Retail market resigned to Q1 results carnage
Online ventures yet to offset offline loss
Thailand's retail market is likely to see a sharp contraction in the first quarter as the spread of the coronavirus compounds the blow from widespread drought and evaporation of tourist arrivals.
Total retail sales are forecast to drop by 30% in the first quarter this year, with tens of billions of baht in estimated losses, said Phaibul Kanokvatanawan, group chief executive at The Mall Group.
"We expect tepid sales to last throughout the entire year," he said.
Thailand's retail market has reported slow growth of only 2-3% over the last few years, lower than GDP growth. Thailand's economy grew 4.1% in 2017, 4.2% in 2018, 2.4% in 2019, with a growth forecast of 1.5-2.5% this year from the state planning unit, the National Economic and Social Development Council.
"This will be the toughest in several years for retail as the market confronts not only the pandemic, but also rising unemployment, a sharp fall in foreign tourists and tumbling tourism," said Mr Phaibul.
"Retail sales started seeing a sharp drop, particularly in February, when retail malls [except supermarkets, drugstores and outlets selling essential items], were ordered closed."
He said while most retailers have moved online to resuscitate sales, the dip in sales from offline stores has yet to be offset.
Surachet Kongcheep, managing director of Phoenix Property Development and Consultancy Co, said there are about 9,000 square metres of retail space that opened in the first quarter of this year, a vast plunge from 25,840 sq m opened in the same quarter last year.
Only two retail stores opened in the first quarter of this year: The Commons project on Sala Daeng Road and the Japanese department store Don Don Donki on Ratchadamri Road.
The Commons project with retail space of 5,000 sq m opened in January, while Don Don Donki on the ground floor of The Market Bangkok, opposite CentralWorld, opened late last month.
Some retail projects postponed expansions in the first quarter of this year. They include Siam Premium Luxury Outlet, which has 50,000 sq m.
They are not confident in the economy or consumer spending power as a number of foreign workers have returned home, said Mr Surachet.
He said large retail developers, particularly hypermarket and department stores, are likely to put off their expansion into the second half of this year, not only because of the coronavirus pandemic but also the economic slowdown, PM 2.5 dust and widespread drought.
Neeranuch Kanokvilairat, manager of Research & Consulting Edmund Tie & Company Thailand, said retail space in the downtown area totalled 1,478,199 sq m in the first quarter of this year.
The average occupancy rate of retail space in the downtown area decreased to 94.1% in the first quarter of 2020 from 96.3% in the fourth quarter of 2019.
The average occupancy rate of retail spaces in the midtown area also decreased to 90.5% in the first quarter, down from 92.8% in the fourth quarter last year.
Shopping and retail mall tenants have been suffering from a sharp drop of income that used to come from local and international customers, so some have negotiated rental waivers or a temporary discount on rental fees.
Consequently, the average rental rates of retail malls in the downtown and midtown areas in the first quarter this year decreased by 24.9% and 28.2%, respectively, from the fourth quarter of 2019.
"The outbreak will cause more retailers to realise the necessity of online platforms to maintain sales," Ms Neeranuch said.
"Online will prove useful, not only during this pandemic, but also for other major incidents such as riots, protests and serious natural disasters."
The offline and online presence of retail malls and shops is convenient for customers and means sustainable incomes for retailers.
"Whether the coronavirus lasts months or years, the response to the pandemic has fundamentally changed the retail business. It is time to start adapting our business and continue to invest the omnichannel platform. Our sales via the omnichannel format have grown by 25-30% in the first quarter," said Yol Phokasub, chief executive of Central Retail Corporation.