Page 115 - CRC_One Report 2021_EN

Business Overview and Performance Corporate Governance Financial Statements Enclosure

(c ) The JD Central Joint Venture
In September 2017, HCDS entered into a joint venture with JD.com, Inc. (being Central JD Commerce Co., Ltd.,
herein referred to as the “JD Central”) which establishes an online-only retailing business in Thailand.
The business sells merchandise through both a webstore and a mobile application, with the goal of becoming
a leading online marketplace in Thailand. The JV agreements contain various reciprocal obligations of JD.com
and HCDS concerning their respective businesses and the operation of the JD Central itself, and each party has
agreed not to engage in a similar venture with any third party in Thailand. Unlike Central Retail’s omnichannel
platforms, the JD Central lacks any corresponding physical stores, so its offerings are only available online and
the site lacks independent omnichannel capabilities.

Although Central Retail is not a party to the joint venture, Central Retail, in its capacity as an affiliate of
HCDS, expect to benefit from the JD Central in several ways. The JV agreements contain provisions allowing
Central Retail to generate revenue from the JD Central by providing certain supporting services, such as
(i) by acting as a merchandise supplier for the JD Central, (ii) by establishing “flagship stores” on the
JD Central webstore and mobile app, which gives Central Retail access to shoppers targeted by the JD Central,
and (iii) by providing logistics and fulfillment services for orders made through the JD Central. Central Retail
also expects the JD Central website to include links to its own webstores to help drive online traffic and sales.
Central Retail also expects to support the JD Central’s proprietary payment system, which is currently under
development.

Other important benefits that Central Retail expects from JD Central is the access to the distribution and
promotional channels of JD.com, Inc., one of the largest online retailers in China. This will enable Central Retail
a special channel to access Chinese customers and Chinese suppliers and which can help to differentiate its
merchandise mix with unique offerings at price points generally lower than those of other international suppliers
and brands.

Certain terms of the JD Central may limit the flexibility in the omnichannel retailing business.

(d) Expansion Pipeline
Central Retail plans to continuously open new stores in all segments and expects to open approximately
400-500 stores per year within the next 5 years in Thailand and Vietnam. At the same time, Central Retail
will continue to survey the area suitable for stores opening according to Central Retail’s business expansion
plan both in the area where Central Retail has existing presence and in new locations across Thailand and
Vietnam, particularly in underserved markets, that are not so many retail outlets, with growth potential. In Italy,
Central Retail has refurbished the Rinascente Department Store Roma Fiume store in 2021 to increase overall sales.

Regarding new store expansion for the fashion segment, Central Retail has set a goal to expand stores in Thailand,
namely, 2-3 department stores per year, and 20-30 specialty stores and brandshops per year respectively.
For Hardline segment, Central Retail plans to expand 25-35 stores per year in Thailand, distributing electronics
equipment, and specialty stores for home and DIY products, excluding the brands of small-sized stores.
In addition, for the food segment, Central Retail aims to expand 100-120 stores of supermarkets and convenience
stores in Thailand per year and expand 10-15 stores of hypermarket and supermarket in Vietnam. The goal is
to increase the net salable area for all segments approximately by 8-10% per year and the net leasable area
for property segment approximately by 10-15% per year within the next 5 years. The plan may be subjected to
change depending on the situation in any given period.

Annual Report 2021 (Form 56-1 One-Report) 115