A roadmap toward a common framework for measuring the Digital Economy, and the Malaysian Apparel and Accessories Market and Players

Today again TextileFuture is presenting to our readers two features, the first is entitled “A roadmap toward a common framework for measuring the Digital Economy” based upon the discussions in the G2o0 Digital Econmy Task Force 2020 under the auspices of the G20 Saudi Arabias Presidency in 2020. We produced only an excerpt, but the full report can be downloaded, as well as the regarding toolkit from OECD.

The second feature is based entirely on the three excerpts on all aspects of the Malaysian Apparel and Accessories Market and Players. The items are based upon excerpts from the report “Malaysia: Discovering Business Opportunities for Hong Kong Small-Medium Enterprises, 2019”, commissioned by HKTDC and prepared by Euromonitor. The guest author is Wenda Ma from the Research arm of the Hong Kong Trade Development Council.

Here starts the first item:

A roadmap toward a common framework for measuring the Digital Economy

This document was prepared by the Organisation for Economic Co-operation and Development (OECD) Directorate for Science, Technology and Innovation (STI) and Statistics and Data Directorate (SDD), as an input for the discussions in the G20 Digital Economy Task Force in 2020, under the auspices of the G20 Saudi Arabia Presidency in 2020. It benefits from input from the European Commission, ITU, ILO, IMF, UNCTAD, and UNSD as well as from DETF participants. The opinions expressed and arguments employed herein do not necessarily represent the official views of the member countries of the OECD or the G20.

Acknowledgements:

This report was drafted by Louise Hatem, Daniel Ker, and John Mitchell of the OECD, under the direction of Dirk Pilat, Deputy Director for Science, Technology, and Innovation. Contributions were gratefully received from collaborating International Organisations: Antonio Amores, Ales Capek, Magdalena Kaminska, Balazs Zorenyi, and Silvia Viceconte, European Commission; Martin Schaaper and Daniel Vertesy, ITU; Olga Strietska-Ilina, ILO; Marshall Reinsdorf, IMF; Torbjorn Fredriksson, Pilar Fajarnes, and Scarlett Fondeur Gil, UNCTAD; and Ilaria Di Matteo, UNSD.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Cover image: Jason Leung on Unsplash. © OECD 2020 OE gen

Table of contents

Executive summary 5

Preface 7

1. The “digital measurement ecosystem” 7

2. Advancing measurement of the Digital Economy 9

Chapter 1 – Measuring the Digital Economy: digitalisation in G20 economies 11

1. Introduction 11

2. Major trends in the Digital Economy 12

2.1. The Internet is critical in times of crisis 12

2.2. Gaps in technology and Internet usage remain 13

2.3. Managing increasing digital threats 14

2.4. Data at the centre 15

2.5. Digital technology development is particularly concentrated in certain G20 countries 16

3. Indicators for measuring key aspects of the Digital Economy 16

3.1. Infrastructure 17

3.2. Empowering Society 23

3.3. Innovation and technology adoption 27

4. Indicators toward a G20 common framework for measuring the Digital Economy 32

References 33

Chapter 2 – Measuring the Digital Economy: definitions and key measurement challenges 34

1. Measuring the Digital Economy: toward a definition of the Digital Economy 34

2. Defining the Digital Economy 35

2.1. Bottom-up definitions 36

2.2. Top-down definitions 36

2.3. Flexible definition 37

2.4. Summary of responses to a survey the use of definitions and measures of the Digital Economy in G20 countries 38

2.5. Toward a G20 definition of the Digital Economy 39

2.6. Implications of the definition variation for estimates of the size of the Digital Economy 46

3. International definitions and classifications related to the Digital Economy 47

3.2. Additional definitions of concepts related to the Digital Economy 50

3.3. Definitions in the framework for Digital Supply-Use Tables and Handbook on Measuring Digital Trade 51

4. Measuring data and data flows 52

4.1. The measurement challenge 52

4.2. Factors influencing the classification and valuation of data 53

4.3. Factors influencing the valuation of data 54

4.4. Summary of responses to a survey on the use of definitions and measures of the Digital Economy in G20 countries – data flows 56

5. Measuring digital services and platforms 56

5.1. Free or paid for: why are certain digital services explicitly recorded in national accounts and others are not? 57

5.2. Classifying the monetary flows of online platforms 57

5.3. Online platforms providing zero-priced digital services 59

5.4. Summary of responses to a survey on the use of definitions and measures of the Digital Economy in G20 countries – digital services and platforms 60

6. The Digital Economy and the system of national accounts 60

6.1. The need to reflect the digital transformation in economic statistics 60

6.2. Digital Supply and Use Tables 61

6.3. Summary of responses to a survey on the use of definitions and measures of the Digital Economy in G20 countries – digitalisation in economic statistics 62

6.4. Make-up of the Digital Supply-Use Tables 62

6.5. Advantages of the Digital Supply-Use Tables 64

6.6. Outputs of the Digital Supply-Use Tables 64

6.7. High Priority Indicators 64

6.8. A Digital Economy Satellite Account 65

6.9. Ongoing compilation challenges and future work for digital Supply-Use Tables 65

6.10. Measuring the Digital Economy and the Digital Supply-Use Tables 66

7. Concluding remarks 66

References 68

Chapter 3 – Measuring the Digital Economy: Jobs, Skills, and Growth 71

1. Introduction 71

2. Jobs in the Digital economy 74

2.1. Indicators on the number of jobs in the Digital Economy 76

2.2. Indicators on ICT-intensive jobs 78

2.3. Indicators on the dynamics of job creation related to the Digital Economy 80

2.4. Proposed indicators for monitoring purposes 82

2.5. Further key areas for development 82

3. Skills in the Digital Economy 83

3.1. Indicators on individuals’ ICT and complementary skills 85

3.2. Indicators on digital technologies at work 87

3.3. Indicators on the digital skills pipeline 89

3.4. Indicators on NSE and ICT graduates 91

3.5. Proposed indicators for monitoring purposes 93

3.6. Further key indicators for development 93

4. Growth and the Digital economy 95

4.1. Indicators on value added in the Digital Economy 97

4.2. Indicators on investment and productivity in the Digital Economy 99

4.3. Indicators on international trade related to the Digital Economy 101

4.4. Proposed indicators for monitoring purposes 103

4.5. Further key indicators for development 103

5. Survey of definitions and measures of the Digital Economy in G20 countries 104

6. G20 indicators on jobs, skills, and growth in the Digital Economy 105

6.1. Implementation steps 107

References 110

Appendix A 112

Chapter 4 – A Roadmap toward a Common Framework for Measuring the Digital Economy 113

1. Introduction 113

2. Conceptual framework 114

3. A Roadmap toward a Common Framework for Measuring the Digital Economy 117

3.1. Definitions and concepts: 117

3.2. Indicators 118

3.3. Data and methodology 118

3.4. Dissemination of indicators 119

3.5. Institutional arrangements and capabilities 119

4. Recommendations 119

References

Executive summary

This report builds upon previous G20 and other relevant work to develop A Roadmap toward a Common Framework on Measuring the Digital Economy”, including a proposed common agreed definition on the Digital Economy and a set of existing indicators for measuring the Jobs, Skills, and Growth in the Digital Economy. It complements previous work and proposes a clear step forward for Digital Economy measurement.

Chapter 1 provides over-arching context for the report. After providing an overview of key trends currently shaping the scale and development of the Digital Economy in G20 countries, it showcases a range of indicators, updated from the 2018 G20 Toolkit for Measuring the Digital Economy as well as complementing these with select additional indicators to give new insights and perspectives. This is one illustration of how A roadmap toward a common framework for measuring the Digital Economy builds on previous work by the DETF as well as initiatives by International Organisations.

Themes of Infrastructure, Empowering Society, and Innovation and Technology Adoption are explored through 17 key indicators. By reviewing data sources and measurement methods, as well as remaining gaps and challenges, chapter 1 lays the foundations for chapter 2, which builds upon these components to develop a G20 definition of the Digital Economy, and chapter 3, which goes a step further by setting out G20 indicators on Jobs, Skills and Growth in the Digital Economy. These themes are also measurement pillars within the G20 Common Framework for Measuring the Digital Economy set out in chapter 4; the indicators in chapter 1 give an initial indication of indicators that could be selected through future work.

Chapter 2 sets out to establish actionable definitions of the Digital Economy and useful related concepts, prerequisite for any economic measurement framework. Definitional differences can and already do result in large differences in the estimates of the size of the Digital Economy. Moreover, agreement on defining the Digital Economy as well as the tiers within it is important given the implications it has on the scope of indicators chosen to measure the Digital Economy – both those agreed to in the Roadmap, outlined in chapter 4 and those to be developed in the future.

As such, progressing towards a consensual and actionable definition of the Digital Economy is the main objective of this chapter. The following comprehensive definition of the Digital Economy is proposed:

The Digital Economy incorporates all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilising these digital inputs in their economic activities.

The Digital Economy has broader societal impacts and therefore, for policy purposes, extends beyond the activity formally recorded in economic statistics. To address this, the overarching policy definition proposed above is combined with a tiered definitional framework to not only assist with accurate measurement and comparability of the digital economy by statistical offices but to also allow for the incorporation of digitalised interactions not currently recorded as economic activity. This comprehensive definition, including the various tiers underpinning it (see below), will provide G20 members with a consistent and consensual framework to guide policymaking.

The tiers underpinning the proposed definition are the following:

– The Core measure of the Digital Economy only includes economic activity from producers of Digital content, ICT goods and services.

– The Narrow measure includes the core sector as well as economic activity derived from firms that are reliant on digital inputs.

– The Broad measure includes the first two measures as well as economic activity from firms significantly enhanced by the use of digital inputs.

– The final measure, the Digital society extends further than the Digital Economy incorporating digitalised interactions and activities excluded from the GDP production boundary, i.e. zero priced digital services.

– An additional, an alternative measure covers all economic activity that is digitally ordered and/or digitally delivered. It should be considered as an alternative perspective of the Digital Economy, delineating economic activity based on the nature of transactions rather than the firms’ output or production methods as this measure focuses on ordering or delivery methods, regardless of the final product or how it is produced.

In order to combine flexibility and precision for measurement purposes, the comprehensive definition and its tiers find a middle way between a bottom-up approach and a top-down/trend-based approach. Most of the measures outlined in the tiers are commensurate with already existing international definitions or proposals.

As with most definitions of the Digital Economy there remains some subjectivity or “fuzziness” in the proposed delineation between firms that may be reliant on digital inputs compared to those that are significantly enhanced.

Importantly, the alternative measure, delineated by the nature of the transaction, provides not only a different perspective, but also the opportunity to split economic activity below firm level by detailing how much output and value added were ordered and/or delivered digitally rather than assigning the entire firms economic activity to a specific tier based on the production process.

The tiered structure is not the panacea for measuring the Digital Economy but it does offer greater clarity, on both a measurement and policy perspective, especially in relation to indicators for the Digital Economy – both those agreed to in this roadmap and outlined in chapter 4 as well as those developed in the future.

The digital transformation is ongoing and there are important additional phenomena on which international efforts are being focussed to improve measurement. These include:

  • Measures for firms with business models based on providing free digital services, with no explicit charge to the consumer for the service provided. These firms have broken up the traditional direct transactional nature of providing good and services on an unprecedented scale.
  • -Appropriate valuation methods for data as well as suitable categorisation within the various macro-economic classifications. A key requirement for accurate measurement of the Digital Economy is an agreement on how to recognise and record data as a separate standalone product used in production.

Digital Economy satellite accounts begin with the completion of Digital Supply and Use tables (Digital SUTs). These tables take on additional importance, as operationalisation of the proposed tiered definitions will necessitate a statistical framework that generates outputs consistent with the different definitions; the Digital SUTs is such a framework.

Chapter 3 presents available indicators on Jobs, Skills, and Growth in the Digital Economy. Many of these were already set out in the G20 Toolkit for Measuring the Digital Economy but are complemented with additional indicators. These are set out as double pages in which key findings and links to economic theory are highlighted. Relevant definitions are set out as well as the underlying measurement approaches used.

This underpins the main purpose of the chapter – to identify a set of G20 indicators on Jobs, Skills, and Growth in the Digital Economy for adoption and production across G20 economies and beyond. These are presented in Table 1 below. This is undertaken in the context of the relevant measurement pillar within the G20 Common Framework for Measuring the Digital Economy, set out in Chapter 4.

In selecting key indicators for inclusion in the G20 set, various factors were considered. The G20 indicators on Jobs, Skills, and Growth in the Digital Economy aim to (1) collectively address the various key facets of this aspect of the Digital Economy and (2) reflect cross-cutting factors such as gender differences in the extent of engagement in the Digital Economy and its impacts, while also (3) using established definitions, classifications, and sources, and (4) being available with sufficient frequency and country coverage to enable benchmarking and monitoring. These indicators also seek to complement indicators used to monitor the United Nations 2030 Sustainable Development Goals (SDGs).

Finally, many of these indicators seek to operationalise the tiered G20 definition of the Digital Economy set out in chapter 2. The “Information Industries” align well with the “core” tier, while “digital intensive sectors” provide one means of operationalising the “broad” tier for measurement purposes.

Chapter 4 provides practical steps to advance Toward a G20 Common Framework for Measuring the Digital Economy. Key elements are the widespread use of the G20 definition of the Digital Economy (set out in chapter 2) and the regular production of key indicators on jobs, skills, and growth (presented in chapter 3) across countries. In doing so, the chapter attempts to account for countries’ different capacities in terms of data infrastructure and statistical resources, while setting out clear, actionable recommendations for policy makers and national statistical offices (NSOs) to implement.

The Roadmap Toward a Common Framework for Measuring the Digital Economy organises the proposed steps across five areas of work: 1) Definitions 2) Indicators 3) Methodology and data collection 4) Dissemination 5) Institutional capabilities.

After presenting the Framework that is envisaged for development in the medium to long-term, the chapter proposes key implementation steps for the parts of the Framework on which the DETF has worked in 2020. These are distributed between the main actors involved: G20 countries, the DETF and IOs. Other actors such as civil society and the private actor are nonetheless included.

Preface

Widespread phenomena, including ever-increasing digitisation (conversion of information into digital form) and ever-greater digitalisation (applications of digital technologies) are serving to reinforce and expand what is commonly referred to as the “Digital Economy”. Realising the opportunities and addressing the challenges of the Digital Economy requires strengthened international and multi-stakeholder dialogue on measurement. This has been explicitly recognised by the G20, which, following the creation of the Digital Economy Task Force (DETF) in 2016 and the elaboration of the 2017 Roadmap for Digitalisation: Policies for a Digital Future. In 2018, the Argentine G20 Presidency worked with International Organisations led by the OECD, to publish a G20 Toolkit for Measuring the Digital Economy (G20, 2018). This “G20 Toolkit” is designed to motivate the development of a stronger evidence base for analysis and policymaking across key dimensions including digital infrastructure, ICT-enabled innovation, and the use of digital technologies in society, as well as the role of the Digital Economy in driving jobs and growth. This provided background for a negotiated G20 Ministerial Declaration and Annex1.

This report builds upon this and other relevant work to develop A Roadmap toward a Common Framework on Measuring the Digital Economy”, including a proposed common agreed definition on the Digital Economy and agreed set of existing indicators for measuring the Jobs, Skills, and Growth in the Digital Economy. As such, it complements previous work and proposes a clear step forward for Digital Economy measurement.

Chapter 1 sets out key trends shaping the ongoing development of the Digital Economy as well as updating and complementing a range of the indicators set out in the G20 Toolkit to provide a foundation for the discussion that follows and to illustrate the existence of definitions, methodologies, and indicators on key aspects of the Digital Economy. However, there is currently no internationally agreed definition of the Digital Economy overall, and this has been identified as one important barrier to meaningful and comparable measurement.

Chapter 2 examines definitions put forward by government, business, academic, and International Organisation sources to identify commonalities and differences. From these, an over-arching definition of the Digital Economy is proposed for discussion and agreement by the DETF. Chapter 2 also looks at the definitions available for key facets of the Digital Economy which are necessary to complement and operationalise the over-arching definition for measurement purposes. It also looks at several areas where international effort is being focussed on developing definitions and measures needed to more fully understand key elements of the Digital Economy.

Chapter 3 also seeks to advance measurement in a complementary way, by looking in detail at indicators on Jobs, Skills, and Growth in the Digital Economy and proposing a core set of indicators for discussion and agreement by the DETF with a view to their wider development and production across G20 economies. These indicators focus on key ways in which the Digital Economy is impacting economic performance and the lives of G20 citizens. Furthermore, wider adoption of these indicators will entail the broader cultivation of underlying sources, which could also provide a foundation for improving indicators in other areas, such as those set out in the G20 Toolkit (and Chapter 1) themes “Infrastructure”, “Empowering Society”, and “Innovation and Technology Adoption”.

Chapter 4 then situates these within a broader measurement framework accompanied with A roadmap toward a Common Framework for Measuring the Digital Economy.

As an input to this publication, the Saudi Arabia G20 Presidency coordinated a short survey of DETF participating countries to investigate the existence and use of definitions and measures for the Digital Economy and other key facets thereof. We extend our thanks to all for the responses received, which are summarised in this report.

Finally, the indicators showcased in this report can and should contribute to monitoring progress towards the 2030 Sustainable Development Goals (SDGs) set out by the United Nations within G20 countries and beyond. Indicators on the accessibility of ICT network infrastructure and digital skills are particularly relevant.

This preface sets out, at a broader level, key features of the international “ecosystem” through which data on the digital transformation are gathered, compiled, and transmitted for inclusion in international databases and suites of indicators. This provides a background on the foundations underpinning many of the sources and measures discussed. It also serves to highlight key contributions and developments from the various International Organisations working to better measure and understand the Digital Economy, all of which have collaborated with the OECD in producing this report on behalf of the Saudi Arabia G20 Presidency.

The necessary Toolkit can be downloaded here

The full report can be had here

www.oecd.org

Here are starting the three excerpts on all aspects of the Malaysian Apparel and Accessories Market and Players:

The Malaysian Apparel and Accessories’ Market: Key Trends

All Malaysian features by guest author Wenda Ma from the Research arm of the Hong Kong Trade Development Council.

In Malaysia, growth in the apparel and accessories industry has been driven by rising affiuence and surging consumer confidence, backed by stronger spending by women in particular. According to Euromonitor, the value of retail sales of apparel and accessories in Malaysia is forecast to grow by some 6% per annum between 2019 and 2022 to MYR53 billion (US$12.4 billion, or HK$96.3 billion). There is strong demand in categories such as casual wear, sunglasses and costume jewellery.

Stronger Spending by Women

Rising female labour participation and incomes have coincided with a profound transformation of the retail landscape. Malaysian women are enjoying increased empowerment and financial independence. They like to use modern fashion to express themselves and to feel good about themselves, and they are very keen to buy brands. Many Malaysian designers and fashion makers have capitalised on this market potential and as a result Malaysia is increasingly being seen as a thriving emergent fashion capital.

Retail prices of ready‑to‑wear apparel and accessories very much tend to reflect what consumers and aspiring public figures perceive the products are worth. For example, if a popular celebrity buys or wears a particular item from an independent online store, its appeal and its value are likely to increase greatly. Consumers are changing their fashion items more frequently and are looking for a diversity of styles. Retailers tend to stock more styles but smaller quantities of particular items, which leads to increased costs for manufacturers. As a result, overall unit prices are expected to continue to rise.

Fashion Symbols and Smart Technology

Sunglasses are predicted to be one of the fastest growing categories in the apparel and accessories sector in the next few years. This is attributable to a rising perception of them as a status symbol among the fashion conscious. An increasing number of global fashion brands have entered the Malaysian market in recent years, including Longchamp, Celine, Muai Jim and Versace. Other brands at varying positions in the market have expanded their presence and are enlarging their customer base. Kaca-Kaca is one example of this, an emerging popular local brand that offers a wide variety of sunglasses at affordable prices, promoted as a fashion statement for the masses.

Outdoor running, and other sports activities such as hiking and cycling, have become very popular in Malaysia in recent years. The number of sports events and races has increased substantially. Because of this, a rising number of international sports goods stores and brands have established a presence in the country. Sports footwear in particular has seen a rise in popularity, helped by the advances in innovation and design among leading brands such as Under Armour, Asics, Adidas Performance, Puma, Nike, Salomon, Skechers and The North Face. For example, Under Armour’s chip‑enabled Hovr Infinite running shoes enable users to see their running statistics on the MapMyRun app through smart connected technology. Malaysians are increasingly attracted to new technology and innovative designs that integrate footwear with their lifestyles.

Religious Customs and Changing Mindsets

Growth in sales of women’s wear has been significantly fuelled by the increasing demand for casual and modest wear. Riding on the rise in purchasing power among Muslim women in Malaysia, Islamic fashion has become a notable trend in the country. As modern lifestyles spread, Malaysian Muslim women increasingly favour modest dress styles, with women’s shirts and blouses being matched with trousers, skirts or jeans, together with a hijab – a scarf that covers the head and chest.

Adult Muslim women are expected to dress modestly when they are in the company of men who are not part of their family. The popular fashion designer and social media influencer Vivy Yusof has been an inspiration to many when it comes to modern styles. The emergence of online fashion bloggers and social media influencers has made people more aware of fashion, and has led to moderate freedom in dress. This increasingly lucrative market has not only been tapped by emergent popular local fashion labels, it has also been embraced by global brands. Nike Malaysia, for example, launched its first hijab for athletes in 2018, while Noor Neelofa, one of the pioneers of the modern hijab in Malaysia, launched her company Naelofar Hijab’s first sports hijab collection AURA.

Costume Jewellery Appeal to Modern Female Consumers

Jewellery is another apparel and accessories category that has benefited from the rising purchasing power and independence of Malaysian women. Modern female consumers have an increasing appetite for branded jewellery that expresses their personal values and aspiring lifestyles. Young Malaysian consumers are increasingly turning to affordable costume jewellery brands such as Pandora, Folli Follie, Lovisa and Swarovski as a way of expressing themselves through their daily wear.

As Malaysian consumers become more sophisticated, and their sense of self‑expression through fashion becomes more important, apparel and accessories companies will face growing challenges in meeting the demand for unique and distinctive designs, and in accelerating the supply chain process. A few global brands, such as H&M and Esprit, have already been affected by such challenges. Consumers are losing interest in global fashion designs as their attention increasingly shifts to local and regional fashion icons. However, the industry’s prospects for future growth are likely to be adversely affected by increased living costs due to higher rents and rising food prices.

Price Competition Is Keen in Mass Market

With the increasing popularity of internet retailing and the decline of bricks‑and‑mortar shops, overall operational costs in the industry as a whole are declining due to falling overheads. This is making the pricing of ready‑to‑wear apparel and accessories more competitive. The average unit price of apparel is around MYR40‑MYR50 per item. Footwear in Malaysia is highly price‑competitive, due to the rapid growth of online retailers in e‑commerce marketplaces. Consumers can make price comparisons easily on platforms such as Lazada and 11street.

In store‑based retailing, price‑competitive strategies such as bundle purchases are becoming a common promotional tactic to boost sales. Leading brands such as Bata, Skechers and Vincci have, for example, offered discounts to customers buying a second pair of shoes along with their first purchase.

However, a premium pricing strategy is viable for brands that sell unique fashion footwear. Setting costs higher than the existing market players requires effort and resources to create not only a high‑quality product, but also a high perception of that product’s value among consumers. This involves the whole marketing process, from product packaging to positioning in those retail channels that support premium pricing. Prices of local premium shoe brands, such as Christy Ng, range between MYR100 and MYR900 per pair.

The Malaysian Apparel and Accessories’ Market: Entry Strategies and Potential Partners

The local fashion industry in Malaysia is becoming increasingly vibrant. It has plenty of creative talents, and many fashion and design organisations. Fashion shows have been revolutionised and are becoming communities where designers and buyers can come together for business, market intelligence and inspiration. Hong Kong SMEs can work with their Malaysian counterparts to create a sustainable ecosystem for the fashion industry.

Collaboration through Joint Ventures

Creating a joint venture with another partner can be a potential business opportunity for Hong Kong SMEs in the apparel and accessories industry.

It helps to open access to local expertise and distribution networks, and can increase capacity. With the growing market trend towards localisation, and the rise of local talent in fashion design, consumers are increasingly supporting local brands. As such, forming a joint venture can mitigate the potential risks of venturing into a market as an overseas brand, and can make a bigger impact. Hong Kong SMEs can provide expertise in fashion design and manufacture and help both parties grow their business. SMEs can also work with academic institutions, which can help develop human capital, encourage cultural exchanges, gain deeper insights into ethnic diversity, and provide space for young talent to grow and prosper.

The Future Is Multi-channel

Entrants into the fashion retail market will need to ensure that they can provide a seamless omni‑channel experience for consumers through the use of strategic retail partners. To be successful, retailers must be able to sell to their customers not only through physical stores, but also online via own‑branded or third‑party platforms. Fashion products can be both impulse or planned purchases, and Malaysian consumers increasinglyshop at their convenience. Having online and online channels gives retailers greater flexibility to meet their customers’ needs, allowing shoppers to do things like pre‑order items online and pick them up in‑store, or purchase items in‑store and have them delivered to their home.

Physical retail stores remain relevant and complement online sales. Department stores and multi‑brand fashion specialist retailers carry a widerange of premium niche labels, and this represents the best channel for Hong Kong SMEs. Online marketplaces, such as Zalora, Fashion Valet and Happiness Outlet, are popular fashion‑orientated platforms in Malaysia. Hong Kong SMEs need to understand their target demographics when deciding which channels they should focus their resources on. Adopting an omni‑channel strategy will help to drive business growth.

Unique and distinctive designs are essential to differentiate brands. Malaysian consumers are increasingly looking for identity through fashion.

The trend towards branded jewellery is making things more di􀂨cult for small artisans, who do not possess the marketing muscle of large jewellery groups. One option for smaller players would be to distribute their products through ventures featuring premium brands and up‑and‑coming designers.

Using Social Media

Social media platforms such as Instagram, Facebook and Twitter offer low entry barriers to Hong Kong SMEs looking to build brand awareness by using effective digital marketing. Social media is a crowded channel, and creating a successful fashion brand requires effective storytelling and vivid motifs that attract the target consumer groups. Malaysian consumers have demonstrated a growing interest in supporting social movements, environmental sustainability and aspirational public figures.

Leading brands always showcase new arrivals through frequent updates of pictures and descriptions on social media. Sales promotions in online stores and on o􀂨cial social media accounts tend to be less aggressive than those in‑store. Many customers use online channels to carry out“webrooming” – i.e. research on products before they buy. However, there are also a growing number of pure online retailers that are using award‑winning local designs, sustainable practices and personalised customer service to appeal to Malaysian consumers.

Content marketing via social bloggers and online lifestyle media is one of the most effective ways to get brand exposure, especially for new brand players. Popular Instagram fashion celebrities in Malaysia include Siti Nurhaliza and Neelofa, and fashion bloggers are easily searchable.

Nevertheless, Hong Kong SMEs looking to use this strategy must also ensure their products tell a compelling story in order to win their potential customers’ attention.

The Malaysian Apparel and Accessories’ Market: Established Players and Distribution Channels

Malaysia’s apparel and accessories retail business has been substantially influenced by the penetration of premium and luxury fashion brands from around the world. Rising disposable incomes, increasing consumer confidence, a growing population and the effect of government policies have been driving the Malaysian retail sector, attracting international players to try to establish a presence in the market.

Experiential Shopping Concept Grows

Apparel and specialist footwear retail is a highly saturated sector in Malaysia, and accounts for the largest share of retail sales among ready‑to‑wear apparel and accessories. Branded retailers are increasingly transforming their stores into flagship concept stores, presenting a new experiential shopping concept that combines online and oline marketing strategies. One example of this is the leading luxury global brand Michael Kors, which launched a runway‑inspired concept that brings the experience of attending a fashion show into a retail store.

Department stores and multi‑branded fashion specialist retailers carry a wide range of premium niche labels. The growing appreciation of local Malaysian talent and designs has led to an increasing number of multi‑branded fashion specialist retailers. Their in‑store formats and décor imitate an open concept department store. Examples include DESIGNation, Fabspy, LAH’LAH’LAND, Major Drop and Never Follow Suit.

Local Independent Fashion Brands Take the Stage

Local independent fashion brands have used pure online specialist retailers and social media to gain increasing exposure for their craftsmanship.

Because of the strong barriers to market entry in store‑based retailing, many fashion designers, jewellers and entrepreneurs have turned to online fashion shopping platforms to sell their products, and have focussed on digital marketing through social media networks to boost brand awareness and build customer relationships.

The major advantages available to small businesses when they venture into e‑commerce are lower operating costs, a wider audience and product selection, and greater convenience and flexibility. Many online shopping sites offer improved customer service, and free delivery and returns, in an attempt to encourage consumer awareness and improve customers’ confidence in their purchase.

With e‑commerce developing rapidly in Malaysia, an increasing number of third‑party online fashion aggregators are expanding their product ranges, while developing a distinctive market positioning. These aggregators include rising numbers of online boutiques that strategically channel their product portfolios to target customer groups based on demographics and geographic locations using big data analytics.

Apparel and footwear is the largest online purchase category within overall internet retailing. The success of online fashion boutiques has encouraged them to venture into physical retailing. Successful examples of this include CalaQisya, Christy Ng, FashionValet, Bawal Aidijuma, Poplook, Imaan Boutique, Reebonz, Finelycup and online jewellery store Jeoel. Store‑based apparel and footwear specialist retailers, such as H&M, Gap and Zara, are feeling the pressure of online competition and are gradually closing stores.

Big Players Respond to Modest Wear Trend

The Malaysian apparel and accessories market is expanding modestly, with demand from all demographics and income classes. It is highly fragmented, with a large number of domestic and international brands. The top 􀂦ve companies account for almost 10 % of total sales.

Competition in major product categories, such as womenswear and the jewellery, is more intense than in growing categories such as sportswear and eyewear.

The fashion industry is evolving dynamically, responding to fast‑changing consumer tastes and preferences. Large players such as H&M, Bata, Uniqlo, Padini and Zara have increased their expenditure on advertising, sales promotions, merchant rewards, roadshows and online shopping festivals. Furthermore, following the growing trend for modest wear, global fashion brands have launched new product lines that focus on simplicity, quality and themes such as back‑to‑basics.

Affordability and Innovation Are Key to Success

In a highly fragmented landscape, domestic fashion giant Padini Holdings holds the leading position in the apparel and accessories industry.

Padini Holdings has diversified its apparel business through the use of a large number of fashion labels across categories, including menswear, women’s wear, children’s wear, apparel accessories, footwear and hosiery. The company operates wide retail coverage of its fashion brands, including Vincci, Seed, Padini Authentics, PDI, Miki Kids and Brands Outlet. Amid the growing competition from independent online fashion retailers, Padini has also expanded its presence and opened online stores. The success of Padini’s brands is mainly driven by their affordability and the benefit of having established company recognition. However, the impressive growth of innovative fashion designs from independent online retailers represents a significant threat to Padini Holdings.

Uniqlo has followed the trend for modest wear, and this, in addition to its authentic Japanese quality, has helped it maintain its competitive edge over other leading fashion retailers. It outperformed market growth in 2018. Uniqlo’s brand positioning is high‑quality, performance‑enhanced, basic casual wear at affordable prices. Within eight years, it has opened 47 outlets in Malaysia, offering a wide variety of choice and accessible mass‑market product lines to consumers. To try to maintain this robust business momentum, Uniqlo plans to branch out by offering expanded product lines within growth categories such as children’s wear and intimate wear. The company’s success is largely attributable to having a clear vision of its brand, which it is in with economic and social developments in Malaysia and the rest of Asia. Furthermore, it brands its innovations, such as the fabric HeatTech, and its operational strategy gives it cost and agility advantages.

Innovative Fashion Brands Represent Threat to Apparel Giants

Uniqlo’s success has been underpinned by its robust digital marketing strategy and by solidly positioning its brand in consumers’ minds through consistent marketing campaigns and company initiatives on environmental sustainability. Uniqlo has been innovative in its advertising, utilising the latest trends in social media, such as micro‑videos. The brand has also been known for large‑scale marketing campaigns that run throughout different seasons, such as its Uniqlo Wherever campaign, and collaborations with the popular Asian I am Crazy Rich Asians, and the production of Modest Travels. These campaigns have been very successful and boosted its brand recognition among young travellers.

In contrast, Brands Outlet and Padini focus on expanding their physical retail presence by opening new concept stores and refurbishing existing stores. Both brands have been aggressive in advertising and promotional activities. Padini’s brands do, however, have some weaknesses that will impact future growth, such as a lack of a strong marketing positioning across brands, designs that are western‑orientated, and lengthy cycles for new product launches.

The jewellery brands Poh Kong and Wah Chan are among the top 􀂦ve players. Jewellery businesses have benefited significantly from the growing confidence of Malaysian consumers and increased celebrations during festivals. Diamonds, pearls and jade are popular for Christmas, New Year and Mother’s Day. Both brands are highly reputable local jewellery chains with strong market positions, networks, products and service quality.

Their marketing campaigns, roadshows and sales promotions are robust throughout seasonal periods.

Note: These three articles are excerpted and edited from the report “Malaysia: Discovering Business Opportunities for Hong Kong Small-Medium Enterprises, 2019”, commissioned by HKTDC and prepared by Euromonitor.

www.hktdc.com

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