Japan’s second largest retailer Aeon recently announced an ambitious new three-year business plan, in which the company will nearly triple its investment in overseas Asian markets by fiscal 2013.

Japan’s second largest retailer Aeon recently announced an ambitious new three-year business plan, in which the company will nearly triple its investment in overseas Asian markets by fiscal 2013. As a result of its increased focus on emerging Asian markets, the company’s capital investment outside Japan will increase to 25% of its ¥830trn (£5.63bn) budget through February 2014, up from 8% for the year ending February 2010.

Responding to three Asian mega trends - a booming economy, urbanisation and an ageing population - Aeon plans to reorganise its management structure, setting up three regional head offices to focus on expansion in Japan, China and Southeast Asia. President Motoya Okada said: “We aim to entrust local executives with management decisions”.

Aeon aims to take advantage of rising demand in China and Southeast Asia, deploying a multi-format strategy to suit local markets. The retailer will develop more smaller-sized outlets, such as supermarkets and convenience stores, in higher income urban markets. These stores include Ministop convenience stores in major cities in South Korea,

Metro Manila in the Philippines, Qingdao in China, and Bangkok in Thailand. In addition, Aeon plans to develop new markets in Asia, saying it will start feasibility studies to enter Cambodia, India and Indonesia.

The retailer is, however, justifiably jittery about its increasing reliance on overseas development. The challenge is not to be underestimated. Japanese retailers from all disciplines, FamilyMart, Isetan Mitsukoshi and Fast Retailing to name but a few, face the same problems of a shrinking population and stagnant consumer demand at home and are vying for market share in China. In addition, Japanese retailers in particular can face strong resistance from consumers in China, as Isetan Mitsukoshi found last month when its Chengdu store was forced to close temporarily as anti-Japan protests turned violent.

In looking beyond China, therefore, Aeon is wisely spreading its bets. India and Indonesia in particular could represent strong opportunities with much less in the way of competition from rival Japanese and international retailers. With Walmart’s development in India well underway, however, and reports that the US giant may be eyeing a return to Indonesia, Aeon needs to get its act together pretty sharpish.

➤ Matthew Stych, research director, Planet Retail. For more information contact us on:

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