Japanese Retail Accelerates Expansion into Southeast Asia
Aeon and Takashimaya become proactive as domestic market shrinks
Aeon and Takashimaya become proactive as domestic market shrinks
Jiji Research Institute
A growing number of Japanese retailers are moving into ASEAN to take advantage of the region's massive market of 600 million people. Over the last two years, Aeon has established a presence in Vietnam, Cambodia and now Indonesia. Department stores, convenience stores and specialty stores are also picking up the pace of their expansion into Southeast Asia.
Japanese companies are increasingly establishing operations in Southeast Asia, and the retail industry is no exception. Supermarket major Aeon has been particularly proactive, on 30 May 2015 becoming the first Japanese supermarket to open a store in Indonesia. Aeon set up stores in Vietnam and Cambodia in 2014, and is also looking at moving into in Myanmar. Major department store Takashimaya is planning to set up in Vietnam and Thailand. This new level of interest has been spurred by the shrinking of the domestic consumer market as Japan's population ages and the birth rate declines, with the number of supermarkets, department stores, convenience stores, specialty stores and other retail players setting up in Southeast Asia looking likely to grow.
Succession of store closures in China
The movement of Japanese companies into China has been slowing since around 2013, with plant and store closures ongoing. There have been a string of store closures in the retail industry, including department store major Isetan Mitsukoshi shutting its doors in Shenyang, a major city in northeastern China, supermarket major Ito Yokado closing its four stores in Beijing, and major consumer electronics mass merchandiser Yamada Denki pulling down the shutters in Tianjin and Nanjing. According to survey results compiled by Teikoku Databank on Japanese companies in China, there were 13,256 companies left as at the end of May 2015, marking a drop of 1,138 firms in less than three years. This downturn is primarily the result of spiking wages and the deterioration in Japan-China relations since the Senkaku Islands dispute broke out in 2012.
Massive market of 600 million people
Conversely, a growing number of companies are moving into the ASEAN (Association of Southeast Asian Nations) region. ASEAN's 10 member nations together boast a population of around 600 million people, some 100 million more than the European Union (EU). As incomes rise, ASEAN is attracting attention not just as a production base but also as a consumer market.
Indonesia, where Aeon has been operating since May this year, has a population of some 240 million people-around twice that of Japan-making the country the fourth most populous in the world and of course the largest in ASEAN. Per capita gross domestic product (GDP) is more than US$3,500. Once per capita GDP crosses the US$3,000 mark, people apparently start buying cars and consumer electronics, and that's exactly where Indonesia is now. It was that potential that made Aeon decide to get the jump on other Japanese supermarkets and department stores and set up in Indonesia.
Aeon's first store, a large shopping center with a retail sales area of 77,000 square meters, has opened in the suburbs of Jakarta, Indonesia's capital. The shopping center's four floors house hypermarket Aeon as a core tenant, along with some 280 specialty stores. Of these, 47 are operated by Japanese companies, including Uniqlo, the tutoring school Kumon, major consumer electronics mass merchandiser Best Denki, and travel agencies JTB and HIS. There are also numerous Japanese eating places, including ramen and sushi restaurants. Aeon plans to have five big shopping centers in operation in Indonesia by the end of FY2016.
New stores in Cambodia
In FY2012, Aeon shifted to a three-headquarters structure located in Japan, China and Southeast Asia respectively, from which it has been expanding its Asia business. In Southeast Asia, Aeon's strongest presence is in Malaysia, where it has 58 stores. Last year in Vietnam, which has a population of 90 million, Aeon opened one store in the major city of Ho Chi Minh and a second in Bình Duong in the south. This year, it plans to set up a further store in the capital of Hanoi. Last year, Aeon also opened its first store in the Cambodian capital of Phnom Penh. Aeon has been the first Japanese supermarket in both Vietnam and Cambodia.
Takashimaya already has a presence in Singapore and, albeit later than originally planned, will open its first store in Vietnam's Ho Chi Minh in 2016 as the first Japanese department store to arrive in Vietnam. The store will be located in the equivalent of Tokyo's Ginza. Where per capita GDP for Vietnam as a whole is less than US$2,000, Ho Chi Minh boasts almost triple that level, with the appetite for spending running high. Takashimaya is also planning on opening a store in the Thai capital of Bangkok in 2017, accelerating its incursion into Southeast Asia.
Tokyu Department Store opened a second store in the outskirts of Bangkok in June. Isetan Mitsukoshi too has a store in Bangkok, and is investigating the feasibility of business in Vietnam and Indonesia to add to its current presence in Singapore, Malaysia and Thailand.
Thailand boasts 2nd largest number of 7-Eleven stores
Japanese convenience stores have also set up in Thailand. 7-Eleven has the strongest presence there, operating 8,334 stores as at the end of March 2015. This is just under half the number of stores 7-Eleven operates in Japan (17,569) and outnumbers the 8,124 stores in the US, with Thailand now boasting the second largest number of 7-Eleven stores in the world. This year the company will add another 600 stores to its fold, aiming to reach 10,000 by the end of 2018. FamilyMart too has more than 1,000 stores in Thailand-1,188 as at the end of April this year. Looking at FamilyMart's international presence by country, Thailand comes in third after Taiwan (2,957) and China (1,332). Albeit still with far fewer stores than the other two chains, Lawson also has a presence in Thailand.
Uniqlo too picks up its pace of expansion
It is not only supermarkets, department stores and convenience stores that are setting up in Southeast Asia. In recent years, specialty stores too have been boosting their presence. Fast Retailing, which operates the casual clothing store Uniqlo, opened its first store in Indonesia in June 2013, the largest of all its Southeast Asian stores with a total floor area of 2,680 square meters. There are also Uniqlo stores in Singapore, Malaysia, Thailand and the Philippines. Chairman, President and CEO Tadashi Yanai plans to pick up the pace of the company's expansion into ASEAN based on his confidence in the region's potential to develop into a larger economic zone than China. Muji is another specialty store with outlets in Thailand, Indonesia and the Philippines, and this trend among specialty stores seems likely to grow.
Japanese convenience stores struggle in Vietnam
These Japanese retailers are not necessarily experiencing universal success in their Southeast Asian operations. FamilyMart and Aeon have convenience stores and mini-stops in Vietnam, but both have dissolved their relationships with their local Vietnamese partners and still have well under the number of stores originally planned. When tying up with local firms, companies need to investigate their proposed partners very carefully. In addition, competition with US, European, Korean and Southeast Asian companies is also inevitably going to intensify in the coming years. Japanese retailers will need to be meticulous not only in choosing prime sites for their stores but also in lining up distinctive products and products geared to local needs.
(original article : Japanese)