Market Opportunities & Potential : Luxury Retail Market in Cambodia

• 9 December 2016
• Local News
• 5882 Views

Retailers are pursuing new growth opportunities; they are eyeing countries new to modern retailing and customer segments hungry for specialty products, with a reasonable level of local demand.

The luxury retail market in Cambodia is relatively new. Despite its small size, the country has seen a rise in the premium segments and become the new playground for big name retailers. Wealthy consumers dominate luxury consumption and they are able and willing to pay a premium for quality and consider discretionary goods and not just basic necessities.

Increasing brand awareness and the growing purchasing power of high net worth consumers are fuelling further growth. In recent years, local Cambodians have developed a taste for high-end skin care, expensive luggage, fine wine and watch & timepieces. Several high street brands have already gained a foothold in the Phnom Penh market. Fashion retailers, encompassing the luxury, mid-range and specialist clothing brands, have dominated the list of retailers’ intent on expanding into Phnom Penh.

“Cambodia is a developing country. People have the desire to own everything new and they find high-quality products attractive,” said Chan Mlop Sokha, from Sokha Law Office.

As more Cambodians become able to acquire global tastes, a new generation of luxury customers has emerged; they are always open-minded to new brands from all around the world. As a result, more international brands are expected to enter the retail market to take advantage of the growing purchasing power of consumers.

Luxury international retail does not necessarily require deep pockets in order to enter this market – they’re attracted by not only the high exposure of consumers, but also relatively low rents compared to more established retail markets in the region. This indicates that ‘an early move can be a smart choice’.

However, Cambodia remains relatively unsaturated with overseas brands compared with other regional markets. Not so long ago, the lack of big brands, and the absence of up-market places made it hard for these luxury brands to set up shop. On the other hand, most retail facilities in Phnom Penh are unsuitable for the luxury retail businesses.

The lack of quality real estate is the biggest obstacle for luxury retailers, which were previously housed almost exclusively in five-star hotels inside their luxurious, contemporary and inviting atmospheres in order to correspond to the status of these brands. A very good example is Vertu, the high-end telephone brand which has an exclusive dealership located in the Sofitel Phokeethra Hotel in Phnom Penh.

Formal spaces catering to this segment of ‘affluent’ prospects have grown in recent years. To capture the opportunity, Phnom Penh is actively expanding high-end retail spaces to house luxury brands. It is important for existing and planned shopping mall developers to offer a variety of new experiences for customers. New commercial buildings are sprouting up to house incoming brands, although luxury retailing in Cambodia is just a tiny fraction of what it could be in future. Retail space is due for an exciting time.

However, total future supply is changeable, largely due to excessive supply in the pipeline. Currently, demand from most luxury retail brands is concentrated in a high-profile development – Vattanac Capital Mall; an exclusive mall devoted to branded merchandise. Being developed by local leading developers Vattanac Properties, many of the country’s luxury retailers are concentrated in this high-end mall including Brioni, Hugo Boss, Longchamp, Salvatore Ferragamo and other luxury stand-alone brand stores.

Many international brands tend to partner with local franchises as these luxury brands command only a tiny share of the market. When consumption rates become higher, a corporate model can be adapted accordingly where the luxury retailer can retain greater control over brand and operations.

To date, there are no official statistics to truly help us measure retail growth, so we can only ever estimate how the competition is performing. For luxury retailers who are hesitant to make the huge financial commitment to come in with a whole store, they can test the market by setting up ‘shop-in-shop’ concepts in multiple brand stores with a variety of labels under one roof.

“Brand name products have good qualities. That’s why all these products are more expensive compare to the non-branded products,’’ said Veasna Sea, Sales Lead at Phnom Penh City Center.

In the long run, sophisticated shoppers are expecting a wide range of brands, and for the stores of each brand to offer the most up-to-date choice of products. The luxury market brands should also be aware of the tendency for the rich to travel to other major shopping destinations such as Hong Kong and Singapore for a better range of cheap luxury goods. So, each of their strategies to expand the market is always planned carefully.

Consumers who visit these specialist stores tend to be interested in making a comparison between the luxury brand offerings prior to their purchase.

The Cambodian market is expected to see relatively strong retail value sales growth over the forecast period. The underlying trend is positive, with more brands now entering the Cambodian market and gradually raising their standards for quality and service. Nonetheless, retailers should conduct extensive research to study consumers\’ behavior and lifestyles first, to gain insights into that particular market group in order to provide the best possible product offerings that best meet the needs of the Cambodian market, before they roll out any physical stores.

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