The retail sector has been the most active in preparing to tap the handsome business opportunities that the Asean Economic Community (AEC) is expected to offer at the end of this year.
The evidence is all over the country, particularly in major border provinces. Not only local retail operators but also big players such as Central Group, The Mall Group, Tesco Lotus and Big C have gained footholds in key provinces to reap the benefits from the AEC's trade liberalisation and free mobilisation of manpower.
Many have moved across borders to make their significant presence in high-potential countries such as Vietnam, Malaysia and Indonesia.
However, it is not always a smooth path for business operators. Many challenges, particularly differences of culture, laws and regulations, tastes and local preferences, have to be overcome.
High-potential provinces
Expansion of retail businesses has continued in all regions in recent years.
In the North, Chiang Rai is a significant gateway connecting Thailand to Laos, Myanmar and China. In the East, Rayong will benefit from the government's projects to develop high-speed train routes from Nong Khai and Bangkok to Map Ta Phut.
In the South, Hat Yai in Songkhla province offers a connection to Penang, Malaysia's second-largest city after Kuala Lumpur and a Thai-Malaysian trade centre.
The Northeast is attracting the most investment from local and major retail operators because of its prime location connecting with Laos and Vietnam.
Top investment targets include Ubon Ratchathani, Udon Thani, Mukdahan, Nong Khai, Nakhon Ratchasima and Buri Ram, where Central Group, Tesco Lotus, Big C and Makro already have a presence.
"Udon Thani is the city with the most crowded retail expansion. Retailers have continued to invest there, not only because of the AEC but also because it is one of the top 10 destinations for tourists," says Sawat Teerarattananukulchai, president of Udon Thani Chamber of Commerce.
The number of tourists visiting Udon Thani has been increasing by 10-20% each year. And high economic growth in Laos, particularly capital Vientiane, has prompted Laotians to cross the border to shop in Udon Thani.
Udon Thani accommodates two Big C stores, three Tesco Lotus supermarkets, a Robinson Department Store branch, a Makro outlet and an Index Living Mall as well as local operators such as UD Town, Save Mart and Klang Plaza.
Yet the province continues to draw more investors. Boonthavorn Co, a seller of kitchen and bathroom equipment and construction materials, plans to build a new complex there.
Kridchanok Pattamasattayasonthi, managing director of Index Living Mall, a home furnishings and decor company, foresees increasing demand for its mall in the Northeast.
"Sales of Index Living Mall in Ubon Ratchathani and Udon Thani have expanded by 15-20% in recent years, outpacing the annual growth of 5% at other branches," she says.
Key players
Central Group, Thailand's largest retail operator, is blazing a trail in high-potential provinces in various retail formats.
Chief executive Tos Chirathivat says the company will continue to branch out in border provinces this year and next. It will launch marketing campaigns aimed at luring customers from Laos, Cambodia and Malaysia to its stores. Customer relationship management will be employed to study and understand the behaviour of customers in different cultures.
"Our business in border provinces has grown very fast. Central Plaza has welcomed Chinese and Myanmar shoppers, while Robinson in Mukdahan draws Lao shoppers from Savannakhet province, which has a population of 1 million," Mr Tos says.
He says the purchasing power of the 300 million people in Cambodia, Laos, Myanmar and Vietnam should help spur a spending spree that is likely to offset a drop in Thailand's domestic spending caused by the ailing economy.
The group will also open Robinson stores this year in Rayong, Buri Ram and Tak. Tak Chamber of Commerce projects an increase of trade via the Mae Sot border with Myanmar to reach about 50 billion baht annually.
Meanwhile, The Mall Group will invest about 1 billion baht on a facelift for The Mall Nakhon Ratchasima while planning to open more outlets in major tourist destinations including Phuket and Hua Hin.
Siam Retail Development, a subsidiary of Land and Houses Plc, is also eyeing major destinations such as Nakhon Ratchasima, Khon Kaen and Nakhon Si Thammarat.
"Nakhon Ratchasima is a gateway to the Northeast and Khon Kaen is a major city in the Northeast's upper region," says executive director Prasert Sriuranpong.
Hypermarket operators such as Tesco Lotus, Big C and Makro have also joined the chorus by opening outlets in border provinces.
Thai retailers go Asean
Vietnam, Malaysia and Indonesia are the three countries drawing the largest investments from Thai retailers.
Both Berli Jucker Plc, the SET-listed trading and retail company owned by billionaire Charoen Sirivadhanabhakdi, and Central Group have focused on Vietnam, where GDP growth has outpaced that in other Southeast Asian countries.
The penetration of modern grocery stores in Vietnam is still low, while the number of middle-income and high earners is projected to triple over the next five years.
By last year, Berli Jucker already had 95 convenience stores in Vietnam. The company tried to buy Metro Group's cash-and-carry unit there recently but failed when shareholders voted to reject the deal.
Central Group opened two Robinson stores, called Robins, in Ho Chi Minh City and Hanoi in Vietnam last year. This year it plans to open another outlet in Ho Chi Minh and another in Hanoi with a total investment of 400 million baht.
The group also opened the first Central department store in Indonesian capital Jakarta last year and plans to open one in Malaysia this year.
Early this year, the group invested in Vietnamese appliance chain Nguyen Kim through its Power Buy subsidiary.
"Together with Power Buy's strength, we expect Nguyen Kim to expand briskly in Vietnam and drive Power Buy's development into a key player on Asean's stage," Mr Tos says.
Index Living Mall and HomePro have also opened outlets in Malaysia.
"The purchasing power of Malaysian people is high and competition is less," says Ms Kridchanok of Index Living Mall.
Challenging times
Opportunities often come with challenges. The onset of the AEC does offer great opportunities but differences of laws and regulations, business environment, culture and consumers' tastes can be obstacles.
Chulapong Yukate, executive chairman of Zicolaw (Thailand) Co, says the major problems of doing business in the Asean market are trade regulations, laws and understanding local demand.
"Shoppers in each country have different demands, so Thai businessmen have to pay a lot of attention to that," he says.
Alan Thomson, president of Robinson Department Store Plc, says human resources and high import taxes are the main hindrances to doing retail business in Vietnam.
"Retail is a relatively new business for Vietnam, so it is very difficult for the company to find young people equipped with experience in the sector to service customers," he says.
At Robinson in Vietnam, the company recruits and trains Vietnamese staff in Vietnam but some management are sent to be trained in Thailand. In future, the company will train all staff in Thailand before sending them back to work in Vietnam.
Sanan Ungubolkul, president of Srithai Superware Plc, a Thai maker of melamine tableware and polyethylene terephthalate bottles, says business operators must not assume that consumers in different countries have the same tastes and demands. The company exports its products to Laos and has an office there.
"Before, I presumed Laotian consumers preferred inexpensive tableware and I was wrong. They actually prefer high-quality products," he says.
Therefore, understanding the demands of local consumers is a vital key to success in operating a business in Asean countries, says Mr Sanan.