In Southeast Asian countries where poverty is easing but the middle class has yet to achieve critical mass, businesses involved in modern retailing find they still need to win many people over from traditional ways of living and shopping.
Motorcyclists speed past the Parkson Saigon Tourist Plaza in Ho Chi Minh City, one of nine department stores the company operates in Vietnam.
One company that has been undertaking this challenging yet rewarding task is Malaysia-based Parkson, which operates the department stores of the same name across the region.
Parkson usually aims to be the first mover in a market and in doing so it has ventured into emerging markets such as Vietnam and Myanmar, with Cambodia next on its list.
"The first department store in Phnom Penh is expected to be opened in the third to fourth quarter of next year depending on how fast the construction can proceed," says Tham Tuck Choy, the CEO of Parkson operations for Vietnam, Myanmar, and Cambodia.
In fact, three big fully fledged outlets are confirmed to be opened within the next two years in the capital of Cambodia. The new malls, he said, would offer local customers an "all-in-one retail-tainment experience".
"It is more like providing a lifestyle that is for the whole family to spend the whole day in the building because we have department stores, food, and entertainment facilities such as cinemas, bowling and gyms," Mr Tham says.
"We are very confident in our strategic location, good catchment area, and ample parking space, enough to house about 1,000 cars, compared to some local shopping centres that barely have space to park 100 cars. That's why we're so eager to launch the stores."
The first Cambodian branch will have a total of 36,500 square metres of floor space, nine times larger than the first outlet in Myanmar, which Parkson opened in Yangon last year.
Mr Tham said the company was confident that a bigger development would work in Cambodia because the market has been open to foreign business for many years already, and the company had better knowledge of local consumers and business conditions.
"Cambodian people have been anticipating something new, or some higher-standard department stores. We've been surveying the market for a long time. We know the readiness of the market quite well, so we've come in with a fully fledged plan," he said.
In Myanmar, Mr Tham told Asia Focus that the opportunity was offered and the deal was made only about a year after the new government began opening up the economy. "We were happy to start small to learn about the market, and from there we can grow," he said.
The two examples illustrate how different strategies are needed in each country depending on the market situation and demographics. In the future, the Parkson executive said, in terms of the size or number of outlets, Myanmar will have more than Cambodia because of the larger population base.
"Population can determine the number of outlets we can open. The number of Cambodian outlets must be limited given the population of just around 15 million, compared with 60 million in Myanmar and 90 million in Vietnam," he said.
According to World Bank data, Cambodia, Myanmar and Vietnam are all considered lower-middle to low-income economies whereas Parkson targets middle- to upper-middle income consumers.
However, the company expects its international expansion to lead to sustainable growth as it is a long-term player. Mr Tham firmly believes in the growth potential of the three countries, while acknowledging the predominance of a prospering traditional trade sector.
"Vietnam, Myanmar and Cambodia are ready for our business," he said. "People are very receptive to new products, new trends and new ideas, so I think this is favourable to us in the retail business."
A lot of investments are pouring into different sectors of each emerging economy, he noted, and these will translate into higher-income economies in the near future. "The economy is so vibrant, therefore purchasing power is growing. People are starting to look for branded goods and quality products."
Parkson has been introducing the modern retail lifestyle in emerging countries since it was established in 1987 in Malaysia under the Lion Group, a local conglomerate with interests in retail, property development, mining, steel, agriculture and information technology.
In 1994, the retail brand made its first foray abroad by entering China. It entered Vietnam in 2005, followed by Indonesia and Sri Lanka, and in May 2013 Parkson FMI was launched in the heart of Yangon.
The company now has an extensive network of 138 department stores and supermarkets in six countries across Asia Pacific and plans to reach 170 stores by 2015.
NEXT MOVE
"There is a plan to open a new branch in Yangon city, hopefully next year," Mr Tham said, adding that between three and five outlets are possible in Myanmar's commercial hub, supported by a population base of 6 million.
After a year of exploring, he said, the company has come up with a second-phase expansion plan for the existing Yangon branch to create fully fledged shopping mall.
"Initially in the coming few years, we will just concentrate our efforts in Yangon because it is more commercial and more ready, while at the same time we are looking for opportunities in Mandalay and Nay Pyi Taw," he said.
After nearly half a century under direct military rule, people in Myanmar are learning to embrace modernisation alongside their traditional lifestyle. Parkson consequently has an obligation to provide customers a combination of both international and local favourites.
"Things change fast. We can see that the country is going through a very high-speed development," the CEO said. "People have a lot of expectations from us as an international retailer to bring new things to them."
Sales volume of the Myanmar store is still modest given its small size of 4,000 square metres, compared with 15,000 to 20,000 sq m for a typical full-service department store. The limited product offerings mean there are fewer consumers as well, according to Mr Tham.
"Although we have fewer transactions because it's smaller store, when we measure value per transaction it is quite equal to branches in Vietnam. That's why we are so eager to expand to a fully fledged mall," he said. "Eventually I think it will be as good as the market in Vietnam."
VIETNAM: A VICTORY
Parkson Vietnam operates nine outlets in three cities: six in the commercial hub of Ho Chi Minh City (HCMC), two in the capital city Hanoi, and one in the northern seaport city of Haiphong where most imports and exports circulate.
"The 10th store will be opened in December in Danang in the middle of Vietnam. It's a vibrant city with good tourism, lots of development and big hotels," Mr Tham said. "Another branch will open in District 3 in HCMC. We hope it can be launched in the first or second quarter of next year."
In Vietnam, the occupancy cost for business is high, despite a low minimum wage averaging 2,275,000 dong (about 3,465 baht or US$107) a month. Even though economic conditions in Malaysia are quite different and wages far higher, total operating costs are quite similar but different in terms of expenditure components.
Prior to the economic slowdown in 2012, Parkson had been enjoying annual growth of between 20% and 30% in Vietnam. "Now it is still considered at a low level, but we can foresee the market will pick up soon from next year onward," he said.
Vietnam in the past year has started to overcome some of the economic challenges it was facing, notably high inflation and interest rates. Foreign direct investment almost tripled last year to $15.31 billion, the Financial Times reported recently.
"They have to upgrade the infrastructure to cope with high-speed growth," said Mr Tham. "The current government is spending a lot of effort on upgrading facilities, buildings, seaports, power plants and road networks. With all these in place, the economy will certainly pick up again like before."