Shopping centres face challenges

Malaysia-based Parkson recently surprised market-watchers with its announcement to stop its operation in Keangnam Hanoi Landmark due to big losses.

In its termination notice to tenants released in the New Year, general director of Parkson Vietnam Tiang Chee Sung claimed that since the store opened in 2011, Parkson Landmark had failed to achieve a single daily profit target.

“In view of this situation and after deliberate consideration by the management of Parkson Landmark, we regret to inform you that entire store will cease business operations with immediate affect and the last trading date of the store will be on January 2, 2015,” the notice said.

Invested in by Malaysia’s Lion Group, Parkson Retail Asia operates more than 60 shopping centres in Malaysia, Indonesia, Vietnam and Myanmar. Parkson Keangnam was its ninth store in Vietnam.

In its 2013 financial report, Parkson Retail Asia announced that it had achieved a record topline with gross sales proceeds of S$1.109 billion and revenue of S$446.3 million. However, in the 2013 financial year, Parkson had to admit that it faced challenging environments in its markets of Malaysia and Vietnam with softening of consumer spending.

“The economic slowdown in Vietnam impacted discretionary spending there adversely, resulting in relatively flat same store sales growth and profit contraction for our Vietnam operations,” the report said.

“The weaker performance of our Malaysia and Vietnam operations coupled with incurrence of non-operational costs e.g. costs related to the e-commerce start-up, led to a 15 per cent decline in our net profits to S$38.1 million. Nevertheless, we are not distracted by such periodical volatilities but are focused on the long-term trend of increasing consumption spending in Asia, in line with the rising economic wealth of the region,” it added.

Parkson is not the only retailer facing challenges in the Vietnamese market. In Hanoi, Trang Tien Plaza, Hang Da Galleria and Grand Plaza stopped operations and are undergoing renovations to meet the needs of a wider clientele.

Trang Tien Plaza and Hang Da Galleria originally intended to offer modern luxury shopping centres. The experience of the luxury shopping environments provided by the two centres has warned other developers to think twice about appealing to a small market segment.

The centres were largely focused on just luxury customers but in both cases it has become clear that a wider market would need to be appealed to.

“We will re-plan the whole centre so that Trang Tien Plaza can appeal to a wider range of customers,” said Nguyen Thi Ngoc Dung, general director of Trang Tien Trading and Investment Company, the operator of Trang Tien Plaza.

Hang Da Galleria [now called Hanoi Square] was renovated twice in recent years. Originally a popular and well-used wet market built during the French period, the site saw a controversial restructuring into a modern shopping centre in 2011. The new centre simultaneously alienated regular market-goers and traders and never attracted the high-spending visitors the developer envisaged. The developer later downgraded the types of shops available to appeal to a wider customer market but this proved a failure.

Grand Plaza fared even worse and closed after more than one year of operation. The centre recently re-opened after restructuring with effort to attract customers and tenants.

According to a source from IDJ Financial, the investor in Grand Plaza, the recent change in its policy to leasing either an entire floor or the whole building has helped identify a clearer market for the building.

“Closely following market indicators, IDJ Financial have put endless effort in seeking and approaching potential customers. Over the past year, Grand Plaza Shopping Centre has quite a few enquiries from organisation tenants, including Samsung, Dream & Joy, My Way, and MB Land,” the source said.

Grand Plaza has approached and worked with potential customers that are interested in hiring entire floors to expand their business, such as Mediamart, Nhat Hong Wedding Organisers, Queen Bee, Hero World, and View Plastic.

“Despite positive signs, we are fully aware of that careful steps are necessary to avoid potential risks. As Grand Plaza has not proved that successful in terms of the leasing market, IDJ Financial and investors have met, worked together and agreed upon a variety of solutions to seeking customers and leasing terms,” the unnamed source claimed.