7-Eleven could spell out inconvenience

[PHNOM PENH POST]

After dramatic expansion in the past four years that has seen chains including SMILE and VIP expand in Phnom Penh, Cambodia’s minimarts could soon face stiff competition from the undisputed king of convenience stores – 7-Eleven.

This week’s announcement by CP All, the world’s third-largest operator of the franchise, that Cambodia is “on the company’s expansion plan” is likely to test the competitiveness of a domestic industry that has blossomed in recent years despite the economic crisis.

Some minimart operators noted during the height of the downturn that they took advantage of plummeting rents in Phnom Penh by opening new stores. But Bangkok-based CP All would represent a much more threatening proposition, as anyone that has visited Thailand will note.

Using a strategy typified by the increasing frequency with which customers leaving a 7-Eleven in Bangkok can see another across the street (and sometimes more), CP All currently operates 6,000 outlets in Thailand and is planning to open 500 new stores per year.

Based on a classic franchise model, this would represent a serious challenge to Cambodia’s own brands of minimart.

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Minimart operators noted during the height of the downturn that they took advantage of plummeting rents

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Although Kriengchai Boonpoapichart, CP All’s head of finance and investor relations, termed Cambodia’s retail industry “underdeveloped” in an interview with Bloomberg earlier this week, the minimart sector here is considerably more developed than in Laos, Burma and even Vietnam.

Phnom Penh has an unusual convenience-store culture whereby customers often linger to drink and eat snacks at tables outside the store. Customers regularly go back inside to make additional purchases.

This does not exist to the same extent in many other countries in the region and almost runs contrary to the classic convenience store doctrine based on the concept of rapid purchasing.

A September 2009 survey by Indochina Research found some 28 percent of people in Phnom Penh most often use convenience or neighbourhood stores for shopping, compared to just 4 percent in Vientiane and 8 percent in Ho Chi Minh City. But in a separate category in which respondents were asked which type of retailer they liked to shop at the most, only 6 percent chose the convenience store category in Phnom Penh in their reply.

This tells us a great deal about why 7-Eleven, the world’s largest convenience retailer by number of outlets, has been so successful.

People will shop in minimarts if they are there, but they do not necessarily like doing so, and therefore the key is presence.

Another element of the potential 7-Eleven challenge to the Cambodian minimart sector is trademark infringement.

With the likes of 7-Elephants plying their trade in Phnom Penh using remarkably similar signage to the real thing, the question remains – just how aggressive would 7-Eleven be in dealing with imitators, should
the firm launch in Cambodia?