Thailand remains one of the most promising retail markets in Southeast Asia with plenty of room to grow, say local retail operators. However, challenges persist as consumer preferences are changing quickly and their spending power remains subdued.
Savings and convenience are the two things today's shoppers want most, says Robert Cissell, president and CEO of Big C Supercenter Plc.
"Retailers will need to hit the right spot by fulfilling consumers' preferences and behaviours, and striving to offer more comprehensive value-added services in order to be the preferred one-stop shopping destination," he told Asia Focus.
Communicating to consumers through the right channels is also becoming more crucial, he said, noting that Big C was placing greater emphasis on digital marketing to complement its traditional media channels.
The main challenges facing Thai retail, in Mr Cissell's view, are negative economic factors including high household debt levels and the slow recovery among the grassroots-level population, as well as uncertain global factors that are affecting the Thai economy.
His focus now is to anticipate consumers' changing preferences and stay ahead of the competition through pricing strategy and promotional offers.
"While the government is expediting its public spending and investment and implementing measures to stimulate the economy, Big C will help maximise consumer purchasing power by strengthening our leadership in price, convenience and assortment," he said.
Big C is investing in an omni-channel network of physical stores and e-commerce businesses as well as more value-added services.
"Our dual retail-property model that ensures a complete tenant mix to satisfy every customer need from all groups ranging from banking, medical and beauty to postal or government services," said Mr Cissell.
This year, Big C plans to add three hypermarkets, 18 Big C Market outlets and 150 Mini Big C stores across the country. Last year, it opened 77 stores in all formats. The company now operates 637 stores country-wide with 124 hypermarkets, (Big C Supercenter, Big C Extra, Big C Jumbo), 37 Big C Market supermarkets, 324 Mini Big C stores (91 in Bangchak petrol stations), and 152 Pure drugstores.
As of the end of last year, Big C had 154 shopping malls anchored by large-format Big C outlets with total retail space of 767,000 square metres.
Salinla Seehaphan, corporate affairs director of rival Tesco Lotus, is also optimistic about the growth potential of Thailand's retail market but concerned about consumer spending power.
"We are continuing to expand our business despite the economic outlook as we continue to see untapped opportunities in the Thai retail market," she said.
In her view, the retail industry plays an important role in supporting the broader Thai economy.
"As the retail sector expands, Thai farmers and SMEs will have more channels to distribute their products in an efficient way," she said. "Thai retailers will continue to offer high-quality products at low prices to help consumers save on their cost of living."
To respond to challenging conditions, Tesco Lotus has stepped up its money-saving Roll Back promotional campaigns, in which it has invested some 4 billion baht over the past two decades.
"This year we've earmarked the biggest budget ever to bring down prices of fresh food, grocery and essential household items," said Ms Salinla. "We're investing 600 million baht to make our fresh food prices as good as wholesale prices."
To respond to changing shopper behaviour, Tesco Lotus is also offering online shopping for fresh food and grocery items through its own portal and leading regional e-commerce portals such as Lazada.
"Customer responses to these channels have been positive and we're seeing a growing trend toward online shopping," she said.
Tesco Lotus now operates about 1,800 stores across Thailand. This year it plans to open five large stores in provincial centres and 50 Express stores around the country, while expanding its online shopping business. Tesco Lotus has approximately 1.46 million sq m of retail space and serves 12 million customers per week.
Despite retailers' general optimism, analysts say the anticipated rebound in consumption spending is not yet apparent. In fact, most retailers recorded negative same-store sales growth, a key performance measure used in the industry, in the first quarter of this year, according to RHB OSK Securities (Thailand).
"While there was still profit growth, this was mainly driven by new store expansions and cost efficiency," it said.
Tisco Securities noted a 1.8% contraction in same-store sales in the most recent quarter for Big C, reflecting declining spending on durable goods. The results have also been reflected in the retailer's recent weak share price performance.
However, analysts at RHB believe the rebound in tourist arrivals as well as the start of state-backed infrastructure projects will be the keys to improving consumption over the course of the next year.
"You can see that Thai retail operators are still continuing to open new outlets every year, meaning that the market is still growing," added Kriengchai Boonpoapichart, head of finance and investor relations of CP All Plc, the operator of 7-Eleven convenience stores.
The traditional retail trade in Thailand still overshadows the modern trade in most areas, but as the country becomes more urbanised, he foresees changes in consumer preferences and behaviours.
"As a result, there will be more room for the modern trade to grow, both small and large formats, while the traditional mom-and-pop stores will slow," he said
Mr Kriengchai believes the biggest challenge for Thai retail operators will be increasing their market share as the opportunities grow larger. In doing so, they have to be quick to adjust to changing consumer preferences.
"We are in the consumer market and people need to consume, they need to eat no matter what the economic condition is," he said. "Thai retailers need to provide alternatives to consumers, expand their product varieties, allow people to 'trade down' when the economy slows and keep up with new demands."
As of the end of last year, CP All had a total of 8,127 stores countrywide with 45% in Bangkok and 55% in provincial areas. The company plans to open about 600 new stores annually, reaching a milestone of 10,000 by 2018.