Two furniture and home accessories chains, Index Living Mall and Ikea, are pessimistic about prospects in Thailand, citing weak consumption because of the coronavirus outbreak.
Tom Suter, store manager of Ikea Bang Yai, said spending power in furniture and home accessories was active only in the first few weeks after stores reopened on May 17 and has since slowed.
"We expect our sales in the current fiscal year ending Aug 31 to contract by 5% from last fiscal year and against 3.5% growth in our earlier projection," he said. "In 2021, our business is likely to stay in a contraction of 3% before it comes back to normal condition in 2022."
Kridchanok Patamasatayasonthi, managing director of Index Living Mall Co, said that while furniture and home accessories are not regarded as luxury goods, the overall furniture sector is likely to shrink 20-30% in the worst case this year because of the viral impact.
With the gloomy outlook for furniture and home accessories, both Index and Ikea are scaling down their store size for cost-efficient management and tapping more online channels to boost sales.
Index plans to downsize its stores to 3,000 square metres from 5,000-18,000 sq m. The size of Ikea will drop to 2,000-5,000 sq m compared with 50,000 sq m at the Bang Yai store.
Ikea will reduce its product prices by 3% in September and aims to boost sales via the online channel to 25% of total sales from the current 12%.
"With many crises we experienced in the past and the current Covid-19, we have learned to survive. We're doing business without debt and maintaining rich cash flow,'' Ms Kridchanok said, adding that the company will delay its plan to open a large store this year because she believes spending power will recover by the end of next year.
"We will allocate instead a budget to IT, supporting our online expansion and virtual stores. During the pandemic, the contribution from our online business rose to almost 5% of total sales from only 2% before Covid-19."
Currently there are 31 Index Living Mall stores across Thailand and 20 franchise stores abroad.