Chatuchak vendors sold short in struggle for survival

Chatuchak vendors sold short in struggle for survival

As unregulated sub-leasing schemes drive up rent and shop owners complain of management woes, the future of the country's most famous market looks grim

Weerapoj Petch-chamnan had not even heard of Chatuchak weekend market when, at age 10, he travelled there from Surat Thani to help his brother run a small clothing shop. But as he navigated his way through the labyrinthine network of cramped, steamy alleyways, he sensed an opportunity.

SHUTTING UP SHOP: About 200,000 people, more than half of them tourists, visit Chatuchak each weekend. But unaffordable rents mean an increasing number of stores at the market are closing down.

Coming from a family of limited means, the young Mr Weerapoj always believed in working hard, and hoped that one day he would be able to run his own business. Just five years later, he marked the beginning of realising that dream. He rented a five square metre shop at Chatuchak, and opened a business selling T-shirts. It was the first time he had been able to stand on his own feet without relying on the daily wages from his brother.

Business was good, buoyed by the hundreds of thousands of foreign tourists and locals who flocked to the market every weekend in search of a bargain. By the time he turned 20, Mr Weerapoj had accumulated savings of more than 100,000 baht and decided to expand his business. He rented out several more shops inside Chatuchak, and opened stores in other prime shopping districts like Pratunam.

For Mr Weerapoj, Chatuchak is a place of opportunity, a place where someone from even the most humble background has a chance to forge their own destiny.

But, some 30 years after he first set foot inside the market, he’s scared members of the younger generation will not be afforded the same possibilities.

“Walk into the middle zone of Chatuchak and you’ll see plenty of shops closing down,” he told Spectrum. “In the next couple of years, we could see the end of Chatuchak as we know it. It is a shame.”

SALES SLUMP: Official rents fail to recongise the fact that shops along the market’s thriving walking street are far more lucrative for vendors than those buried deep within its maze-like centre.

PAYING THE PRICE

The market sits on a sprawling 68-rai plot of land on Phahon Yothin Road owned by the State Railway of Thailand, and for most of its history has been managed by the Bangkok Metropolitan Administration.

But in 2012, a dispute over rent between the SRT and BMA prompted the railway authority to take back control of the lucrative market site.

Sirima Hiruncharoenwej, the SRT’s chief of assets management, told Spectrum the BMA had been asked to pay a higher annual rate, which was based on a new calculation by private land analysts.

“For over 30 years, the SRT had been collecting an annual fee of 20-30 million baht from the BMA so that it could run the market on SRT land,” she said. “However, after hiring analysts to estimate the land value, we discovered in 2002 that it was worth around 300 million baht per year, and in 2012 that it was worth 420 million.

“We proposed a new rental rate but the BMA found it too high, so the SRT had to take over the management of the market.”

In the end, that higher estimated land value was passed on to vendors in the form of higher monthly rents. Since 1982, when the BMA began managing Chatuchak, vendors had to pay monthly rents of just 600-800 baht, depending on the location of their shops.

However, the SRT implemented a new flat rate, regardless of location, and raised rental costs by more than 300%.

“In 2012, the rent was raised to 3,157 baht, plus 395 baht for housing and property tax. So the total rent rate became 3,552 baht a month,” Ms Sirima said.

“However, that was the two-year contract which ended in 2014, and as of last year, the rent rate stayed at 3,157 baht, but the tax increased to 451 baht, so now the flat rate is 3,608 baht.”

The rental fee is the same across the market, except for restaurants which pay only 1,500 baht a month. That has pushed the SRT’s revenue from the market to 36 million baht per month, against costs of about 12 million baht.

While the rent rise drew inevitable groans from shop owners, most are more concerned with the flat rate structure, which ignores the fact that shops along the market’s thriving walking street are far more lucrative for vendors than those buried deep within its maze-like centre.

Ekachai Arunyapongpaisal, 39, a vice-president of the Chatuchak Vendors Association, called the approach unfair, saying selling opportunities vary massively depending on a shop's location.

“I think it was a miscommunication at first,” he said. “The SRT had said that the rate was going to be calculated per zone, but vendors did not buy into the idea at the time, so the flat rate has been in use since.”

While the market closes at 6pm on Saturday and Sunday, those shops which line the walking street are allowed to remain open until 7pm, a rule which some vendors say is unfair considering everyone pays the same rent.

But Ms Sirima dismissed the criticism, saying the higher flat rate, compared to the BMA’s cheaper rates, is a better approach.

“The rate is inclusive of services including trash management, cleaning and security that the SRT provides for the vendors,” she said.

“The BMA used to add extra [service] charges, but now vendors only need to wire it to our account which is a more direct and accountable approach.”

On the surface, the monthly rent of 3,608 baht appears relatively low considering the number of visitors that pass through Chatuchak every weekend. But in reality, a complex network of unregulated sub-leasing and back-room deals means some vendors pay up to 20 times the standard rate.

FORCED OUT OF BUSINESS: Many shops in the hard-to-access middle zones of the weekend market are shuttered and display ‘For Lease’ signs.

‘THE COSTS ARE TOO HIGH’

According to Mr Weerapoj, who is now chairman of the Chatuchak Vendor Cooperative, rising rents are driving out vendors.

“It is part of the reason why many shops are closing down or are open to sub-lease, as they find the costs are too high to operate,” he said.

Mr Weerapoj said shops along the walking street, a wide boulevard closed off to cars during the afternoon, attract a huge number of customers because they are more visible and easily accessible.

For those people who hold the rental contracts for these shops, sub-leasing to the highest bidder can prove a lucrative and risk-free enterprise.

“Shops near Kamphaeng Phet Road, where there is an MRT station, and those on the side of Phahon Yothin, where there are both MRT and BTS stops, go for as much as 30,000 baht a month,” Mr Ekachai said.

For those who actually operate a business, the high sub-leasing costs mean profit margins are slim.

“I own a hat shop on the outer side, and I sell from Friday evening right through the weekend and I make a little over 10,000 baht in revenue each week,” Mr Ekachai said. “If I start to get less than that figure, I might sub-lease my shop too.”

It also wreaks havoc with efforts to organise the market into distinctive zones. With authorities effectively losing the power to select tenants, they have no control over what type of shops end up in each zone.

CONTRACTS FOR SALE

While sub-leasing can provide steady income for contract holders, those looking to cash out completely can expect a hefty payday.

In a business deal known as seng, shop owners can essentially demand a lump sum to transfer the name on the rental contract. Such a deal does not come cheaply for the buyer, often commanding rates as high as three million baht, according to one vendor. But the returns can be lucrative: the contract is for life, and can be passed down to family members.

Both sub-leasing and seng deals are, however, technically not allowed.

Ms Sirima, from the SRT, said she is well aware of the issue, yet claims it is almost impossible for authorities to weed it out, since the deals are done voluntarily and in private.

The SRT is legally prevented from charging annual rents worth more than 2.75% of the land’s value. So long as the SRT collects its monthly rent from the contract holder, it has little incentive to intervene and stamp out sub-leasing schemes.
“I have inquired personally with some shop owners and heard that those stores near the road can be sub-leased for more than 30,000 baht, or 55,000 baht for a double lot,” Ms Sirima said.

One vendor in Zone 16 said it was easier for him to simply rent out his shop than to actually run his own business. His charges 12,000 baht per month and has never had any problem finding a tenant. Though the vendors usually move after one or two years, the next vendor usually fills up the spot very quickly.

On the day Spectrum visited Chatuchak, many shops in the middle zones of the market were shuttered, with “For Lease” signs hanging in front.

With business so bad in these hard-to-access middle sections, Mr Ekachai said many of the shops were simply used as storage units for vendors who ply their goods on the busier walking street.

BAGGING A PRIME SPOT: For those who hold rental contracts for shops along the market’s popular walking street, sub-leasing to the highest bidder can prove a lucrative and risk-free enterprise.

ROOM FOR IMPROVEMENT

Since the SRT took over administration of Chatuchak market, some 1,020 vendors have filed lawsuits with the Administrative Court accusing it of legal and technical misconduct. The complaints argue that the SRT does not have direct authority to manage the market.

They cite the Railway Act which stipulates the state body can only operate businesses related to restaurants, railways and hospitality.

After retaining the Chatuchak management, the SRT renewed contracts with Chatuchak vendors directly, an act which was found by a court late last year to breach the limitations of its authority.

Despite the court ruling, the SRT continues to manage the market in areas where it can. Ms Sirima, who has been in the job since November, is planning to coordinate with the Tourism Authority of Thailand to develop a campaign to promote the market.

First, however, she said the market needs a makeover.

“To develop a tourism campaign with the TAT, Chatuchak needs to improve its zoning so that the selling point is clearer,” she said.

“Restaurants in the market need to focus more on cleanliness and safety. The market needs more toilets and entrances and exits.

“I understand that visitors tend to avoid those stores in the middle of the market because the space is quite cramped and the heat is very difficult for many to cope with.”

She said while most Thai customers are familiar with the market and will simply go straight to the shop they are looking for, foreign tourists are more likely to wander around. The challenge, she said, was to make sure they could do so comfortably.

“We’re planning to register the market. Since Chatuchak is not a fresh market, it might fall into the one-storey shopping centre category,” Ms Sirima said.

LOST IN RETAIL: The huge market, with its labyrinth of cramped alleyways, sits on a sprawling 68-rai plot of land on Phahon Yothin Road owned by the State Railway of Thailand.

VYING FOR CONTROL

Vendors wonder, however, why this hasn’t been done already, since it means Chatuchak is operating as an illegal market.

The failure to register Chatuchak as an operational market is one thing the vendors cooperative, led by Mr Weerapoj, considers an administrative flaw, and is using as ammunition to attack the SRT’s governance.

Since the SRT took over Chatuchak operations in 2012, little progress has been made in terms of renovating the site. Delays have been partly caused by disputes with the BMA.

Ms Sirima said several weeks ago, she ordered a tree within the compound to be cut down because it was blocking the road, only to find a warning letter sent to her from the BMA saying permission was required from City Hall.

Chaloemchai Kiewpradit, the BMA’s chief of weekend market operations, said there were still several matters being worked out between City Hall and the SRT.

He said the BMA was ready to resume management of the market if the rental fee can be settled at an “acceptable” rate.

“The BMA has managed Chatuchak since 1982,” he said. “The SRT has always tried to increase the annual fee. In 2002, it proposed that an annual fee be increased to 300 million baht, with a 10% increase every three years, but we settled on a lower rate than that.

“Then in 2012, the SRT proposed the annual rate rise to 420 million baht a year, which is still a subject of dispute.”

Mr Chaloemchai, who still maintains an office at Chatuchak in a building that belongs to the BMA, explained there are two main issues being discussed between the two state agencies.

“The first is whether the BMA could manage the premises in a way that could benefit both agencies,” he said. “Secondly, the BMA is asking, if ultimately it could not secure the Chatuchak management, whether the SRT could offer compensation of around 300 million baht for the [BMA-owned] buildings and maintenance on the Chatuchak grounds.”

He said the BMA, if it is able to retain management of the market, would turn the plot into a profitable area at a reasonable management cost.

“The BMA sees this as a mission to maintain the reputation of Chatuchak as an international shopping landmark,” Mr Chaloemchai said.

“With our manpower and expertise, we could make the land more profitable at a lower cost. The SRT is outsourcing everything from security to cleaning services.

“I don’t think they will be able to generate the 420 million baht they are after.”

BITS, BOBS AND BOXES: For vendors who sub-lease space at the market, the high costs mean profit margins are slim. It also wreaks havoc with efforts to organise the market into distinctive zones.

‘THEY WILL HAVE TO ADAPT’

Ms Sirima is running weekly surveys looking at the number to visitors to Chatuchak, leading to rumours that the SRT might be looking to outsource the market’s management.

Prapas Chongsanguan, who was removed as SRT governor last year, had earlier signalled the BMA would not be given control of the market. “Most vendors clearly don’t want City Hall,” he said. “So if we don’t manage the market ourselves, we’d rather have another investor run it.”

Mr Ekachai said he feared the market might be redeveloped as the debt-riddled SRT looks to boost its bottom line. “That is what I think and some other vendors are also thinking the same thing, but every time we meet with the SRT representatives, they say that it’s not going to happen.”

Ms Sirima said there were no plans to redevelop the market site, and that the SRT was there to stay. “I believe vendors can stay alive, but they will have to adapt,” she said.

“The surveys conducted since New Year show that there are around 200,000 visitors to Chatuchak each weekend. Half of those come from China, Malaysia and Singapore, while the rest are Westerners and Thais.”

Mr Weerapoj said he would have no problem if the land is redeveloped, so long as vendors are not simply abandoned. “It is fine if the SRT is going to kick us out, but I think that they should find a new place for us, probably 100 rai, so that we could move there.”

MONEY TO BE MADE: After hiring analysts to value the land, the State Railway of Thailand found the market was worth 420 million baht in 2012.

CUSTOMER DISSERVICE

As the cost of running a shop at Chatuchak rises, customers say they are noticing the cost of goods rising too.

Linda, a shop owner from Italy, has visited Chatuchak annually for the past 10 years to look for new supplies and exotic designs for her clothing shop.

“I think Chatuchak is getting bigger every year but the items are being sold at more expensive prices,” she said.

Kwan, who visits Chatuchak weekly to source materials for her handmade clothing business, said she had heard many vendors complain that it was becoming increasingly difficult to make money.

“I think the market has to work on its zoning. The rampant sub-leasing means the market’s zoning is disorganised, as the type of items being sold changes every time a vendor moves out,” she said.

“On top of the heat, this makes it difficult for people to find what they are looking for. People just want to walk where it is not too hot or crowded.”

She said the proliferation of night markets across the city, such as JJ Green which sits right next door to Chatuchak, has also helped to kill off business.

“But Chatuchak still holds an edge, compared to other wholesale locations such as Pratunam, because the products here, accessories, furniture or leatherwear, are more diverse and unique and are mostly handmade.”

Mr Weerapoj said Chatuchak’s land value could not be estimated in net terms; its uniqueness and diversity and the reputation it brings to the country in terms of tourism are invaluable.

“Chatuchak creates jobs for not only us vendors, but also for tuk-tuk drivers, hotels, restaurants, airlines and countless other people involved in making it appealing for visitors,” he said. “Chatuchak is a place of opportunity for all and it should belong to the people forever.” n

Do you like the content of this article?
COMMENT (7)

Vote delay

Parliament delays by a month the vote on six motions on charter amendments and to set up a tripartite panel as pressure mounted outside Parliament.

21:36

Joshua Wong arrested for 2019 illegal assembly in Hong Kong

Hong Kong police arrested prominent democracy activist Joshua Wong on Thursday for participating in an unauthorised assembly in October 2019 and violating the city's anti-mask law.

20:11

AirAsia adding services in super app

AirAsia Group announced on Thursday it is building a super app off its existing mobile application and website to provide services such as e-commerce, deliveries and payments that will be available next month in Thailand and Asean.

19:48