AT Padini Holdings Bhd, where vagaries of teen tastes and latest stiletto styles dictate corporate policy, Yong Pang Chaun cuts an almost unfashionable figure.
Unshaven in a plain white shirt, the managing director of the KLSE second board-listed fashion apparel company, leaned forward to explain in impatient Cantonese that his was a pragmatic approach to business.
“Everyone wants to be called a market leader these days and depending on what definition you use, everybody appears to be one,” Yong said cynically. “If we opened up another 100 stores tomorrow, does that make us a market leader too?”
Yong, unfashionably down-to-earth and known as “Captain” to his closest lieutenants, is adamant that would not be the path he’d be following.
Unfashionable too is the company’s expansion plan because, he said, Padini was not interested in entering the China market – at least, not yet.
“We’re not ready for that leap right now,” he said, adding that for Padini, which earns over 90% of its revenue in Malaysia, there was yet a lot of untapped potential right here.
Yong told StarBiz this in a rare interview recently at his office – a remarkably utilitarian room devoid of the usual trappings of the plush executive suite located within a warehouse complex in Shah Alam.
His was the practical face and brains behind a group that had grown many-fold from a humble textile merchant and manufacturer of ladies' garments to the owner today of some of the country’s most successful fashion brands: Vincci, Seed, PDI, P& Co, Miki and namesake Padini.
This had been translated into revenue in the hundreds of millions and good profits, consistently moving upwards since the company’s shares were listed on the KLSE in March 1998 at the height of the Asian financial crisis. Annual revenues have more than doubled while pre-tax profits almost quadrupled since then.
Analysts said the group’s healthy balance sheet would be boosted even more if the value of its brands, believed to be worth millions, could be accounted for.
Last month, Padini announced a record net profit of RM9.4mil in the year to June 30, an over 50% increase from last year, on the back of revenues of RM188mil. For a retail business in a period hit by dampeners like the Iraq war and SARS outbreak, this was clearly no easy task.
Despite Yong’s humble demeanour, the company had obviously progressed a long way from the early 1970s, when he started in the rag trade together with his sisters (both of whom are still active in the business and sit on the company’s board), and things were “much simpler.”
Yong said customer demands and quality expectations had changed enormously from those first days and so had his approach to business. Today, lead times were far shorter, styles were changing faster, choices were greater than ever and competition more intense, he added.
The company now copes with five changes of seasons or “turns” a year, more than double previously, with obsolescence happening within 2-3 months of a design appearing on the racks. Clothes and fashion had become perishables, he said.
This has required a vastly different modus operandi: following the trend of many other fashion houses, Padini outsources almost all of its manufacturing processes.
Whereas previously we sold shirts, today we are trying to sell a lifestyle, he said of the dictates of the new generation of moneyed young consumers. “That’s why brands are so important to us.”
According to Yong, developing brands has been a key objective of the group for some years now, and it isn’t something that could be done overnight. He said the number of Padini outlets did not matter (though the over 70 shops and 90 consignment counters could hardly be considered insubstantial) as much as the recognition that his brands enjoyed.
That, Yong said, was what he understood as the market leader: in whatever brand you sell, the meaning of market leader is one where your customers recognise you as the leader.
Yong said he wanted all his brands to be as successful as Vincci, which specialises in ladies' foot and leather-ware and accessories. With well over a million pairs of the shoes sold every year, it is the single largest contributor to group profits. Last year, Vincci Ladies Specialities Centre Sdn Bhd posted a pre-tax profit of RM10mil on the back of revenues of RM58.94mil.
“We’re really focused here and able to meet expectations,” he said, of a brand some analysts had described as a local market leader.
The long-range view of brand development was always on the radar and the group continued to spend about 3% of revenues on advertising and promoting the brands, with plans to increase the percentage, Yong said.
On the topic of expansion, however, Yong is more circumspect and believes in being focused. “The domestic market is big with a still growing middle class and we have less than 10% of it, so there’s plenty of room to grow,” he said.
The next step will be to branch out regionally – something the company has already started to do in stages in Singapore and Brunei. “We are also looking at Thailand as the next major market for us,” Yong said.
Although selling to China will be the prize, logistical problems have to be overcome first.
“China is not just a single market. It is a complex place the size of over 20 countries. Just the weather alone is an issue,” he said, explaining that the climate in most regions of China was different from the tropical heat of Malaysia.
With vastly different clothing requirements in a fast-changing fashion scene that transforms itself every 2 months, Yong said, this was a recipe of disaster for the unprepared. There was still “much research to be done”, he added.
Yong said the group was now consolidating its position and building human resource capabilities for the next stage of growth.
The group is also working on developing a master-franchising agreement to allow the franchising of stores following “many requests” from around the region.
“We need to know our strengths and constraints. Of course, China is a big and lucrative market but at the moment, we are not ready yet. If we do go in, it’ll be for the long term,” he said, predicting that, by then, a totally international brand marketed right around the globe would not be out of the question.