How AEON Become Successful?
If you enter a shopping complex in Malaysia, you might encounter a supermarket selling a variety of choices for groceries and foods. AEON was formerly known as Jaya Jusco (Jaya Jusco Stores Sdn. Bhd),
It was first set up in Malaysia in 1982 in response to Dato’ Seri Dr. Mahathir’s request to modernize the retail industry in Malaysia which he believed to improve the country’s economy. AEON mall was actually a Japanese company founded from 1758 in Yokkaichi, Japan.
AEON is a leading retail store in Malaysia which earn a lot of income from their customers that visits often for their goods and services. However, how did AEON successfully spread their name and brand to the whole Malaysia? This article will let you know how they become successful.
Locations of the store is a huge factor to their success as the population of the customers will definitely affect their sales and income. Therefore, AEON located their stores in major cities where the incomes are averagely higher than other places in the country.
Most of the stores are located in the middle-upper income township which reflects the “Community Shopping” concept to ensure a steady flow of relatively high-quality customers.
AEON’s management mainly focuses on shopping-centre management. Their revenues from the latter are charged on the tenants on AEON’s rental space and continue to be steady and reliable. AEON’s occupancy rates are at average 99% as the others in the same industry has the average of 80%.
The rentals accounts for 35%-40% of their profits although the revenue is about 8% of the total sales. This provides an insulation to the bottom line should there be a weakness in the retail business.
Negative Working Capital Requirement
AEON’s strategy allow the cash and credit card payment from the sales accrues firstly to AEON and waits 2-3 months before paying to their supplier.
When shorter days are needed to sell the inventory, which is about 30 days, a measure of the number of days taken to sell the average inventory in a given year and the low receivable collection period, which is about 7 days, will be the number of days to collect its receivables.
Moreover, AEON enjoyed the negative working capital requirements over the 5 years and proof its well-managed cash conversion cycle.
AEON risks by setting their price lower than the other competitive retail stores as the price wars are always ongoing among the retail community.
Their price is much less susceptible as the positioning of their in-house brands such as Arcadia or Jusco Selection carried in the stores which helps reduce the price discounting.
AEON stores are positioned at the premium end of the middle-class market. As customers, it would be hard to distinguish between AEON and the other best markets in the area.
This is important as the customers have become more affluent over time and premium products can achieve an increase of sales and income better than lower end products.
Lower income customers would buy a product but the middle-class customers would prefer better qualitied products. So premium strategy will have less competition with the other markets providing lower end products.