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| • EXCH RATES |
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Baht/$ 33.51/56
Bid/Ask
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GOLD |
14,350
+ 350
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Modern Thai retailing began in the days of middlemen who would offer commodities in nearby neighbourhoods, often through their own small shops, known as cho huay. This was followed by clusters of shops in certain areas known for shopping, such as Sampheng, Banglamphu, Wang Burapha and Yaowarat. Bargaining between buyers and sellers was expected, as fixed prices were not yet common. Central Wang Burapha, Thailand's first modern retail centre, opened in 1956, followed soon after by Thai Daimaru, located in Ratchadamri Arcade. The store ushered in the era of modern retail development in Thailand and offered fixed prices at a time when even the Central stores had elements of bargaining. Also, it contained Thailand's first escalator, which drew huge crowds. Two chains well-known today, Robinson and The Mall, followed. Competition and choices for Thai consumers increased as we became more comfortable with the format, convenience and price structure of these new retail centres.
In 1990, Makro was the first ''big-box'' store to enter Thailand, the first Asian location for the Dutch cash-and-carry operator. Soon after, CP Group launched the Lotus brand in Thailand, and they later formed a partnership with UK-based Tesco in 1998 to create Tesco Lotus. Also new to the market were Big C, originally from Central Group, and Carrefour, which started as a joint venture between Central Group and Carrefour.
Also growing in popularity during this time were supermarkets, as they successfully built a supply chain that soon offered the freshness of wet markets in a much more pleasant format. Early supermarkets were proprietorships, but the segment was consolidated when Tops Supermarkets (operated by Royal Ahold) purchased a number of supermarkets from the Central Group that were later bought back by Central. Tops can now be found in Central and Robinson department stores, or as the anchor tenants in neighbourhood centres.
CP Group is also very active in the convenience store segment. The first 7-Eleven opened in 1989 in Bangkok's Patpong area, and the format proved a huge success. There are more than 4,400 locations in Thailand currently. The Japanese chain Family Mart came to Thailand in 1993. Tesco Lotus's Lotus Express also operates in this segment.
Another segment in the retail sector is the so-called category killer, a specialised store designed to dominate a segment through a wider range of products and more competitive prices. The first ones were seen in Thailand during the mid-90s, with HomePro (home improvement) and Office Depot (office goods). These stores resulted from increased competition in the typical format as operators tried to distinguish themselves from shopping malls and superstores, and have driven many traditional retailers to either improve their offerings or exit the market. Power Buy and Index Living Mall are more examples of category killers.
The financial crisis in 1997 had a number of effects on the retail sector. We witnessed CP Group eventually ending its partnership with Tesco, while Central sold the majority stake in Big C to the French Casino Group as it decided to change its focus. However, Central later bought out the stake in Tops held by the struggling Ahold group of the Netherlands. Retailers became more prudent, with an emphasis on product offerings and niche launches. A number of second-tier department stores could no longer compete and were closed. Today, Central and the Mall Group are the dominant department store operators.
As the retail sector became more sophisticated, we saw a number of luxury malls such as Emporium and Gaysorn Plaza developed in the 1990s and retailers focused more on branding. Central Chidlom underwent extensive renovations and was soon Thailand's most upscale department store.
The success of The Emporium led to the launch of Siam Paragon, a joint venture between the Mall Group and Siam Piwat, which owns the Siam Center and Siam Discovery malls nearby. After Gaysorn Plaza finished its renovations in 2002, Siam Center followed suit, while Central has recently completed its renovation of the World Trade Center into CentralWorld. One quality all of these retail centres share is proximity to the BTS Skytrain. When the BTS originally launched in 1999, only Central Chidlom had a direct bridge connection to one of the stations. However, numerous retail centres have since added this feature, which has become a requirement for luxury malls given Bangkok's traffic and weather.
The latest wave of development has focused on neighbourhood centres, which are essentially scaled-down malls built around an anchor tenant, usually a supermarket or Cineplex. Siam Future Development (SFD) is one of the leaders in this area. Most neighbourhood centres are located in residential areas on the outskirts of the central business district, and they have grown in line with changing consumer behaviour, as they are much more convenient and satisfy most shoppers' daily needs. Popular neighbourhood centres in Bangkok include J-Avenue and La Villa.
In just two decades, retailing in Thailand has evolved from a traditional model to the global model seen today. Retail centres have become increasingly sophisticated as consumers have become more aware of their options. In the near-term, we expect to see continued development of neighbourhood centres in Bangkok, as they provide the most logical solution for the needs of residents.
Nithipat Tongpun is Director and Head of Retail Services of CB Richard Ellis. This article is the second of a weekly series examining the evolution of the Thai property market to mark the 20th anniversary of CBRE in Thailand. For more information, please visit www.cbre.co.th
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