Japanese retailers look to Southeast Asia
Domestic demand-oriented companies, such as supermarket chains, convenience stores and food makers, are accelerating moves into the markets of other Asian countries.
Deflation, a declining birthrate and a rapidly ageing population have been shrinking Japan’s domestic market, making other Asian countries, whose economies and populations continue to grow, more attractive.
Aeon Co. has launched a project to operate in Vietnam. Aeon President Motoya Okada said at a press conference in Ho Chi Minh City: “Vietnam is a growing and vital market. We want to open stores in Hanoi and central regions of the country.”
Aeon’s first store will open in the Celadon City district of Ho Chi Minh City. The Celadon City complex is scheduled to open in 2014 with 130 tenant stores. Aeon plans to open stores in China and other Asian countries, too, and has set a goal of increasing its combined overseas sales to the level of its domestic sales by 2020.
An increasing number of Japanese retailers are entering Vietnam thanks partly to Hanoi’s deregulation of foreign capital after the country joined the World Trade Organisation in 2007. Amid strong economic growth, the number of middle-income earners in the country has been increasing dramatically.
Though Vietnam is a communist country, it has posted high economic growth of more than 5 per cent per year since 2000 under its “Doi Moi” reform policy. Vietnam's gross domestic product in 2010 was US$101.5 billion. Its population is nearly 87 million.
Last Friday, a food section of a Ministop convenience store in Ho Chi Minh City was crowded with students from nearby schools. “Adult consumers in this country are conservative, and many of them always use the same stores,” a local operator of a distribution business said.
FamilyMart Co. and Ministop Co. have adopted strategies of opening stores in Vietnam near schools. Their lineup contains fast foods that target young people, such as onigiri rice balls, sandwiches and steamed meat buns.
Because the average age of Vietnamese nationals is about 27, the companies aim to attract young consumers.
FamilyMart’s local joint venture – Vina FamilyMart Co. – plans to open at least 40 stores in Vietnam. Junichi Yamashita, president of Vina FamilyMart, said, “Our strategy is to attract young people first.”
Retailing is not the only industry that is accelerating entry into Vietnamese markets. Sagawa Express Co. has began operating in Vietnam. The company has already started operations in China, Thailand, the Philippines, Malaysia and other Asian countries. In these countries, the company is operating Japanese-style parcel delivery services to homes and offices within fixed time frames.
Kumon Educational Japan Co. is operating in 13 Asian countries and territories, including Vietnam. Though Kumon’s fees are higher than local cram schools, its methodical teaching methods have proved to be popular. Kumon had more than 100,000 registered students in Indonesia and Thailand as of the end of 2011.
Beer brewers are also enthusiastically setting up in businesses in Southeast Asian countries. Sapporo Holdings Ltd. started a brewery in Vietnam in January. Asahi decided in July 2011 to purchase a Malaysian beverage maker to get a foothold in that country’s market.
Not only restaurant chains such as Yoshinoya, Zensho and Ootoya but also an increasing number of security companies, beauticians’ schools, bridal service companies and firms in other industries have begun operating in other Asian countries.
Yuichi Endo, president of Toshin Consulting Asia, a company that helps Japanese companies set up in Vietnam, said: “The country has a young population, and stable economic growth can be expected. Such factors are encouraging Japanese companies to enter the market.”
As deflation continues in Japan and people’s disposable income does not show any sign of increasing, sales at department stores and supermarket chains have fallen for 15 years in a row. According to an estimate by the National Institute for Research Advancement, the number of high- and middle-income earners in other parts of Asia whose annual disposable income is $5,000 or higher will increase from 1 billion in 2010 to 1.9 billion in 2020. The figure is predicted to rise to 2.5 billion in 2030.
But it is not all roses for Japan’s retailers that are moving abroad. Many have little experience operating overseas, and they face many tasks such as fostering human resources.
An official of the Japan External Trade Organisation said regulations concerning foreign capital and sudden changes in business rules are among the obstacles that companies operating abroad face.
To utilise the economic growth in other Asian countries for the revitalisation of the Japanese economy, the government will need to encourage partner countries to relax such regulations through the Trans-Pacific Partnership and economic partnership agreements.
Masafumi Shoda, head of the consumption affairs team of Nomura Securities equity research department, said: “Other Asian markets are similar to that of Japan during the nation’s high economic growth period. This means some businesses that are struggling in Japan, such as supermarket chains, will be able to flourish in such markets. If companies can get a good grasp of the local consumption culture, their chances of success are high.”
