The Malaysian Insider :: Features
The Malaysian Insider :: Features |
| Inditex quietly grooms cut-price brand for budget battle Posted: 17 Mar 2014 11:14 PM PDT In fact the store belongs to the world's biggest fashion retailer Inditex – and may be its secret weapon to lure back austerity period shoppers who have turned away from its fashion brand Zara to the cheaper styles of H&M and Primark. Since the 2008 financial crisis, mid-market retailers in developed markets have lost ground to both discounters and high-end brands as shoppers economise on basics, while treating themselves to the odd luxury. Inditex does not break out sales figures for either Lefties or its Zara stores in Spain. But it has shrunk the number of its Zara stores in Spain from 514 in 2008 to 469 at the end of 2012 while adding five or six Lefties stores a year "in recent years", according to a spokesman. Lefties now has 86 stores in Spain and 16 in Portugal. With consumers now wearing Primark fashions alongside luxury labels, Inditex may be changing the mix of its stores to test the waters of this new, evolved retail market, said one sector analyst. Inditex's sales in Spain dropped 5.5% in 2012, to 3.5 billion euros, and accounted for only 21% of total sales against 37% in 2007 as the group has grown fast in emerging markets. By contrast, Sweden's H&M and British Primark expanded fast in Spain during that time, as unemployment topped 26% and retail sales shrank steadily in the 2011-2013 period. Both brands have much lower average prices than Zara. H&M's sales in Spain rose 5% to 6 billion Swedish crowns (US$940.39 million) in 2013 compared with a year earlier, while its number of stores rose to 156 from 146 in the same period. Primark, owned by Associated British Foods, has grown to 39 stores since arriving in Spain in 2006. Together their total outlets are still dwarfed by Inditex's total of 1,900 for all of its brands, but H&M and Primark's offering makes them well placed to capitalise on the latest shopping trend: Though Spain's economy is slowly healing, consumers remain frugal as companies freeze or cut salaries. "No one has any money to spend," said Mercedes Granda, 38, having a coffee with her mother Laura in Xanadu mall. "At first I didn't fancy shopping in a cheap store like Primark. Then I got used to it. I think the quality is good." John Bason, chief financial officer of Associated British Foods, insists Primark is not dependent on hard times for growth but acknowledges that Spain's low-cost niche was underdeveloped. "What Primark has demonstrated is the potential for growth of the value segment in Spain," he said. Stealth strategy For now Inditex barely acknowledges the existence of Lefties. The 21-year-old brand, created to sell Zara's leftover last-season rejects, is not promoted on Inditex's corporate website. Two foreign investors in Inditex told Reuters they weren't aware of the brand. And yet in recent months Lefties stores have been redesigned. Gone are the dim rooms with haphazardly laid out tops and trousers where shoppers rifled through odd sizes. Instead attractively bright units display new Lefties-branded clothing lines, surrounded by posters and TV screens on which models show off designs. "Women's shorts from 9.99 euros. Kids' knitwear from 7," reads the tickertape display above the entrance to the Lefties store in the Xanadu mall. Behind the scenes, Lefties is recruiting designers, pattern makers and buyers to report to its new head Xavier Ruz – formerly of Inditex's teenwear brand Bershka, who was appointed in January. The label has also just launched its own newly designed website. Inditex declined to provide information on its Lefties strategy, investment or sales figures. But with the boost to its stores it is clear that Lefties is taking a larger share of its parent's Spain strategy. "I think it's only a matter of time before Inditex treats it as a separate brand and breaks out its figures," said Carlos Hernandez from retail consultancy Planet Retail. Mall to high street Two-thirds of the Spanish Lefties are in shopping centres, where sales have plummeted 25% since 2007. It will be taking on a very confident Primark, which is seen now as a desirable tenant for such malls, said David Brown, associate director of retail capital markets for real estate company JJL. "In some centres footfall has increased by up to 30% after Primark entered," he said. Hernandez at Planet Retail noted that Inditex was replacing some of its Zara stores with Lefties – where the goods cost a third less – in poorer areas. "You have a clearly impoverished society – people who can't afford to pay 30 euros a blouse in Zara and unfortunately we're talking about millions of people." Already there are signs that the low-cost battle is moving from the malls to the streets. Madrid Mayor Ana Botella has announced that Primark will open a store onMadrid's Gran Via, a major shopping avenue in the heart of the capital. Hernandez believes Inditex has every incentive to treat Lefties as a separate format and roll it out abroad too. "I think they could export the brand to other countries where Inditex has a large presence like Britain and Germany," he said. "Spain is not the only country where the crisis has taken its toll." – Reuters, March 18, 2014 |
| Despite scandal, Indonesian election could entrench political dynasties Posted: 17 Mar 2014 09:00 PM PDT The family of Syahrul Yasin Limpo, the second-term governor of this resource-rich Indonesian province, has dominated local politics for three generations, and a fourth waits in the wings. Eight of Limpo's close relatives will run in the country's parliamentary elections on April 9: two sisters, one brother, two brothers-in-law, two nephews and a daughter. It all adds up to a formidable dynasty in a country where political families are both increasingly common and dogged by allegations of corruption, neglect and misrule. In December, Indonesia's anti-graft agency, known by its Indonesian initials KPK, arrested Ratu Atut Chosiyah, 51, the matriarch of a wealthy clan with a stranglehold over politics and business in Banten, an impoverished province west of the capital Jakarta. Chosiyah is now in detention awaiting trial accused by the KPK of bribing a judge to favour her candidate in an election dispute last year. Her lawyer denies the charge. The KPK seized her family's fleet of luxury cars, while local media reported on overseas shopping sprees and a US$500,000 (RM1.6 billion) renovation of Chosiyah's private mansion. Her arrest has not dimmed the ambitions of other political families, who – as the lengthy list of Limpo candidates suggests – could become more deeply rooted than ever in the post-election landscape. Paradoxically, these dynasties are byproducts of Indonesia's democratic rebirth. After the 1998 overthrow of former dictator Suharto, Indonesia embarked upon an ambitious programme of decentralisation that, through direct elections, turned many local leaders into influential politicians. Following these politicians into public office are spouses, children, siblings and in-laws, spawning family fiefdoms in every corner of this vast archipelago. Some have shored up power by misusing central government funds intended for regional development, analysts said. "Indonesia right now is flooded with money and there are many so-called little kingdoms around the country where nobody's checking how local officials spend their budgets," said an official at an international development agency who asked not to be named because he works closely with the Indonesian government. In the Philippines, political dynasties have held sway for 70 years or more and are "prevalent in areas with more severe poverty", said a July 2013 study by the Asian Institute of Management in Manila. Poverty entrenched those dynasties, said the study, although there was "less evidence" that dynasties caused poverty. In Indonesia, dynasties are a relatively new phenomenon and it's too soon to conclude that they impede development, said Michael Buehler, an assistant professor at Northern Illinois University who has studied Indonesian elites in depth. "But the Philippines basically shows us that dynasties are bad news. Overall, the economic development of places where dynasties have been for decades has been worse than places where there is more competition." The Limpo homeland of South Sulawesi, about 1,400km east of Jakarta, is no economic backwater. With a population of about eight million people – the same as Switzerland – the province is rich in nickel ore and a major producer of rice, cocoa and maize. Its capital Makassar is a trade and transport hub between east and west Indonesia. Sitting in an office guarded by a tiger which has been stuffed in mid-snarl, Limpo cites his achievements as governor: a growing middle class, falling poverty levels and a higher than national economic growth rate. However, South Sulawesi ranks low among Indonesian provinces for spending on health and education, according to a 2012 study by the Australian government and the Indonesian policy group Partnership for Governance Reform. Limpo began his career as a low-level bureaucrat in Gowa, a district adjoining Makassar's eastern suburbs and run since 2005 by his younger brother Ichsan. There are eight Limpo candidates standing for election or reelection to district, provincial and national assemblies on April 9, mostly – but not always – on a ticket for the Golkar Party, which was Suharto's political vehicle for decades. Limpo's younger sister Dewi is running for the People's Conscience Party (Hanura) and his daughter Thita for the National Mandate Party (PAN). Limpo doesn't view his family as a dynasty. Voters have a choice, he argued, and if they happen to choose a Limpo – that's because his relatives are hard-working, experienced and honest. "My family members have dedicated their lives to the people, and so far our track record is very good," he said. "Until now none of the family has shown signs of corruption." At 28, Limpo's nephew Adnan is already a political veteran. He was first elected to the provincial assembly a decade ago while still at high school. Now a Golkar candidate – his campaign slogan ("I'm Yellow") derives from the party's colour – Adnan is running for his third term in office. "Look at John F. Kennedy," he told Reuters after a recent strategy meeting in one of Makassar's smoke-filled coffee shops. "All his relatives were fit to be leaders during that time." Thita, 33, one of three Limpos running at the national level, compares her family to the Gandhi-Nehru dynasty of India. Understandably, the Limpos are less keen on comparisons with Chosiyah's disgraced clan in Banten. "We have different origins," said Limpo. Chosiyah's dynasty is rooted in business: construction projects her father won during Suharto's rule were the foundation of its current wealth and power. Her husband Hikmat Tomet, who died in November, headed Golkar's Banten branch, which allowed him to place family candidates at the top of the party's list, said Buehler. Three of the four Chosiyah relatives running in the April election are Golkar candidates. "I'm not even sure her arrest will undermine her family's power," he said. "All her underlings are still in place." Chosiyah's spokesman Fitron Nur Ikhsan has repeatedly defended the family in the Indonesian media, describing it as "democratic" and ruled by consensus. By contrast, the Limpo family is rooted in the bureaucracy – the governor's father was a former soldier and five-time district head – and boasts neither the same wealth nor control over party politics. Limpo is head of Golkar in South Sulawesi, but choosing election candidates is the task of another party member belonging to a rival family. This could make it more vulnerable than Chosiyah's family, said Buehler. The growth of Indonesia's clans is not inevitable – just look at the results of last year's mayoral election in Makassar. Irman Yasin Limpo, the governor's younger brother, ran against a local architect and lost. So did Nani Rosada, who ran in June 2013 to succeed her husband Dede as mayor of Bandung, the capital of West Java province. In most areas, however, the member of a clan loses not to a reform-minded candidate, but to a member of a rival clan, said Buehler. "The dynasty building of families is mainly constrained by the influence of other families," he said. The KPK's investigation of Banten's first family could further entrench some dynasties, as incumbents seek to be replaced or joined by children and other relatives who might help shield them from unwanted scrutiny. After an interview at the governor's official residence, Limpo's daughter Thita presents a 15-year-old schoolgirl who had recently returned from summer school in England with a burning desire to enter politics. She is Andi Tenri Bilang Radisya Melati – the governor's granddaughter. – Reuters, March 18, 2014. |
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