Has the Thai shopping mall era come to an unceremonious end? With nearly everything now available with the touch of a button, physical shopping centres have been forced to fight for their commercial lives. That is no small task, with new online retailers willing to suffer losses for years to stake their claim in a piece of the market, all the while wooing sellers with their size, lower prices and shorter shipping times.
Online retailers are gobbling up market share at a breakneck clip in developing markets. While some sectors like food and drinks remain fierce contenders in the brick-and-mortar arena, sales of apparel, cosmetics and electronics are quickly retreating from shopping centres.
But while analysts have predicted doom and gloom for many a year, malls have yet to turn into ghost towns, with major shopping centre owners in Thailand maintaining sunny forecasts for their future earnings.
Perhaps boosting their optimism is the fact that online retail behemoths like Amazon are looking to throw their hat into the offline game to boost their marketing and distribution prowess. After all, consumers are still looking for the all-immersive experience, sampling the fruit (or feeling a dress's fabric) before they buy. Brick-and-mortar stores also remain the champions of impulse purchases that are less likely to transpire online.
BIG TRANSFORMATION
"Malls must pull in customers through services that can't be replicated on the web like beauty salons, co-working spaces or water theme parks," said Wuttikiat Techamongklapiwat, executive vice-president of property and lifestyle mall at Robinson Plc.
He said Thai retailers are adapting their business models to a rapidly changing retail landscape, which is now dominated by online sales and digital solutions.
Department stores and shopping complexes, as well as hypermarkets, are freeing up space for shops that focus on providing lifestyle products and experiences to customers.
Up to 30% of retail space will be dedicated to services like beauty salons, barber shops, co-working spaces and water theme parks, Mr Wuttikiat said.
"We hope the move will allow them to remain competitive with online businesses," he said.
Central Group, meanwhile, has said it will also dedicate a minimum of 30% of its retail space to services that can't be replicated online.
Mr Wuttikiat said Robinson has pivoted towards a "Robinson Lifestyle Centre" format in order to increase its competitiveness. Under the new model, the size of Robinson Department Stores will shrink, and close to 70% of floor space will go towards food, tutors, fitness and co-working spaces and recreation services.
Robinson will open two Robinson Lifestyle Centres and one department store per year. Its shopping centres are "integrated", comprising shopping complexes, department stores, and anchors.
The Robinson Lifestyle Centre in Lop Buri province has a water park called Fun Festa Splash. Playgrounds and integrated fitness centres have also been added to its centre in Phetchaburi, and will be added to new Robinson Lifestyle Centre in the future.
Robinson will emphasise sales by offering international products under its own house brand, which will allow it to differentiate from its competitors.
"We offer experiences people can't find online, which helps us keep and expand our customer base," Mr Wuttikiat said.
DELAY IN NEW MALL OPENINGS
The effects of e-commerce, added to a sluggish economy, have dragged down the number of shopping centre visitors.
SET-listed retail companies delayed their expansion plans in the first half of 2017. Delayed shopping centre projects include the Iconsiam on the Chao Phraya River, and Central Pattana Plc's Central Festival Phuket Phase II in Phuket, which was postponed for next year. The Mall Group delayed construction of its 100 rai Phuket Blue Pearl mega retail project.
"We will be slower to open new stores. We want to transform our stores to deliver a unique shopping experience for the customers," said Yuwadee Chirathivat, chief executive of Central Department Store Group.
She said Central Group will transform a variety of sectors, including product development, offline and online sales and services, lifestyle-centric store decor, and marketing activities, which will now be enhanced by customer-centric strategies and digital technology.
"The goal is for Central Department Store to become a venue where customers gather not only for shopping, but also to learn new things, and to gain insight into other cultures," Mrs Yuwadee said.
Sales of apparel, cosmetics and electronics are quickly moving away from the traditional shopping centre to the online channel. (Photo by Kosol Nakachol)
Piyawan Leelasompop, executive vice-president for marketing at Central Department Store (CDS), said the landscape of the department store will change. It will include lifestyle venues like beauty salons, nail salons, and or women's gadgets.
"We will strive to offer more personalised services like customised hats or bags, and increase our co-working space footage," Mr Piyawan said.
As Nicolo Galante, Central Group's chief operating officer, put it: "Digital transformation is challenging for us. We are beyond the technology wave."
The company will use big data analysis on The 1 Card's 12 million cardholders to craft its strategy, Mr Galante said.
Mrs Yuwadee said the US online retail segment is strong because of the country's geographical size, as many Americans find it difficult to physically go to department stores. This is vastly different from Central department stores, which are easily accessible to shoppers across Thailand.
Central Group is working on AuxVillesDuMonde.com and an accompanying app. The app will allow in-store customers to receive suggestions on hotel and restaurant bookings and popular tourist spots. It will also let users shop for special items at its luxury department stores through a network of concierges.
Other luxury retail complexes such as Gaysorn, Central Embassy, Emporium, EmQuartier and Siam Paragon are offering broader dining, entertainment, wellness and cosmetic surgery options.
Gaysorn Property Development Co has renamed Gaysorn Plaza to Gaysorn Village in order to underline the conceptual change. The venue offers 18 diverse dining venues, up from the previous eight restaurants. An onsen (Japanese-style bathhouse) is scheduled to open in September this year.
Central Embassy has budgeted 615 million baht to add more "accessible" brands to attract a wider variety of shoppers.
Among Central Embassy's new amenities are the Open House, a "community living room"; Siwilai City Club, a new social club; and a co-working space and new restaurants on the sixth floor.
Many of Central Group's retailers are also working on omni-channel platforms. Among these are HomePro, Land & Houses Group's home improvement store; Charoen Phokphan Group's Makro cash-and-carry store; and Central Group's Robinson Department Store.
ONLINE SHOPPING TRENDS
According to a study by Asia Plus Securities, online shopping constitutes a larger percentage of purchases in the US than anywhere else. Department stores, hypermarkets and speciality stores have borne the brunt of the e-commerce rise. Convenience stores and wholesalers, on the other hand, have come out mostly unscathed. The most popular items purchased by Americans are apparel, shoes and sporting goods.
Sales at almost all department stores in the US dropped in 2015. Sales revenue at Sears plunged 9.3%. Kmart and Macy's lost 5.3% and 3.5% respectively. JC Penney remained flat.
Hypermarkets were not immune either. Sales at Walmart grew by 1.6%, and Target's declined by 0.5%, but both of these stores have strong online components.
The research also found that speciality stores like Home Depot have weathered market changes well. Products sold at Home Depot are not suitable for online channels, because customers like to consult store attendants before purchasing big, high-delivery-cost items. Home Depot has merged its online and offline channels, which is why it has continued to perform strongly.
The Electronic Transaction Development Agency (ETDA) also reported that department stores captured 32% of the e-commerce market, followed by processed food, beverages and agricultural products (23%); cosmetics, food supplements, fragrances and beauty equipment (20%); apparel, ornament, sporting goods and souvenirs (11%); computers, electronic equipment and communication (11%); and furniture and home decoration (4%).
Shopping at department stores through online portals has continued to grow over the past three years from 6% in 2014 to 32% in 2016. Like in the US, fashion apparel, shoes and sporting goods generate the most online sales in Thailand.
"The impact on Thailand's physical department stores will be smaller than in the US. In sweltering Thailand, people still prefer to shop and stroll through department stores," said the ETDA report. "Thai malls are one-stop shopping centres; they emphasise restaurants and entertainment to a greater extent than American ones. Americans, in contrast, go to malls only to shop."
Luxury brands are lowering their price points to cater to a broader customer base. They are also getting more adept at replacing out-of-stock items.
Online sales in the fashion sector are cannibalising physical stores' sales. High-end brands are opening cafes inside their overseas shops to increase foot traffic. This trend will hit Thailand in the near future, the report said. Like hypermarkets, malls are focusing on small retail stores close to customers.
HomePro launched HomePro S, which has floor space six times smaller than the HomePro average of 6,000 square metres. Similarly, Big C will open 200 Mini Big C stores this year.
While convenience stores have not been greatly affected by e-commerce, they have started to switch to premium ready-to-eat meals in order to carve out a niche in the market.
Lazada, Weloveshopping and Tarad.com are major e-commerce sites in Thailand, Asia Plus Securities said. 11Street, the popular South Korean e-marketplace, entered Thailand this year.
"E-commerce in Thailand will lift off soon, as long as customers are confident in the products and their timely delivery," said a researcher at Asia Plus Securities. "This is the time for physical retailers to position themselves strategically."