Swarovski stores have several different colour themes depending on location, and this one is green. The store is laid out in a richly illuminated square, departmentalised into figurines, jewellery, watches and a small curation of other accessories. This store is one of several Swarovski stores worldwide, including its units on the Champs-Élysées in Paris and in SoHo, New York, both decked out in a vibrant green colour palette that the company calls the “Green Wonder”. The real wonder of it is that it is here at all. Udon Thani is a provincial capital, but it is far from the kind of affluent major metropolis exemplified by Bangkok, more than 550 kilometres to the south-west. It is, in fact, much closer to the Lao capital, Vientiane, a mere 75 kilometres to the north, just across the Mekong River, which forms the border between Thailand and Laos. If the green colour livery of the Swarovski store is meant to evoke nature, there is plenty of it around to associate with. This is farming country, with rice, cassava, sugarcane and rubber the main crops under cultivation. Although the population catchment of Udon Thani is significant – more than 1.5 million in Udon Thani Province alone – this is pretty rugged country for a luxury brand. So what are Swarovski, Chanel and co. doing here? Udon Thani is a university town and a medical hub, and because of its location on the main tourist ant-track between Thailand and Laos, and its excellent connectivity with major northern tourist centres such as Chiang Mai, it attracts substantial passing tourist traffic. Blueprint for a successful real estate model But there is another crucial reason that high-profile brands can open there: the mall itself, one of a 45-mall network owned by Central Pattana, is absolutely world-class and offers a real estate platform that would be the envy of a regional city in any Western country. Mid-market brands such as H&M, Uniqlo and Muji have had large stores in the mall for some time, while the mall has also successfully attracted a growing number of emerging Thai brands. Bangkok-headquartered GQ Apparel, like Swarovski, opened in Central Udon a month ago, and other brands originating in the capital have been operating there for some time, including Luxury 29 and Yuedpao, which began as an obscure T-shirt shop in Bangkok’s Chatuchak Market. Other provincial cities are benefiting from the same commercial development excellence. Around 120 kilometres south of Udon Thani, another provincial capital, Khon Kaen, has just gained its second major enclosed shopping mall developed by Central Pattana. Regional hubs such as Ubon Ratchathani, Chiang Mai and Korat also have major malls that comfortably match the quality of the best secondary-market shopping centres elsewhere. Further south, resort cities such as Pattaya, Rayong and Phuket have become shopping destinations in their own right because the quality of the retail platforms and abundant foot traffic are enticing leading retailers to expand beyond Bangkok. The Thai government is also playing a strong supporting role by encouraging infrastructure investment and commercial development to diversify economic growth beyond Greater Bangkok. Southeast Asia’s next major opportunity for retailers Thailand isn’t alone. Elsewhere in the region, the same forces are luring high-profile retailers out of their respective congested capital cities and into regional centres. As in Thailand, the quality of provincial shopping malls is rising to rival that of the major cities. This is occurring in Vietnam through the increasing market penetration of Japan’s Aeon Mall, which is eagerly pursuing opportunities for development outside the traditional growth centres of Ho Chi Minh City and Hanoi. Under the company’s current medium-term management plan, Vietnam’s strong consumption trends are prompting it to accelerate store and mall openings in satellite cities in the south, such as Binh Duong, the north, including Hai Phong, and the central region around Hue and Da Nang. The importance of this cannot be underestimated. Aeon is a world-class mall developer capable of providing a platform for leading retailers, including those in the luxury segment. It already hosts Uniqlo, Zara, H&M, Muji and Decathlon in regional Vietnam, but luxury players are likely to follow, as they have with Central Pattana in Thailand. Again, as in Thailand, the central government is supporting the process through policies that encourage the growth of provincial hubs. It is also becoming increasingly receptive to development by foreign mall companies such as Aeon and the expansion of global retailers. In the Philippines, a similar pattern is taking shape, again due to a combination of the exceptional capability of its commercial developers – particularly SM Prime, Ayala Land and Robinsons Land – and deliberate government policy focused on developing regional cities. Luxury retailers have typically established their presence in developing countries in three phases. Phase one is a presence in luxury hotels and airport duty-free shops. Phase two is a presence in the best malls in major cities. Phase three is expansion into secondary markets. Thailand is now experiencing phase three, while neighbouring countries such as Cambodia, Vietnam and the Philippines remain in phase two. The process of developing world-class real estate platforms in these phase-two countries is now well underway. Once consumer spending power catches up, the next stage of luxury retail expansion across Southeast Asia is likely to accelerate rapidly. Further reading: Thailand’s flea markets grow in stature as shoppers seek out the special