RETAILING

Government policies that have put money into the pockets of more people are creating a larger consumer culture. But the way Thai people consume is changing and producers, as well as retailers, need to be aware of the trends

by SUJINTANA HEMTASILPA

Consuming with a difference

No matter what form the next government takes or what its policies will be, Thai people are unlikely to lose their zeal for shopping, even if economic growth slows in the short term.

In fact, local demand for consumer durable goods and other products stands to rise as more money circulates in more households _ in the countryside as well as the cities.

Anusorn Tamajai, an economist and senior vice-president of BankThai Plc, believes household consumption will continue to increase significantly, to the delight of retailers. But also on the rise is household debt, because of the Thaksin government's policy to help low-income people gain access to credit through channels other than neighbourhood loan sharks.

Pansak Vinyaratn, Prime Minister Thaksin Shinawatra's chief policy adviser and a key architect of many of the government's populist policies, says consumption is good for the country and its economy.
He believes Thai people's willingness to spend will not be curbed because of rising oil prices, creeping inflation or a modest economic slowdown.

But consumers, in his view, will demand more products and services that represent their preference of sophisticated lifestyles. Thais' consumption behaviour is also being influenced more by the consumption trends in more developed markets, particularly Western countries.

Citing the prediction of Nelli Rodi, a trendsetting French firm, Mr Pansak said consumers worldwide would soon adopt "monsoon" lifestyles, which involve rapid preference changes and fluctuating consumption behaviour.

He suggested Thai retail business operators adjust their product offerings, and add value to their products and services through design and innovation.

Mr Pansak also suggested that producers and retailers add "Thainess" to the designs of their products to attract both domestic and international consumers, and differentiate the products from imported ones.

"Thainess in design here doesn't mean something like Lai Kanok [traditional Thai craft patterns], but the attributes of Thai culture that could be reflected in the design of a product," he said.

Mr Pansak said the charms of Thai culture could create a kind of "mysterious allure" to attract consumers. Keeping the product fresh and appealing is the challenge. Things will continue to sell as long as the "seductive force" of a product or service is not yet clearly identified. But once it is clearly identified, consumers could be bored and the product could disappear from the market within two or three years, he said.

However, some Thai designers think "Thainess" is not a panacea, but almost a suicide attempt, for product development in this country.

Other Asian countries, such as South Korea, had tried to sell products with their cultural characteristics to international consumers before, but the attempt did not pay off, said a local designer who asked for anonymity.

In her opinion, designers should try to design products that fit into mainstream lifestyles of the majority of people in their markets, to make them sellable.

The price of wooing wealthy shoppers

ATTRACTING well-heeled shoppers to Thailand has long been a goal of the local retail and tourism industries. The easiest way to do so, they say, is to reduce the country's high import taxes on branded luxury goods, which currently range from 35% to 60%.

Successive governments have resisted the idea for fear of losing tax revenue, but lately the Thaksin Shinawatra administration has started to warm to the proposal. The government has commissioned the Sasin Graduate Institute of Business Administration of Chulalongkorn University to study the pros and cons of lower duties, with a report due early in 2005.

Meanwhile, wealthy Thais and foreigners continue to seek out Prada bags and Cartier watches in Hong Kong and Singapore, where prices are 20% cheaper than in Thailand.

Among the vocal advocates of the duty reduction is Supaluck Umpujh, vice-president of The Mall Group Co, the operator of seven Mall department stores and The Emporium and co-developer of the Siam Paragon centre in collaboration with Siam Piwat Co.

Ms Supaluck said high import duties had deterred a number of international brand owners from setting up their own stores or opening additional outlets in Thailand since they did not think they would perform as well as those in Hong Kong or Singapore.

Chadatip Chutrakul, the managing director of Siam Piwat, the operator of Siam Centre and Siam Discovery, however, has a different view. She said the current import duties had not at all deterred international brand owners from expanding in Thailand.
"A lot of them see high potential to market their products in this country, and they just come, no matter how high the import duties are," she said.

She agreed, however, that Thailand's capability to compete with other Asian countries as a regional shopping destination would be enhanced if the government waived the import duties, particularly for top brands.
In any case, she said, the government should also reduce import duties on raw materials used by local manufacturers to enable local fashion firms to compete with international brands.

Among the opponents of the plan is Boonkiet Chokwatana, the president of ICC International Plc, the licensee of several international fashion brands and also a manufacturer and distributor of its own brands.

Mr Boonkiet says lifting the duty would do more harm than good to the local fashion industry. As cheaper products from countries with lower labour costs are flooding the Thai market, small fashion manufacturers that do not have enough resources or technology to differentiate themselves through design or innovation will find it hard to survive, said Mr Boonkiet.

In such a scenario, an import duty cut that allowed international brands to rake in sales in Thailand would just worsen the situation, he said. "We should be a shopping hub for locally made products so that products made by our people will sell more."

In an otherwise healthy year, major retail players in 2004 experienced brief discomfort when the government, in its zeal to reduce soaring energy costs, sought to curb the operating hours.

During a five-week period, major retail groups said they lost two billion baht in sales and they raised the spectre of up to 1,500 job losses.
That was enough to persuade the cabinet to reverse its position.