What Is The Winning Retail Formats In Thailand During Economic Downturn

by Dr Chatrchai Tuongratanaphan, Executive Director, Thai Retailers Association

 

Overview

  • Retail trade is an important sector in Thailand, accounting for a sizable share of GDP and Employment. In 2016, the retail sector had a combined value of THB3.2trillion, or 15% of GDP, which puts it in second place after the industrial sector, which accounts for 27.4% of GDP.
  • It is also a major employers: based on published statistics, employment in the retail sector estimated at roughly 4% of total employment in Thailand – equivalent to about 6.2 million jobs. More than the industrial sector which employ only 5.8 million jobs
  • In the past, the Thai retail sector was dominated by small, family-rungrocers which obtained stock from middlemen and distributors. However, the situation has changed considerably and largescale operators are less dependent on wholesalers as they now own extensive branch networks and are able to occupy favorable bargaining positions when negotiating with producers and wholesaler
  • In addition, they have managed to adopt a range of innovations, including shop & stock and distribution management systems, distribution centers, and the widespread use of technology deployed to help in a range of tasks, which allow them to gain various marketing advantages.
  • Over the previous two decades, the modern retail chain sector has seenrapid expansion, in particular in Bangkok and in those regional centerswhere the level of urbanization has been high. However, the coming of modern retail chain has stimulated the expansion of the whole market. The retail market has been expand from 760,156 Million baht in 1993 to 3,133,850 Million baht in 2014 which is more than 4 folds of the market.
  • The big mis-understanding is modern retail chain has dominated the market and cover almost 75% of retail market. The fact is currently, modern retail chain control only 32% of the market in 2016.
  • The modern retail chain outlets can be categorized into five types, each of which has distinct features.
  • Department stores are the largest retail units which retail higher quality goods, both domestically produced and imported and sell at higher price points than goods in discount stores. Department stores are usually found in citycenters, their design works to highlight visual appeal and they are typically staffed with assistants who help to adviseand assist shoppers. Central and Robinson are major operators in this mold.
  • Superstore/Hypermarkets/Supercenters are large-scale retailers which sell primarily to lower- and mid-level consumers. Outlets may be found in both city centers and on the edges of urban areas and the stock range typically emphasizes value and low price. These types of outlets operate distribution centers. In this group, Big C, and Tesco Lotus are the main players.
  • Supermarkets focus on the distribution of foods (e.g. meats, fruit and vegetables, and ready made) and household consumer goods. Businesses may either operate free-standing retail units (e.g. Foodland) or be found in department stores (e.g. Tops Supermarket and Home Fresh Mart).
  • Convenience stores are small retail units which are rising in popularity, taking market share from older style retailers. Consumers prefer modern outlets which carry a wide range of stock and which are conveniently located in or near communities. 7-Eleven and Familymart are notable examples of this type of store.
  • Specialty stores are found in large communities and retail higher quality and higher priced goods, including the retailer’s own brands. Boots, Watsons, and Supersports are examples here.

In addition, modern retail chain has developed new formats such as specialty store and single-price stores. Also, they expandtheir branches to other provinces and penetrate into rural communities Retail outlets have become acenter of communities. Modern retail chain therefore, has continued to increase among intensifying competition.

Successful retail strategies during economic downturn

  1. Price sensitivity is having a big impact on brand management and the development of private label. In the Central Food Retail Supermarket My Choice, its private brands are no longer seen as supplierlow-cost and low-quality products, but as credible and viable alternatives to national brands. People look for value for money, irrespective of whether the product is being offered by a national brand or a private label. My Choices labels are traditionally more successful in segments where product differentiation is low, such as snack products and fresh produce items.
  2. Think Space is the new concept for survival amongst digital trend. “Bookstores today are not just stores, but public spaces where people can relax,” Think Space bookstores are reinventing themselves. Redefining themselves as “knowledge centers” or “cultural hubs,” physical bookstores are reviving an industry in a downturn.
  3. The digital trend O2O (Online to Offline) strategy. Retailers developed online tools such as mobile apps and other online features to encourage consumers to visit offline stores. For example, Tesco Lotus launched iBeacon, a function which allows customers to receive promotions, discounts and news via instant notifications when shopping in stores. Customers who buy 7-Eleven products via the Line Gift Shop from the Line app can collect the products at any 7-Eleven store.

Forecast

The TRA forecast that the retail industry in Thailand will grow around 3.0 -3.2% in 2016, but this mostly depends on Thailand’s economic situation and government expenditures on public development projects. Retail developers in Thailand still continue to expand to all areas of Thailand. Some foreign retail developers are also entering the Thailand market to develop their first shopping malls in the next few years and will expand to other countries in ASEAN. Retail developers in Thailand try to develop shopping malls as destinations with large-scale projects and significant design, with services and shops suitable for the mass market.

Online and mobile shopping will become the new competitors of retail centres in the future, so most new retail centres and all shops and brands will try to attract customers with a different shopping experience.

 

*Would you like to know more about the current retail situation and economy of these countries — Malaysia, Singapore, Thailand, Indonesia, the Philippines, China, Korea, Hong Kong, New Zealand, Turkey and Taiwan?

Visit us on MyInnoCreative.com for each country report every fortnight, courtesy of the Malaysian Retailers Association. These country reports were compiled for the 18th Asia-Pacific Retailers Convention and Exhibition (APRCE) 2017 in Kuala Lumpur.

Watch out for the country report of New Zealand on 7 May 2018.