shopping mall development business, which includes rents collected from specialty store tenants at its malls both domestically and outside Japan, accounts for another 5 per cent. The international segment, which encompasses retail sales from its stores outside Japan, generates an additional 5 per cent. Collectively, these far-flung business segments provide insight not just into Aeon’s own performance but also into broader retail trends across Japan, China and the ASEAN countries where it operates. Few retail conglomerates in Asia offer the same broad-brush perspective on how retailers are travelling in the region. Promotional activity continues to buoy sales The growth in revenues was achieved despite a troubled Chinese economy, nettlesome US trade policies, and domestic conditions in Japan, where declining real wages and rising energy costs are straining household budgets. “As a result, consumers’ frugality remained pronounced,” management noted in its analysis of results. It further cited “restrained purchasing behaviour and reductions in the number of items purchased, observed particularly in essential categories such as food, apparel, and furniture. On the other hand, service-related demand, including dining out and travel, remained solid due to autumn leisure demand.” A key theme running through the company’s reporting is that, with prevailing headwinds in some of its markets – most notably Japan and China – Aeon had to push hard on promotional activity to support revenue growth. Promotions intensified across its general merchandise, supermarket and discount store businesses, inevitably weighing on gross margins. Still, after-tax profit reached 19.4 billion yen ($123 million), an increase of 29 per cent on the corresponding period of 2024. ‘Co-creation’ is the new buzzword All of the company’s business segments enjoyed top-line growth year to date, with part of the credit going to the strength of its Topvalu house brand, which grew by 6.8 per cent year-on-year. The standout performer, however, was the shopping centre business, which posted operating revenue of 386.8 billion yen ($2.5 billion), up 5.2 per cent from the first nine months of 2024. Aeon wants its malls to be more than just “community hubs” – the term du jour of the mall business across Asia. Instead, it aims to turn them into “community co-creation malls”. The concept goes beyond attracting visitors with food, entertainment, services and events. It involves deeper integration into local communities through partnerships with local governments and other entities to address regional issues and promote local creators and producers. This approach echoes initiatives by mall operators such as Siam Piwat in Thailand, which is rolling out ecologically and technology-driven co-creation concepts in Bangkok. In Japan, Aeon is seeing success with the model: specialty store sales at its malls increased by 5.9 per cent and foot traffic rose by 2.6 per cent. Overseas visitors also contributed, supported by duty-free sales. Management is also encouraged by foot traffic trends at its malls in China and across ASEAN. In China, government stimulus measures – including a large-scale appliance trade-in program that appears set to be extended and expanded – have lifted sales of digital products and other household goods. Shopping centres in Vietnam and Cambodia are also contributing to operating profit, although imbalances are emerging. In Phnom Penh, for example, a surge in new retail floorspace over recent years has created persistent vacancy issues and placed pressure on rents. A similar pattern is evident in Vietnam, where headline demographics have led some operators to overlook the stark contrast between increasingly affluent urban cores and relative rural poverty. Vincom, Vietnam’s leading domestic mall operator, is struggling with vacancy rates of around 15 per cent outside city centres. Thailand’s Central Retail, which operates 42 malls in Vietnam with a similar average vacancy rate, faces comparable challenges. These are flashing red lights that Aeon would do well to heed. Despite these risks, the company recorded two grand openings during the quarter. One was Aeon Tan An, located just southwest of Ho Chi Minh City. The other was Aeon Mall Changsha in China’s Hunan province, which opened in November. International retail business International operating revenue for Aeon – excluding overseas mall specialty tenant rental income – grew by 2.2 per cent year-on-year, although operating profit declined by 1.3 per cent. Vietnam remains the darling of the company’s Southeast Asian retail expansion ambitions. The bullish tone around the market is occasionally concerning for the reasons already noted. Under its current medium-term management plan, Aeon has positioned Vietnam – now in what it describes as a demographic bonus period with strong consumption trends – as its most important market. It is accelerating dominant store openings in surrounding cities across the southern region (Ho Chi Minh City and Binh Duong), the northern region (Hanoi and Hai Phong), and the central region (Hue and Da Nang). In ASEAN, the race is on. There are growing signs that 2026 will be a year of consolidation for Southeast Asia’s largest retail conglomerates as they attempt to recover from past excesses. Central Retail, for example, has exited its Nguyen Kim appliance chain and is working to fix issues at its Go! Malls in Vietnam are also stabilising their domestic operations and seeking traction for their new wholesale club format. Vincom continues to grapple with vacancies at second- and third-tier malls, while other Thai giants such as Lotus’s and Big C face the need to upgrade ageing hypermarkets in provincial cities. Despite persistent talk of expansion, there are clear signs of stress beneath the surface. Addressing these challenges will require some quiet, hands-on work behind the scenes if meaningful fixes are to be achieved. Further reading: Aeon Mall hits the right note in Japan and Vietnam, but China is still problematic