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Discount stores and hypermarkets backed by deep-pocketed multinationals are forcing locally owned rivals to adapt. For consumers, the result is better selection and lower prices

 

RETAILING

Thinking even bigger

Sukanya jitpleechep

Thailand's retail battlefield this year has been tougher than at any time in the past decade, now that big multinationals have established a firm foothold in the market.

The majority of new investments have come from leading international retail chains: UK-based Tesco with its Tesco Lotus stores; France-based Casino Group with Big C; Carrefour of France; Netherlands-based Royal Ahold (Tops supermarkets) and Makro; and Belgium-based Food Lion.

All the international operators have been pouring money into the country in anticipation of an economic recovery and improved purchasing power. Along the way, they have been responsible for a dramatic change in the way many Thai consumers shop.

Analysts estimated that the total investments this year, mainly in the discount-store segment, topped six billion baht and created 3,000-4,000 jobs.

Tesco Lotus alone has committed some three billion baht to seven new stores: six in Bangkok and one in Nakhon Ratchasima.

Carrefour opened two new stores in the capital while Makro spent 1.3 billion baht to develop two new stores, one in Bangkok and one in Nakhon Pathom. Big C has three new stores: in Hat Yai, Hua Mark in Bangkok and Samut Prakan.

In Bangkok, the most competitive retaining areas are Rama IV and Chaeng Wattana, where discount stores are going head-to-head.

Tesco-Lotus raised the stakes by starting 24-hour service at its stores on Rama IV and Sukhumvit Soi 50. It is also promoting an all-in-one store concept with food outlets and other types of services.

The sharp increase of foreign participation in the Thai retail market has not been well received by some local retail players who lack the financial resources to keep up. Other critics point to the imminent death of small family-run stores, a point seized on by some political parties looking to play the nationalist card in the election campaign.

Among the proposed solutions are zoning, limits on business hours or mandatory closing for one day a week at discount stores. The government response to date is that if any limits were placed on giant stores, they would apply to all, Thai- or foreign-owned.

The number of hypermarkets is expected to raise to 81 in 2001 and 150 by 2005 and 300 by 2010, with four players - Big C, Carrefour, Tesco Lotus and Makro - continuing their expansion, analysts say.

Their strategies are all similar, focusing on low prices and wide selection. Makro has an additional focus on small businesses that buy products in bulk for resale.

Consumers stand to benefit the most from the competition, given the big chains' substantial bargaining power with suppliers, as well as operational efficiency brought on by superior technology, but suppliers are suffering as some grocery stores have been turning to buy goods from discount stores and not from manufacturers, often at even lower prices.

The other high-potential sector is convenience stores, but they have also been suffering to some extent from the proliferation of discount stores. To improve their competitiveness, they are expanding heir selection to include more fresh foods, books and entertainment products.

Many traditional family-owned retailers, meanwhile, have decided that it makes more sense to become franchisees. As a result, the Charoen Pokphand Group expects to double the number of its 7-Eleven outlets to 3,000 in the next decade.

Supermarkets, meanwhile, have had to look at new approaches, given the lacklustre investment in new shopping complexes where they are traditionally located.

To solve the problem, Tops Supermarket decided to open more stand-alone stores, at RCA and Sukhumvit 40 in Bangkok, and in Pattaya. Tops now has 41 stores nationwide.

Food Lion opened five supermarkets near wet markets by renovating existing outlets that had been performing poorly.

Japanese retailers have been mostly inactive. Siam Jusco Co, the operator of Jusco supermarkets, and Sogo and Isetan department stores made no new investments in 2000. One Jusco outlet in Min Buri was closed this year, while the company has expanded product selection and cut prices at its four other Bangkok locations.

For Thai-owned retail businesses, the focus has been on renovating and improving efficiency to compete with their well-heeled rivals from abroad. Some are adding entertainment, well-known food and supermarket chains or language centres to draw shoppers.

Provincial retailers have suffered the most from the arrival of the multinationals. Their best strategy seems to be to avoid competing directly with discount stores and to find their niche markets.

In Hat Yai, Diana Department Store is a good example. It has been modernised to include a Tops supermarket as a new magnet to draw some customers away from Big C and Lotus.

With the Bangkok retail scene apparently saturated at the moment, operators are looking more toward major provincial centres, where consumer purchasing power has improved significantly.

The Central Group, the country's biggest retail chain, has announced plans to invest eight billion baht to develop a shopping complex on Rama II Road and to expand the Central Airport Plaza in Chiang Mai.

The Mall Group also plans to open one or two new high-end shopping complexes in Bangkok, using the Emporium model, in the next five years. In Nakhon Ratchasima, the group has been shaking up the local retailing scene since it opened its giant complex in August.

Tang Hua Seng, a medium-sized Thai retail group, scrapped its plan to open a discount store at the ailing outlet in Bang Phli, Samut Prakan. Now it is being converted to a department store.

''Selling more brand-name products will make us different from our arch-rival here because the lines will not be available in discount stores,'' said executive vice-president Viroj Chunprathipthong.

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