This year has been a good one for DaimlerChrysler Malaysia. It has introduced various new models such as the Mercedes-Benz SLK and the new-generation C-class which have been very well received.
President and CEO Frank Steinleitner sees a lot of factors coming into play in terms of his expectations for 2005. With the new duty structure in place, locally assembled cars in the premium segment would be affected the most.
Some strategic evaluations and discussions on further investments are in the pipeline to ensure that DaimlerChrysler is on track with its plans for Malaysia, says Steinleitner.
The shopping scene at Suria KLCC continues to be vibrant and full of new shopping experiences. General manager Andrew Brien is planning a series of changes at Suria KLCC which will see the opening of 130 refurbished stores by the first quarter of next year.
A firm believer in offering the “feel good” shopping experience, Brien insists that it must also be different every time. Today’s shopping experience has been redefined, he says, noting the different trends emerging among department stores and retail centres.
President and Chief Executive Officer
DaimlerChrysler Malaysia Sdn Bhd
What is your outlook for the economy in 2005?
For 2005, we expect to see sustainable growth in the economy largely driven by continued positive growth across all sectors coupled with a fairly favourable external environment which is expected to yield a growth of 6% next year.
Better economic prospects are envisaged as the Government aims to provide a strong and stable macroeconomic foundation, improve corporate governance, fight corruption, streamline the public service delivery system and collaborate effectively with the private sector. Malaysia must be ready to face the challenges ahead, especially the pressures from globalisation and issues such as the volatility of oil prices, the performance of the US and Chinese economies and tightening of monetary policies across major economies. Nevertheless, we believe the Government will be able to come up with effective strategies to overcome the challenges.
What are the prospects for your company in 2005?
Our passion and drive to maintain our strong position never end; thus, we believe 2005 will be another exciting and positive year for DaimlerChrysler Malaysia (DCM). We have a lot to look forward to in 2005, especially new expansion plans such as:
·Introduction of more new models – the Mercedes-Benz A-Class, CLS, M-Class, etc;
·New brand – Mitsubishi Fuso commercial vehicles;
·Consolidation of assembly locations; and
·Further enhancement of service retail network.
Meanwhile, the smart brand recently introduced is going very well with the colourful and trendy urban lifestyle in Malaysia, especially in the heart of Kuala Lumpur. Many have found the smart car to be a refreshing sight and an expression of life, which are very much in line with what the smart brand was intended to provide. With smart, DCM has carved a niche segment with the smart fortwo coupe and cabrio, and the limited editions of the smart roadster and smart Brabus will also be made available.
Corporate earnings have been generally robust in 2004. What are your expectations for 2005?
DCM has performed very well in 2004. We have continued to maintain our leadership position in the luxury car segment with a strong market share of more than 40% despite intense competition. We have also achieved more than 20% growth year-to-date with close to RM800mil in turnover, which is in line with our growth turnover set at the beginning of this year. In addition, realising the growing demand of our target market, we have introduced various new models this year such as the Mercedes-Benz SLK and the new generation C-Class which have been very well received. We are also proud to have again been awarded several accolades this year, such as the Best Executive Car for our Mercedes-Benz C230K and Best Limousine for our Mercedes-Benz S350 at the NST Car of the Year Award, as well as being selected as the Best Continental Compact Sedan by Autocar (Asean) for our Mercedes-Benz C230K.
We are glad to have a strong foothold as the leader in the premium car segment. However, we are not resting on our laurels. For 2005, our primary goal is, of course, to further strengthen our leadership position, to achieve a further increase in our earnings and to operate profitably.
Nevertheless, we also believe that entrepreneurial success goes far beyond pushing profits to the limit. It encompasses a lot more than just financial success. For DCM, this means our unshakeable commitment to good and responsible corporate citizenship – wherever we do business.
In 2004, DCM’s commitment to and efforts in humanitarian, environmental and cultural projects can be clearly seen with our involvement in HIV/AIDS education and awareness, the Eco-Product International Fair, Malaysian International Fashion Awards and many more. We hope that in 2005, by working closely with the Government and various NGOs, we will be able to contribute even more to the local community, especially in the areas of road safety awareness and education, which will be one of our focus topic next year. We are very happy to see that the Transport and Education Ministries are very supportive of our Mokitown project, a road safety initiative for children which we will launch at the beginning of next year.
How will rising oil prices affect your group’s business strategies?
The much talked-about cost attributed to the increase in oil prices is most probably due to the fact that Malaysia is one of the few places in the world where we talk in terms of “sen per kilometre”. In other countries, especially in Europe, people talk of litres per 100km. By making a long-term commitment in the automotive industry, DaimlerChrysler has addressed issues such as this through years of ongoing research and development. We have already developed alternative solutions whereby DaimlerChrysler has a proven track record of our commitment and vision of “Energy for the Future”. In Malaysia, the Mercedes-Benz Vito natural gas vehicle, one of the bridging technologies in DaimlerCrysler’s powertrain roadmap for the future, can already be seen on the road. Mercedes-Benz's future directions are:
·The first and most important direction is the continuous improvement of our modern combustion engines and diesel technology. The smart car, for example, consumes 3.1 litres of diesel fuel to travel 100km on the highway and 3.9 litres per 100km in city driving (for a combined rating of 3.5 litres per 100km).
·The second direction is represented by alternative fuels such as the first synthetic fuel derived from biomass.
·The third is the introduction of hybrid technology in suitable markets.
·The fourth is fuel cell technology.
What were some of the challenges faced by your group in 2004; how did you tackle these challenges?
Despite intense competition in 2004, we have managed to overcome the challenges that we faced. It is our belief that we have to stay focused and continue with our strategies to always be ahead of the competition. This will ensure that we are resilient and that we are unwavering in our direction rather than crafting new strategies that are designed merely to respond to short-term trends or to simply follow what others are doing. As such, being a leader in our segment, DCM has carried on with our long-term strategies. We are pleased to see that our continued passion has contributed to the growth of the company as well as our strategic investment and expansion plans. One of our key long-term strategies which we are proud of is the development of 17 Autohaus with a total investment of RM120mil by our dedicated Mercedes-Benz dealers to ensure a high quality of service and retail experience for our customers.
In view of the rising commodity and product prices, what do you expect of profit margins in 2005?
A lot of factors will come into play in terms of our expectations for 2005. For example, this year, as part of our expansion plans, we have made huge investments in Malaysia through our partnership with DRB-Hicom for the setting up of the assembly plant in Pekan. However, with the new duty structure in place, locally assembled cars in the premium segment would be affected the most. As such, we would have to make some strategic evaluation and possibly discuss further investments with the Government to ensure that we are still on track with our plans in Malaysia. In addition, we face a strong euro, which has further appreciated close to 10% in 2004. No doubt these factors will result in a price increase.
Nevertheless, we are obliged by our brand heritage to maintain leadership in all aspects. The rising commodity and product prices should not be compensated with a decrease in quality in order to earn profits. The pioneering spirit that we have will certainly continue and never be compromised. We believe that by delivering the best product, service and after-sales service to our customers, we will again be able to succeed and operate profitably in 2005 as well, as see positive results from our expansion plans. It is with continuous effort that we seek to remain the most desirable automotive brand in the world with an exemplary attitude.
Suria KLCC Sdn Bhd
What is your expectation of consumer spending next year?
The signs and outlook seem extremely positive. Consumer spending is expected to remain robust given expectations that consumers’ disposable income will increase, which in turn will raise their confidence level and lead to higher demand for consumer goods and services.
According to the Malaysian Association for Shopping and High-Rise Complex Management, retail sales growth is expected to pick up at a gradual pace and growth of 7.1% is in order for this year valued at RM56bil compared with growth of 3.6% last year. The industry’s growth in the second quarter this year showed an impressive improvement of 15% compared with 5.9% in the first quarter.
We have experienced strong growth especially during this festive season starting from Deepavali and we expect this trend to continue well into 2005. We are looking forward to another good year for Suria KLCC.
Is there any particular segment of the business where you expect to see greater demand?
Sophistication in consumer tastes has led retailers to reposition themselves to meet changing needs. We have also seen a rise in consumers splurging on non-essential and luxury items as well as a trend towards “Home Fashion”. The home is now a fashionable place, not just a place to sleep and eat in.
What do you see as the challenges in your sector for 2005?
Even though the outlook may seem positive, a rising tide, as the saying goes, does not necessarily lift all ships and not all retail centres will do well.
The retail industry is a dynamic one, but in order to succeed in this industry, one has to be responsive to the changing lifestyle needs and preferences of consumers. Thus, it is important to recognise these changes and try to find pockets of opportunities in them.
Suria KLCC is going through a series of changes. Indeed, the first quarter of 2005 will see the opening of 130 refurbished stores to welcome the festivities. These include new names as well as newly renovated stores of current retailers.
One of our key successes is our strategy to renew ourselves from time to time – thus our tagline “Always Something New”. We have always believed in giving our consumers a different experience every time they shop at Suria KLCC, whether it's a new store, a newly refurbished store, a new window display, a retailer’s in-store activity or a consumer event, Suria KLCC aims to give a sense of newness to different segments of customers. We want to make sure that shopping at Suria KLCC is entertaining, rewarding and refreshing.
We strive to ensure that Suria KLCC is able to pre-empt the changing consumer demands and trends and remains relevant to our shoppers in all areas. It is a “feel-good” shopping experience and must be a different experience every time.
In view of rising commodity and product prices, what do you expect of profit margins in 2005?
Retail is indeed a very interesting industry as we deal mostly with the end product. Rising commodity and product prices might not necessarily affect profit margins. How can this be? Today’s retailers operate in an environment that requires a focused attention to customer perceptions and preferences, thus the pricing strategy of a particular product is also dependent on the positioning of the brand and basically how the end consumers perceive the product. Consumers are now more discerning in what they want. Hence, retailers must continue to be creative and innovative, especially in the way they package their products, in order to ensure customer loyalty.
Thus, it is the innovators in retail who will be best positioned to overcome the issue of rising commodity and product prices. At the same time, many retailers have also been actively looking for ways to better control their costs and enhance their overall merchandise offerings as well as to improve customer service and building better interactions with their customers. In this way, costs have been reduced in other areas whilst at the same time operational efficiencies are taking over. In fact, the end result of this should see profitability improving for the retail industry.
Do you expect any changes in the industry landscape next year?
As it is, there are currently 200 shopping centres in the Klang Valley (according to the Malaysian Association for Shopping and High-Rise Complex Management) and the number is gradually growing with the new ongoing developments. The total gross built-up area of retail space is 96 million sq ft while net lettable space is about 59.5 million sq ft. Another 8.5 million sq ft are expected to come on stream by the end of this year. However, with the increasing number of shopping centres, Kuala Lumpur is still well below Australia and the US in terms of retail space (sq ft per person). Kuala Lumpur has 12.1 sq ft per capita whereas Australia has 20.9 sq ft per capita and the US 35.6 sq ft per capita. In fact, there is room for growth for Kuala Lumpur for quality retail.
The ones which will stay in the competition will be those which can stay ahead of the retail movement and are able pre-empt the changing retail trends and demands.
In fact, retail/shopping centres have come a long way. In the past, we used to have one single department store providing a wide variety of merchandise; now we have shopping centres and hypermarkets that have taken on the role of department stores. Department stores have evolved, too, by becoming anchor tenants of shopping centres instead of being a stand-alone building of its own. Why the change? As shoppers are given more variety, they would become more sophisticated in taste, and thus would also change their expectations and look for new shopping experiences.
Today’s shopping centre has also been redefined! It is no longer just a place to shop in. It is also a place to meet people, be entertained, eat, hang out, have fun – basically an extension of the community, i.e. we have to become a social place and not just a place to shop in. And if we are a social place, we have to change the entire ambience to fit the role. To sum up, it is all about the experience.
As a retailer, it is most important to recognise your niche and the role you can play in a particular area. It is important to realise that a new centre’s main role in an established area with existing shopping centre/s, is not to gain at the expense of the existing centres. Ideally, it is to complement and build a thriving community in that particular area. It boils down to the positioning strategy in the local market to ensure you can compete and conduct business effectively with other players.
For Suria KLCC in the coming two years, several new projects in Kuala Lumpur City Centre and the surrounding areas will transform this place into a vibrant focal point of up-market residential and office buildings. We can, therefore, leverage on this development as we expect the number of people working and visiting Suria KLCC to more than double, especially when the Kuala Lumpur Convention Centre is completed and brought into operation in early 2005.