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Business

Aeon brings the modern mall to Cambodia

Aeon Mall Phnom Penh officially opened on June 30.

PHNOM PENH -- Japanese retailer Aeon has opened Cambodia's first giant shopping mall. Aeon Mall Phnom Penh officially opened on June 30, and for now it faces scant competition from other international retailers.

     Even Cambodia's prime minister, Hun Sen, attended the mall's opening ceremony, where he expressed his expectations that the mall will play a leading role in job creation and stimulating consumption.

     The 68,000-sq meter mall is in the center of the Cambodian capital. There are 190 retailers and food outlets, with Aeon's namesake supermarket serving as an anchor store. There is also the biggest cinema complex in the country, and an ice-skating rink. Parking can accommodate 3,000 cars and motorcycles. In all, the complex took 20 billion yen ($195 million) to build.

     Aeon aims to have 10 million visitors annually to the mall. Cambodia's population is just 15 million.

Customers walk through Aeon Mall during its two-day pre-opening celebration on June 28 and 29, which drew 100,000 visitors each day.

     "We want to open at least five stores in Cambodia," said Aeon President Motoya Okada at a press conference. When accounting for investment in infrastructure and employee training, that number would be the minimum required by Aeon for its Cambodian operations to survive, Okada added.

     The neighborhood where the mall is located is home to embassies, temples and upmarket hotels. But the area is also served mostly by small restaurants and shops run by individual owners. These types of retail facilities have been the norm, as large commercial facilities, such as Aeon Mall and locally owned Sorya Shopping Center, are few in Phnom Penh.

    Cambodia is one of the poorest countries in Southeast Asia. Its per capita gross domestic product is around $1,000. But it has great potential as a consumer market, since 70% of its population is 30 or younger. Lexus and other luxury vehicles are commonly seen on the capital's streets. There are no regulations blocking the entry of foreign retailers.

     Aeon regards the area within a 20-minute drive from the mall as its basic target market. About 680,000 people live in this area. One of the mall's attractions is a satellite studio for a TV channel popular with younger viewers. On weekends, concerts and variety shows will be aired from the studio, meaning the mall will be a place where new trends are spread to the rest of the country.

Testing tastes

Aeon originally faced difficulties attracting tenants to the mall in the fledgling retail market.

     "Many prospective tenants told us they wouldn't be able to decide to lease or not until after the building was completed," said Shinobu Washizawa, managing director of Aeon (Cambodia).

     To help Japanese clients see the growth potential of the Cambodian market firsthand, the company organized tours. It even developed a system that enables its tenants to exchange information about suppliers via an online chat application.

     Aeon also conducted low-key market research for its general supermarket, opening a store in Phnom Penh and testing the reactions of customers toward Aeon's private-brand food and sundries. This also helped the company create case studies and provide effective responses to problems with customs clearances and distribution processes, as well as learning about local tastes.

Pick-and-choose sushi is a hit with locals at Aeon Mall in Phnom Penh.

     The company, however, continues to face challenges. The Aeon general supermarket can source most fresh foods locally, but Cambodia's underdeveloped food industry makes it necessary to import a number of processed foods from Thailand and Vietnam. Sushi has proven to be very popular at the mall, but ingredients are imported from Thailand.

     Among Aeon private-brand products, instant cup noodles sell for about $1.90 each, double the price in Japan, due to customs duties and distribution costs.

     The price gap with traditional markets also remains big. Coca-Cola is very popular in Cambodia. A 350-milliliter can of Coke sells for the equivalent of 40 cents at the Aeon supermarket, while the same drink can be bought for about 30 cents at local markets.

     "Aeon is clean and hygienic, but I will continue to do my daily food shopping at a local market where it's cheaper," said a 39-year-old housewife.

     President Okada acknowledges that the high price of processed food is a major problem. But with just one store in the country so far, the company has been unable to develop new supply chains as quickly as it wants. Opening large malls and cultivating consumption has been Aeon's business model. But it is still unknown if this model will pay off in this emerging market.

     The two-day pre-opening celebration at the Aeon Mall on June 28 and 29 drew 100,000 visitors each day. But many came simply to window shop. The mall's success will depend on how it can offer value and compelling shopping experiences to consumers.

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