Saturday September 22, 2012
Parkson to continue expanding in Asia
By CHOONG EN HAN
SUCH is the sweet taste of achievement for Parkson Holdings Bhd that is celebrating its 25th anniversary, after forging a luminary brand name for itself along the way that is echoed far and wide in larger Asia. Nonetheless, the growing pains and struggle have made this year's silver anniversary all the more sweeter.
Following the spin-off of its department store operations in China and Asean to separately-listed entities in Hong Kong and Singapore, Parkson is setting its eyes on South-East Asia to tap the region's growing affluence after expanding aggressively to 45 stores in China. It now operates 125 stores across Asia.
Operating in markets with a total population of 1.6 billion consumers, Parkson now serves more than 100 million customers in all its stores, and is at least exposed to 200 million consumers of the populace.
In a recent media luncheon, Datuk Alfred Cheng, who is the managing director of both Hong Kong-listed Parkson Retail Group Ltd and Singapore-listed Parkson Retail Asia, says that after reaching such a matured age, the company is still raring to go for more and ride along the dragon wave of economic growth experienced in Asia.
“While we have seen our fair share of frustrations and road bumps, we are happy to see some of our milestones. 25 years is a long time, and what is important is that this year is the time for us to reflect a lot on what we have done, and what we need to do for the next 25 years.
“It would be much more difficult and hopefully the brand would stay for the next 100 years to come,” says Cheng, who is now spearheading the company's strategy to tap into Myanmar, which had just opened its door to foreign investors, while also charting a steady expansion-cum-branding drive in countries the company has presence in China, Indonesia, Sri Lanka, Vietnam, and soon Cambodia.
Parkson Holdings rang up RM376.08mil in net profit for its financial year ended June 30, 2012, a solid 7% growth in bottom line compared with the previous financial year. Revenue rose to RM3.44bil from RM2.92bil previously.
The earnings of Parkson Retail Group which manages its China operations fell 17% year-on-year to RM136mil due to weak same-store sales growth in the fourth quarter. Meanwhile, its Asean operations under Parkson Retail Asia is still buzzing with activity, with Malaysia recording same-store sales growth of 9.2% year-on-year, Vietnam 9% and Indonesia 9.3%.
Carrying an extremely diverse range of brands from men's wear Alain Delon to skincare ZO Skin Health, not only Parkson experienced an influx of European brand enquiries seeking for exposure in the Asian market, it has also seen the emergence of Asian designer brands as well from Malaysian contemporary designers Key Ng and Melinda Looi.
Meanwhile, in China, lingerie Aimer and sportswear Lining are making inroads to other markets too by leveraging on Parkson.
Currently, it plans to open a 40,000-sq-ft departmental store in Yangon, the capital city of Myanmar, by next year. The population of Yangon accounts for 45% to 55% of the buying power of the entire country.
Likening the company's strategic store location in Yangon to the golden triangle of Bukit Bintang, Cheng says the company wants to have the first-mover advantage and be the first to put its name out there due to great advertising value while leveraging on that opportunity to understand consumer preferences.
“The country is not ready yet for a full-fledged departmental store. Give us two years and we will have all the opportunity to learn the market and train the people to be ready for a big-scale store,” he says.
Cheng says that right next to the current planned store is another piece of land, which Parkson will be working with the same friendly parties in Myanmar to develop a full-fledged departmental store.
Naming Thailand's retail giant Central Retail Corp and South Korea's Lotte Co Ltd as its biggest potential competitors to fight for a bigger slice of the pie in Asia, Parkson is bringing its A-game on the table to meet the competition.
The company has also ventured into Indonesia with a platform of six stores under the name Centro Lifestyle Department Store, while similar ventures has been done in Sri Lanka with 17 stores under the name Odel.
“We need to understand the market a bit more before we eventually introduce the Parkson brand. I think one of the most important lessons we have learnt over the years is that what works in one country should never be assumed to work in another. That is why some companies fail when they attempt to expand overseas,” he says.
He says consumers today are remarkably similar from country to country but there are also dramatic differences between them.
Describing its learn-and-train strategy as the most understated reason for Parkson's success, Cheng says it is also why the company's ears are closer to the ground.
“When the Americans expand overseas, they can send a full team of expatriates over to the country, but we can't. These expatriates would just mixed among themselves but for our staffs, they have to socialise and make friends if we just send him alone to a new country.
“That is how we learn the culture after mixing and working with the local people and learn about their habits,” he says.
Despite a chain reaction from the woes in the eurozone and the fragile economic recovery in America, which has triggered softening retail sales, Cheng still paints a rather rosy picture for Asia.
“If I have to choose, this (Asia) is still the place to be as it is still growing. And compared to the numbers of our competitors in Europe and the United States, the majority of them are experiencing negative sales growth on a same-store basis,” he says.
According to him, everyone still looks at China and India to drive the global economy, but both have floundered in the last six to 12 months.
“All these effects are relative as we still expect strong growth of 9% to 10% overall, and perhaps not 12% to 13% like in the yesteryears. We expect similar recovery to resume in China, but it would not be like what it used to be,” he says.
Even in Malaysia which is a relatively small market for the company, Cheng says the Malaysian market had experienced a commendable 9% growth last year.
“The growth in the local market is still very much intact, and I think we intend to expand our presence in the Klang Valley as we still do not have presence in many pockets of the area, and also extend our reach to Sabah and Sarawak.
“Our plan has always been to open two local stores a year, two to three in Vietnam, four to five in Indonesia and eight to 10 in China,” he says.
On the need to differentiate itself from the competition, Cheng says this has always been a favourite question among analysts and investors but radical changes are not what the consumers are looking for. “There are always innovation out there that we can adopt every year. But we have been in this business long enough to know that your most comfortable coffee, no matter whether you like it or not, is Starbucks, because it's consistent, expected and no surprises,” he says.
“Just 3% to 5% that you do that will keep it fresh for customers, but in reality its more evolutionary than revolutionary. Innovation is always the talking points that a lot of retailers use to differentiate themselves, but evolutionary changes in the way we do business is minimal and that is how consumer wants it to be.”
And that, he says, is the reality of life. “If you look back 10 years ago, changes might seem radical but if it's just compared year on year, it is just the tweaking of brand merchandises, the customer is not looking for dramatic changes,” he says.
Tapping the Internet virtual economy, Cheng says that with technology and the ready accessibility nowadays, retailers will eventually have to look at multiple-channel platform to communicate with customers.
“In today's world, with technology and accessibility, retailers have to look at all channels, multiple-channel platform eventually, to communicate with customers.
“We are now testing our online site and expect to launch it sometime next month concurrently in both China and Malaysia for a start.
“This is just a step-by-step process to learn, just like our Myanmar store, and develop a full-fledged platform,” says Cheng.
He says the time is ripe for Parkson to venture into e-commerce, as only over the last two to three years that the world experienced a surge in Internet sales.
“Today, a good e-commerce site for a departmental store does anywhere between 8% and 12% sales of the overall company. It is an important extension of operations and when you have more business virtually, it will spill over to the physical store too.
“Three years down the road, with our presence across Asia, the e-commerce site might just be our biggest store yet,” he says.