The well-stocked supermarket carrying a wide range of products in one place was a concept virtually unheard of in Myanmar back in the 1990s. In 1996, City Mart Holdings Limited (CMHL) created the first modern supermarket in the nation, known as City Mart. By 2017, CMHL had grown into a large diversified family empire, operating a chain of 22 supermarkets, seven hypermarkets, 52 convenience stores, 28 upscale bakeries and 29 pharmacies – a truly impressive retail footprint in Myanmar’s young economy.

How was City Mart, a local family-run enterprise, able to grow so well within a fairly short timeframe? Myanmar, a relatively poor developing country in Asia with a population of about 56 million, had gone through many decades of military rule and international isolation. This had resulted in an undeveloped free market economy, and almost no modern trade. The supermarket business had to be built from scratch, against a backdrop of a paltry logistics network, rolling blackouts, inadequate property infrastructure and many international brands being barred from entering the Myanmar market due to international sanctions.

“Retailing is a downstream business that requires a lot of upstream activities. We weren’t prepared to build them all, but we had to,” said Ronald Lee, project director of City Properties, a sister company of CMHL.

As the supermarket business developed, different businesses, such as a distribution arm, were started within CMHL to support City Mart. Then the company saw that other businesses also required the same services and started selling these to them.

Explaining the philosophy behind this organic development of capabilities, Lee said, “We look at services we require and then either buy them, or often because of the lack of infrastructure and ecosystem, we were forced to consider doing them ourselves. In an economy like this there may not be good options and you may not have the luxury of time to wait for third parties to develop. Even as Myanmar grows rather rapidly, not all sectors will gain the attention of investors and grow equally. Some of your critical functions may not be the first areas developed as the economy emerges.”

As CMHL grew, it reorganised itself internally to support the increasing scale of operations. It centralised its warehouses to receive deliveries from suppliers, as well as became a redistribution hub for its network of stores throughout Myanmar. CMHL saw its strength in local sourcing and distribution to be its competitive advantage in a market that was heating up with more foreign entrants and new marketing channels.

“We are a local firm, with deep roots in Myanmar and an understanding of the Myanmar consumer. The international firms will be coming; we can’t just lay under our desk in a foetal position and wait for them to get here. Our advantage in this market should always be our understanding of the Myanmar consumers and their needs,” explained Lee.

In 2015, City Mart had become the leading supermarket chain in Myanmar, raking in about US$210 million in annual revenues in 2015 with 6,500 employees. Despite this success, CMHL knew that it was only a matter of time before foreign and local competitors made inroads into Myanmar as the infrastructure came together and trade restrictions eased up. Looking ahead, Lee commented, “We are equal parts paranoid and ambitious. The great thing is that Myanmar is a frontier market, and we feel that we are agile enough to take on new entrants, including e-commerce and foreign retailers, who really keep us on our toes.”

To future-proof the business and strengthen its relationship with its customers, City Mart in 2017 started initiatives that included mining consumers’ data and rolling out an e-commerce platform and loyalty programme for customers.

This case, which was written by Prof Philip Zerrillo, Professor of Marketing (Practice), Lee Kong Chian School of Business, SMU and Adina Wong, Senior Assistant Director, The Centre for Management Practice (CMP) at SMU, analyses the difference in business environment between developed and developing markets and how new business models find their origins in developing markets, as well as provides a close-up of the retail industry and its value chain.

To read the case in full, please visit the CMP website by clicking here.