Retail Industry in Thailand All businesses that sell goods and services to consumers are consider under the category of retailing. In 1997 there was a biggest financial crises in Asian (South East Asia) especially Thailand which was known as Tom Yum Kung Crisis. Thailand was seriously facing with the decline of economic growth where the private companies were going bankrupt causing the overall decline in its economy. The solution to the problem was the Free Trade Agreements that were made between Thailand and the United States of America and between Thailand and China. This agreement helps to facilitate the flow of money in and out of countries. Due to the free trade agreement between the nations, a large number of foreign companies were attracted to invest in Thailand but much in the retail sector. The Thai retail market has strengthened their control by the overseas retail operators during in 1999 and 2000 where the large number of investors initially brought in a lot of job opportunities and capital, making the nation’s economy better. However, looking in long term we could probably see that too much of Thailand’s economy and business sector was and are controlled by foreign corporations especially in Retail Industry by the foreign companies such as Tesco Lotus, Seven-Eleven, and Big C that entered Thailand Retailing Industry and have been growing rapidly. Oppositely, many local stores were forced to declare bankruptcy due to the fierce competition created by huge companies. There are approximately five hundred supermarkets operating in Thailand. The difference between supermarkets, superstores, hypermarkets and cash-and-carry type stores in Thailand is their respective size and method of purchasing. At presently the retail businesses such as supermarkets, superstores or hypermarkets stores can generate more sales than convenience stores especially for snack foods. The largest chains of retail store compare in terms of dollar sales value are Siam Makro, Big C supercenter, Tops supermarket and Carrefour. Moreover, there have been attempts to stop the spread foreign retail stores such as Tesco Lotus, Big C and Seven-Eleven but the reason that could not stop the spread is that people continue to support the business by still purchasing at these stores and neglecting the difficulties of the local grocery stores. From my point of view I strongly agree and would prefer to do shopping in Big C, Tesco Lotus or Makro rather than the local stores because firstly, the prices of goods sold by the large stores are cheaper than those in small local shops. This may be due to the fact that large corporation order products in relatively larger bulge and thus the prices are discounted. Secondly, the large supermarkets and
Transcript
Retail Industry in Thailand
All businesses that sell goods and services to consumers are consider under the category of retailing. In
1997 there was a biggest financial crises in Asian (South East Asia) especially Thailand which was
known as Tom Yum Kung Crisis. Thailand was seriously facing with the decline of economic growth
where the private companies were going bankrupt causing the overall decline in its economy. The
solution to the problem was the Free Trade Agreements that were made between Thailand and the
United States of America and between Thailand and China. This agreement helps to facilitate the flow
of money in and out of countries. Due to the free trade agreement between the nations, a large number of
foreign companies were attracted to invest in Thailand but much in the retail sector. The Thai retail
market has strengthened their control by the overseas retail operators during in 1999 and 2000 where the
large number of investors initially brought in a lot of job opportunities and capital, making the nation’s
economy better. However, looking in long term we could probably see that too much of Thailand’s
economy and business sector was and are controlled by foreign corporations especially in Retail
Industry by the foreign companies such as Tesco Lotus, Seven-Eleven, and Big C that entered
Thailand Retailing Industry and have been growing rapidly. Oppositely, many local stores were forced
to declare bankruptcy due to the fierce competition created by huge companies. There are approximately
five hundred supermarkets operating in Thailand. The difference between supermarkets, superstores,
hypermarkets and cash-and-carry type stores in Thailand is their respective size and method of
purchasing.
At presently the retail businesses such as supermarkets, superstores or hypermarkets stores can generate
more sales than convenience stores especially for snack foods. The largest chains of retail store compare
in terms of dollar sales value are Siam Makro, Big C supercenter, Tops supermarket and Carrefour.
Moreover, there have been attempts to stop the spread foreign retail stores such as Tesco Lotus, Big C
and Seven-Eleven but the reason that could not stop the spread is that people continue to support the
business by still purchasing at these stores and neglecting the difficulties of the local grocery stores.
From my point of view I strongly agree and would prefer to do shopping in Big C, Tesco Lotus or
Makro rather than the local stores because firstly, the prices of goods sold by the large stores are cheaper
than those in small local shops. This may be due to the fact that large corporation order products in
relatively larger bulge and thus the prices are discounted. Secondly, the large supermarkets and
convenient stores are able to provide a larger variety of goods due to their larger store areas and higher
capital.
Thirdly, the products in foreign retail stores are arranged in a clean and pleasant-looking environment
while the products in small local shops are sometimes dusty and expired. Fourthly, the retail stores are
more accessible to people than the local stores which many had gone bankrupt because of the fierce
competition by huge companies. The large corporations’ retail stores such as Tesco Lotus, Big C,
Makro and 7-11 are seen as having a “higher class” than small local shops. Another good reason to shop
at foreign retail than local store is that If we look at current Thailand economy where price of oil getting
higher and uncertainties of the Baht's value against the U.S. dollar have affect the level of economic
growth. At this point, I think that consumers have adjusted their behavior in terms of the way they use
cars to reduce fuel consumption such as saving habits have been adopted to cope with the higher cost of
living. Lastly, I experience that most of the people and I visit foreign stores more often than the locals’
due to the stores’ famous image and reputation. For these reasons, Thais, resident expatriates and
tourists in all major cities have turned to shop more at modern retail market rather than at traditional
markets because consumer can park their car and get everything in one trip from modern retail market
with better value and good quality.
Chapter 1: Introduction
The Retail sector is one of the important components of Thailand GDP worth approximately Baht 1.4
trillion (Modern Trade 40% and Traditional Trade: 60 %). However, the retail market is expected to
grow at least 3-5% in the year 2011. Recently in the past during the year 2010 Thailand retail sector
continued to show improvement and was generally positive with the recovery of the overall economy
while in the same year the retailing industry faces with economic uncertainties and political problems
leading to the shutdown of Ratchaprasong intersection in Bangkok by anti-government Red Shirt
protesters during April-May 2010. This has disturbed the operation of large numbers of retailers in the
same area. However, governments are stimulating the policies with an effort to improve consumer
confidence to stimulate their spending while the Leading chained retailers such as CP, Ek-Chai
Distribution System Co Ltd, Central Retail Corp and Big C Supercenter PCL have performed aggressive
marketing and promotional campaigns to continually expand their sales channel through the internet
because it requires less capital investment and helps the retailers capture wider groups of consumers
which particularly are the younger generation. According to the “Retail Sale Index” there has been an
increase interest from both domestic and international retailers because of the significant development of
retail sector in the past decades with the entrance of new and more modernized players operating under
various trading formats in response to the stimulate the consumers’ behavior.
In 2011, Thailand’s retail market is expected to remain strong as Thai economy has improved because of
the foreign tourists’ had return and the rising demand from Chinese and Indian economies which will
help the increase of the Thai export sector. From the Nation “In Thailand, the Chinese investors will not
invest in upstream businesses such as in the manufacturing sector as they had done in the past. Their
investments will be widely enhanced in local middle-stream and downstream industries such as in
setting up local wholesale centre, in logistics and distribution, and even in retail business. The investors
from China now will set up their business for logistic and product distribution directly in Thailand. The
investor will basically use Thailand as their hub to distribute their goods in ASEAN to enjoy the trade
benefits that will flow from the ASEAN Economic Community in 2015.
According to Chatrchai Tuongratanaphan, a retail expert and adviser to the Thai Retailers Association,
said that “Thailand could take advantage of the wholesale trade centre in order to promote the export of
Thai products together with Chinese goods to ASEAN markets because Thailand has already got a good
geopolitics features such as location at the centre of the Indian and Pacific Oceans where it can be a
trading hub for ASEAN. It will also attract many shoppers from ASEAN into the country especially the
investors will also use ASEAN to connect with other trade communities,"
The Contribution of Retail Industry
Currently, the Thai government is interested in capitalizing on the opportunities within the service
industry due to the fact that it is the key sector that contributes to the country’s economy.
According from the statistics provided by the Ministry of Labor, the foreign corporations in the retail
field such as Tesco Lotus, Big C, Carrefour, Siam Makro and seven-eleven etc have provided steady
increase with a large number of jobs like 135,526 workers working in retail industry in 1990 while
195,299 reported in 1999. During between the year 2000 to 2005, employment in the service industry
expanded by 2.6 million compared to 1.6 million in the manufacturing industry. Currently there are
Construction 7%
Agriculture 13%
Industry 32%
Services 48%
around 12.6 million workers are in the service industry and the demand is growing by 5 % per year.
Therefore, without the large retail corporations, a considerably large number of people might become
unemployed and this would unavoidably affect the nation’s economy. However, it must also be
acceptable that the wide spread of foreign retail stores and supermarkets has obviously put local stores
into a very difficult positions where many storeowners had difficulties trying to survive in this
competitive situation and others who could not bear the pressure fell and declared themselves bankrupt.
From the Biz week 5th
September 2006, more than 50 representatives of bankrupted local store owners
from various provinces traveled to the capital city to ask for help from the Government due to the fact
that huge foreign retail stores had set up too many new branches in many places and the outcome of the
result of their expansion was the local store owners’ difficulties. According to the same source on 30
march till 5 April 2007, a survey was conducted and found that owners of the local store agreed that they
face more difficulties where 88 percent having a severe decrease in sales and the other 12 percent had a
slight decrease after the spread of foreign modern market. Furthermore, large foreign retail stores are
able to sell goods at lower prices due to the fact that they purchase goods in a much larger quantity and
forced local stores to lower their prices. Moreover, statistics have shown that during year 2001to 2006,
the 60,529 local stores in retailing industry out of 90,681 stores had gone bankrupt. The problems
affecting the retail industry is that the industry heavily depend on investment in intangibles field such
human development and technology applications. The critical problem facing by the retail industry is
seeking for qualified service staffs to meet new technology applications because most of available staffs
have received little formal services training and lead to high turnover rate of qualified staffs. It is also
interesting to note that the requirement of human resource in retail sector is heavily concentrated in
skilled labor.
Major Retail Operators in Thailand
Traditional Trade
The Traditional trade operators consist of Mom and Pop stores and local street store etc. These stores are
usually small in size but they are being mostly operated by local family owners. In Thailand retail
sector, the traditional market tends to have the biggest market share than modern trade market.
Modern Trade
1.1 Superstore or Hypermarket
Thailand have the only 2 major players under this market segment are Tesco Lotus and Big C. This
type of market deals with a very large retail facility which carries an enormous range of products under
one roof including full lines of groceries and general merchandise which allows customers to satisfy all
their shopping needs in one trip. Tesco Lotus is known as the biggest player hypermarket segment. On
the other hand, Big C is the second participant within the hypermarket segment. In 2010 Big C acquired
Carrefour’s Business operation to become a leader of hypermarket operator in Thailand with similar to
Tesco lotus in 2011.
1.2 Supermarket Sector.
A super market is defined as a self-service store offering a wide variety of food and household
merchandise products. The sector is larger in size and has wider selection but smaller than a
hypermarket. The major players of this market sector are Central Food Retail (CFR), Foodland and
Villa Market.
1.3 Convenience Sector.
A convenience store is defined as a small store located alongside with busy roads in populated areas.
The items available are such as snack, ice-cream, beverages, cigarettes, selection of processed food,
groceries, newspapers and magazines, toiletries, and hygiene products. Some of these stores also offer
services like bill payment. This sector is dominated by 7-Eleven, V Shop Express, 108 Shops, Family
Mart and Tesco Lotus Express
1.4 Department Store Sector.
A department store is specializes in selling a wide range of personal and residential product. The
department store segment is dominated by two major players namely Central Retail Corporation
(“CRC”) which operates Central, Robinson and Zen and on the other hand is The Mall Group which
operates The Mall, Emporium and Siam Paragon.
1.5 Specialty Stores.
Specialty stores are small stores specialize in a specific range of merchandise with high levels of service
and expertise. The Specialty store segment in Thailand is dominated by two players namely Watson and
Boots. Both chains offer a wide variety of products including pharmaceutical product, health and beauty
items, personal care and consumer goods
1.6 Category Killer
This segment focuses on few categories of merchandises and offers a wide variety of such merchandise
at relatively low prices. In Thailand, there are a number of such chain stores with individual
specialization and the major segments includes office supplies, consumer electronics, sporting goods,
home improvement and furniture etc.
Graph of Major Retailer in Thailand
[Thai
Retail
Busin
ess
Struct
ure
(Sourc
e:
Thai
Retail
ers
Assoc
iation)
}
Chapter 2: PEST (LE) Analysis Overview of Thailand Retail Industry
2.1 Political & Legal Environment
Retail companies are greatly affected with the decision concerning with both political and legal
environment. Political decisions can affect the business in both positive and negative side. From the
current situation, Thailand had face with many political problems since 2006 till now. An unstable
government has given the country an image of instability to control. Political factors include
government policies relating to the industry, tax policies, laws and regulations, government pressure,
