Takashimaya bullish about profit potential in Southeast Asia
Japanese department-store operator Takashimaya is banking on its Vietnam and Thailand flagships to drive growth this year as it seeks to achieve profitability in its Southeast Asian business.
To date, Singapore has been the sole profitable store outside Japan, but this financial year the Takashimaya Vietnam store in the Saigon Centre in Ho Chi Minh City is expected to produce 100 million yen (US$919,000) in operating profit and the company’s president Yoshio Murata told Nikkei in an interview he sees Vietnam as “another Singapore” in the future.
Takashimaya opened its first Southeast Asian store in 2013 in Singapore. Located in the heart of the Orchard Road precinct, that store took several years to turn into the black but now drives the retailer’s business in the region. Last year it reportedly earned 3 billion yen (US$27.2 million) and this year is reportedly on track to achieve 4.8 billion yen ($44 million) in operating profit.
The Vietnam store opened in 2016 and struggled initially before the company refocused its offer by stocking more mid-market brands, a strategy which already seems to be working. The company is believed to be exploring an opportunity to open a second store in the capital Hanoi where it is investing in an urban-development project including a bilingual school.
Takashimaya’s most recent store in the region is at the IconSiam shopping centre in Bangkok, which opened last November.
In an interview with the Nikkei last week, Murata said the success of that store depended in part on the completion of a delayed BTS railway line extension which would deliver people to the centre’s front door. He expects the store will lose about 900 million yen ($8.2 million) this financial year.
As the company learned in Vietnam, the key to its success is likely to lie in stocking more mid-range products rather than focusing purely on the luxury sector as the train will bring more middle-class shoppers.
“Upper-middle product ranges like menswear are not satisfactory,” Murata told Nikkei.
In June of this year, Takashimaya announced it would close its Shanghai store, opened in 2012, its lone post in China. But that decision was reversed when local government authorities adjusted the rent to make the store viable. Takashimaya now expects it to turn a profit in 2021.
Meanwhile, the company is playing down widespread reports of plans to expand into other major Asian cities, including Manila – where rival Mitsukoshi will open next year – Kuala Lumpur and Jakarta.
Murata confirmed to Nikkei that the company had been approached to open in new markets but said its focus for now was on its existing four stores.