Japanese malls in SE Asia eye middle-class consumers

Japanese distributors have been opening shopping malls and department stores one after another to attract the increasing population of middle-income earners in Thailand, Malaysia and other major Southeast Asian countries.

Other foreign and local companies are also opening commercial facilities in those countries, although their economies are experiencing downturns in consumption due to the slowdown of the Chinese economy. To win the hearts of local consumers, Japanese shopping centres and department stores must try to differentiate themselves from the others.

It takes less than two hours by car from Bangkok to the Aeon Sriracha Shopping Centre, a three-storey mall in a residential area of Sri Racha, Chon Buri, which was opened by Aeon (Thailand) on October 21.

The core of the shopping mall is MaxValu, a supermarket selling many fresh and processed foods from Japan. A 26-year-old Thai office worker who lives near the mall said he liked it because he could buy Japanese vegetables and fruits at reasonable prices.

The mall's ground floor covers 10,000 square metres, and it houses many restaurants including a ramen shop and an izakaya pub.

Many foreign-affiliated factories have been built in Chon Buri province, increasing the local population.

"We've expanded to the area in anticipation of its growth potential," said Masamitsu Ikuta, managing director of Aeon (Thailand) Co. "We want to attract middle-class consumers in Thailand."

His statement reflects the company's plan to open more shopping malls in cities in the country.

According to the US-based survey company Nielsen Co, the number of middle-income earners in the 10 ASEAN member countries is projected to increase from about 200 million in 2012 to about 400 million in 2020. Middle-income earners are defined as having a disposable income ranging from US$16 to $100 (S$23-S$142) per day.

The total population in the ASEAN countries is more than 600 million and their average age is 29. These figures suggest that consumption will increase significantly in the medium to long term along with their economic growth.

Japanese distributors are investing in ASEAN countries. Aeon has opened 18 large commercial complexes such as Aeon Mall in Malaysia, and is trying to open facilities in Vietnam and Indonesia as soon as possible.

"We're going to propose to middle-class people in Southeast Asia not only the possession of goods but also improvement of their quality of life," said Shinobu Washizawa, managing director of Aeon Asia.

Tokyu Department Store opened its second store in Thailand in June, in a suburb of Bangkok where many high-end condominiums are being |constructed. Takashimaya plans to open a department store in Bangkok in 2017.

Mitsui Fudosan Co in May opened Mitsui Outlet Park, which sells high-end products at discount prices, in a suburb of Kuala Lumpur, and plans to open one in Thailand as well.

Excess competition

It's not only Japan that's trying to capitalise on the growing markets in Southeast Asia.

The Mall Group, one of the largest shopping-mall operators in Thailand, opened a luxurious commercial complex in central Bangkok, where many Japanese people also live, in March, and is hoping to open more in the country.

A local association of retail companies predicts that the total ground-floor space of commercial facilities in Thailand will increase to 21 million square metres by 2017, 1.2 times the current figure.

Horizon Group Properties, a US-based company, is developing a shopping mall near Kuala Lumpur in co-operation with a Malaysian company. The mall will be equivalent in size to the one developed by Mitsui Fudosan.

The Swedish furniture company Ikea will open its second store in Malaysia at the end of this year.

However, local economies in Southeast Asian countries are stagnant because of the slowdown of the Chinese economy and the falling prices of natural resources.

Gross domestic product in 2015 is predicted to grow by 2.7-3.2 per cent in Thailand, 4.5-5 per cent in Malaysia and 4.7 per cent in Indonesia.

Consumption is expected to fall in those countries.

Since large commercial facilities are planned in many places in the region, a senior official at a major Japanese retail company and other observers said severe competition had already emerged in major cities in Southeast Asia.

To survive in the region, Japanese businesses must adopt strategies that take full advantage of the popularity of Japanese products and services.