Concerns are that, while the middle class is growing, Cambodia’s consumer base is not yet able to support premium retailers
The throngs of Cambodian families streaming into Aeon Mall over the Water Festival holiday made it clear that Phnom Penh’s poshest mall has successfully positioned itself as a destination, just not necessarily one for shopping. Visitors bereft of plastic shopping bags congested the mall’s corridors, cinemas and food courts, but foot traffic petered out near the entrances of its biggest retailers.
Aeon Mall has become a magnet for the capital’s middle class, but has struggled to resonate with its elite, who seem content to shop for the same high-end brands on weekend shopping excursions to Bangkok, Hong Kong and Singapore. The high turnover at the food courts stands in stark contrast to the quiet registers in high-end fashion retailers such as Pedro, Mango and Axara.
According to research by international property firm Knight Frank, at least 12 retailers have pulled out of Aeon Mall since it opened in June 2014 as a result of low sales that did not support the mall’s high rental prices.
But it would be a mistake to think that the $200 million Japanese-operated retail complex is failing. From the management side, the mall has been successful in securing tenants and, despite some of the highest retail rents in the country, it retains a 90 per cent occupancy rate.
This is significantly higher than most of the capital’s struggling second-tier malls, some of which are on the brink of bankruptcy.
More correctly, Aeon Mall is in the natural process of a transformation, as the mall and its tenants look to reposition themselves to the realities of the Cambodian market.
“Most tenants that have vacated the mall were high-end retailers, and are being replaced by more affordable brands that target middle-income households, implying that the market may not be ready to accommodate high-end brands,” Knight Frank said in its Cambodia Real Estate Highlights 1H 2015 Report.
This month has seen new tenants move in to fill the vacated spaces. International restaurant chains Domino’s, Master Suki and Mee Pok opened branches in the mall, while a new Japanese barbecue restaurant and dessert chain Ilao Ilao are scheduled to open within days. Retailer Mo and Spanish fashion label Elisa Cortes are also set to open stores soon.
The new entrants are seen as part of a transformation process – one that is continually seeking to find the right balance between customers and the mall’s 190 shops.
Retailers who have operated in the mall since its inception say while Aeon Mall may have initially overshot its consumer base, rising incomes and changing consumer habits have put the Cambodian middle class on an intersecting trajectory.
Moreover, the mall’s high volume of foot traffic – reportedly 15 million visits in its first year – is a tantalising feature for retailers able to connect with this market segment.
“The middle class in Cambodia is growing, and it is a developing country so we think it is good for us to invest here,” said Meak Sao Phearith, operations manager for bYSI, a Singaporean women’s clothing brand. “Our price range is very competitive and suitable for these customers. We have a lot of products in the $35 to $80 range.”
He said even though similar products could be found on Cambodia’s black market at a far cheaper price, increasingly, more nationals see value in genuine brand-name products and are prepared to pay a higher price for them.
He said one of the strengths of Aeon is its ability to continually generate foot traffic.
“We knew that this mall operator had a lot of experience in other countries and would know how to attract customers,” Phearith said.
“Their marketing supports all of the tenants in the mall, like events for Khmer New Year, Water Festival, concerts and other activities to keep customers coming to the mall. And when the customers keep coming, it gives stores an opportunity to sell their products.”
Chou Mean, store supervisor of Aeon’s Puma outlet, said the most successful mall tenants have been the ones that respond to these seasonal changes. He said the German footwear retailer has also gained traction keeping its prices affordable and offering constant promotions to entice customers.
According to Mean, about 60 per cent of the store’s sales are to foreigners, mainly Chinese tourists, who recognise that prices here are far cheaper than in their home country.
The remaining 40 per cent of customers are Cambodians who appreciate the difference between the store’s official Puma gear and the lower-quality shoes sold in the city’s black market for about $35 less.
They also want the latest styles, which cannot be found elsewhere in the country.
“I think most customers like to see new products, so we make sure we have them in our store,” Mean said.
Aeon Mall’s management did not respond to requests for interview.