The family business nature of retail operators in Southeast Asian countries has become a challenge for those that want to grow in promising new markets outside their home countries, says Andrew Brien, the CEO of Suria KLCC, a leading retail investor in Malaysia.
Retail is a rising star in Southeast Asia, which has weathered the global economic downturn better than most other parts of the world. Most Asean economies are thriving and a brand-new one, Myanmar, is emerging from almost nothing.
As well, retailers are eager to tap the rapidly expanding middle class in many countries, most notably Indonesia with its population of 240 million.
Excluding the modern trade chains, the retail business is dominated by a very small number of operators in each country. In Thailand the department store and shopping centre market is controlled almost entirely by Central Pattana and The Mall Group. Indonesia has Lippo as the dominant shopping mall developer, while the Philippines has SM Prime Holdings. One rarely sees these brands outside their home countries despite increasing moves toward regional integration.
Although some companies have gone public, the majority shares remain in the hands of the founding families, which closely control business strategy and direction.
Mr Brien said the retail environment in Asean was very different from that in other countries such as Australia, where he comes from. The strength of retail operators in their home countries becomes the main factor to be considered before prospective foreign competitors enter new markets.
Although a number of retail developers are trying to expand outside their home markets, success is still elusive. Parkson Holdings Bhd is looking to operate department stores in Myanmar. Its subsidiary, Parkson Myanmar Co Pte, entered into an agreement with Yoma Strategic Holdings Ltd and First Myanmar Investment Co Ltd late last year.
Unlike the aforementioned shopping mall developers, Suria KLCC teams up with partners to invest in and operate shopping malls in Malaysia. It has Suria KLCC located at the Petronas Twin Towers, Alamanda Shopping Centre in Putrajaya, and Mersa Mall in Terengganu in its portfolio.
Mr Brien said the retail business outlook in Southeast Asia was good due to the high potential in many growing markets. Indonesia, for example, is growing very fast with a huge and young population. The middle-income population is also growing. Malaysia shows a similar rising trend.
According to the research by Siam Commercial Bank (SCB), Malaysia, Vietnam and Indonesia are the most attractive markets for the retail business in this region. The growth of the middle- to high-income consumers in Malaysia has doubled in the last 10 years. These consumers accounted for two-third of the country’s population in 2010.
Malaysia’s retail sales per capita grew four times faster than Thailand’s in that period. The report notes that rising affluence in Malaysia has driven demand for sophisticated and premium products.
Mr Brien said Suria KLCC remained focused on the Malaysian market due to the high growth potential despite a relatively small population of 27 million. It has expanded into department stores as well as invested in hotels.
Last year, Suria added many specialty stores at Suria KLCC, and created the Hub as a new entertainment area at Alamanda Putra Jaya.
The company is still looking to expand its business in other Southeast Asian countries, depending on the opportunities, he added.
About the author
Writer: Nalin Viboonchart