VF Franchise Consulting

Aeon Malaysia thinks small

Jun 25, 2014

Aeon Co (M) Bhd., the Malaysian unit of Japan’s largest retailer, is diversifying into furniture and electronics stores as competition from new shopping malls intensifies.

aeonstore

Aeon Malaysia doesn’t have a mandate to expand regionally yet and is focused on enlarging its domestic operations, Executive Director Poh Ying Loo said in an interview in Kuala Lumpur yesterday. The company operates shopping centres, department stores and pharmacies in the country.

“Competition, changing consumer market behaviours all warrant this kind of evolving change,” Poh said. “Retail industry is actually very competitive. There’s an ample increase in retail space in the last one year and it’s going to increase further in the next two or three years.”

Retailers in the Southeast Asian nation are seeking new ways to lure customers as price increases on fuel, power and sugar slow private consumption. Aeon Malaysia plans to spend RM1.4 billion this year and next to open more stores and refurbish existing ones as it prepares for a goods and services tax that it says may hurt sales for three months after implementation in April.

Private-sector consumption expanded 7.1 per cent in the first quarter from a year earlier, after climbing 7.4 per cent in the last three months of 2013, according to central bank data. Aeon’s competition in Malaysia includes Tesco Plc, the UK’s largest grocer.

‘Tough’ competition

“The competition is tough especially among the hypermarket sector,” Poh said. “If you read the newspapers you see a lot of price wars going on. We have been able to maintain our hold so far. I wouldn’t say it is actually easy.”

Aeon Malaysia formed a joint venture with Thailand’s furniture retailer Index Living Mall Co in September to set up shops in Malaysia.

Shares of Kuala Lumpur-based Aeon rose 4.3 per cent to 4.14 ringgit in Kuala Lumpur trading yesterday. Five out of eight analysts tracked by Bloomberg recommend investors sell the stock, with two rating it a hold and one a buy.

’’It would only excite the market when there are mandates for us to expand regionally,’’ Poh said. “That’s not in the business direction yet.”— Bloomberg

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