Industry and Market Place

CHAPTER 5

Industry and Market Place

5.1 The Industry

5.1.1 Definition of the Retail Industry

Retailing is a business transaction in which a buyer usually use the goods or services through personal, family or household use. Retailers are business firms engaged in offering goods and services directly to consumers.

In Malaysia, the supervision of the wholesale and retail sector falls under the supervision of the Ministry Of Domestic Trade and Consumer Affairs (MDTCA) through the Committee on Wholesale and Retail Trade. The Committee was set up in 1995 to control and supervise the industry, including foreign participation in the sector. Authorization from the Committee is needed for foreign companies wanting to set up wholesale or retail operations locally and for the opening and relocation of branches.

5.1.2 Shape of the Industry

The retail division in Malaysia comprises a complex blend of changing forms of economic behaviour and organizations apparent, including hawkers, street traders, small family businesses, bazaars, dry and wet markets and large-scale units such as supermarkets and hypermarkets. The introduction of variety-type modern retailing is still in its early stage but growing.

The Malaysian retail industry is generally buoyant with strong retail growth of 12.8% in 2007, the highest since 1992 while private consumption spending grew at 11.7%. With the economic slowdown and the increasing prices of basic products, the industry is expected to face challenges as consumers begin to limit their spending whilst retailers face cost pressures with rising material costs and intense competition.

With cheaper raw materials domestically produced, cheap labor and political stability, Malaysia would appear to have a comparative advantage in the world

market. As a result, the national income for 1993 is already at an estimated figure of RM8,350 (US$3,340). Given the forecast figures, Malaysia might have a Gross National Product per capita income of almost RM14,000 (US$5,600) by the year 2000 and perhaps more than RM36,000 (US$14,400) by the year 2020 (Ministry of Finance, 1986). In terms of purchasing power parity, it increased from US$5,416 to US$7,500 during the period 1991-1993 and further increased to US$8,996 by 1995 (Malaysian Digest, 1993).

5.1.3 Development of the Industry

Malaysia is a commodity country which is heavily influenced by the world's

fluctuating market demand. In the 1960's, 1970's and early 1980's, Malaysia was over-dependent on two primary commodities, natural rubber and tin. As a result, the country was exposed to economic instability due to wide fluctuations of world prices of these two commodities.

In 1985, with a fall in the world economy, the price of these two commodities fell heavily, resulting in a decrease in the total amount of exports. To overcome these problems, the government has made it a policy to diversify the economy into one with a broader base. Through the First to Seventh (1965-2000) Malaysia Plan and the First (1971-1990) and Second (1990-2000) Outline Perspective Plan (OPP), provisions were made to provide and update the basic infrastructure to stimulate industrialization.

In early 1985, Malaysia was facing its worst economic recession owing to the falling prices of natural rubber and tin. GDP growth for the year was an historical negative value of -1.5 per cent. In the middle of 1986, there were some encouraging signs of economic recovery. At the end of the year, the GDP growth was at +0.5 per cent (Ministry of Finance, 1986). After that, the Malaysian economy has not looked back, growing higher and higher every year. An eight per cent GDP growth over eight years (1988-1996) means a doubling of the economic growth. Statistics show that if the country maintains this momentum, the GDP would triple by 2004 and might be four times that of 1987 by the year 2020 (New Straits Times, 1993).

5.2 The Marketplace

5.2.1 Current Market Condition

One of the most competitive market place in Malaysia is women's apparel. Most of the international brand for this particular market has established their business long before if compared to some of the local brands in Malaysia. This would be an issue to the Malaysian fashion retail market when

they have brought in their brands and products into Malaysia' market.

Bukit Bintang is considered as the biggest fashion market in Malaysia with several giant shopping centres that are vibrant and frequently visited. Well-known and familiar fashion retailer such as ZARA, GAP, CHARLES AND KEITH, ALDO, TOPSHOP, MANGO, PADINI, VINNCI, FOREVER 21 and many more can be easily found in that area which is busy with consumer traffic.

Aside from that, shopping complexes like The Gardens, KLCC, One Utama, The Curve, Sunway Pyramid and Mid Valley Megamall are great market place of the industry. Lots ad stores in those complexes are always mainly occupied by fashion retailer and outlets. The places are consistently crowded with people during weekends and public holidays.

5.2.2 Changes in the Market Place

Due to new technology and trends, people in Malaysia are slowly becoming more aware and conscious about their appearances'. This will be a big advantage to market place in Malaysia.

When higher demands emerge number of provider will increase. This will result to more competition. Although this is an advantage to the consumer, the retailer will have to come up with new tactics. One of them being low prices and sometimes will result to low quality products and poor customer service.