retailers have world class standards that make people go “Wow – this brand must have come from Paris!” And have them be willing to pay prices equivalent to those commanded by coveted Parisian brands like Hermes and Givenchy.
We are already in talks with potential partners to get to the bottom of this issue. For example, a leading local bank has expressed interest to help source funding for selected companies that are ready for regional expansion. In addition, a retail consulting firm is also interested to assist in finding ways to help Malaysia’s retail players join the big boys of the industry. Our retail players must also ask themselves – do they want to enter the big leagues of London, Paris, Geneva and New York or are they just happy being in Bukit Bintang?
While we transform Malaysian brands, we are also helping support the development of Big Box Boulevards by creating a more conducive local retail environment.
More global retail champions would also mean a boost to the economy as domestic consumption contributes close to 60 percent of total GDP and local retail is an integral part of that. It would also help strengthen the local design culture and it is good for Malaysians to have a sense of identity design-wise.
0
