33
DEC 2017 FOOD FOCUSTHAILAND
SPECIAL
FOCUS
61% of themarket in 2014, comparedwith only 25% in2001
3
.
Theoutletscanbecategorized intofive types
4
,eachofwhich
hasdistinct features.
1. Department stores
are the largest retail units which retail
higher quality goods, bothdomestically producedand importedand
sell at higher pricepoints thangoods indiscount stores.Department
storesareusually found incitycenters, theirdesignworks tohighlight
visual appeal and theyare typically staffedwithassistantswhohelp
to advise and assist shoppers. Central, Robinson and theMall are
major operators in thismold.
2.Discountstores/hypermarkets/supercenters
are large-scale
retailerswhichsellprimarily to lower-andmid-levelconsumers.Outlets
may be found in both city centers and on the edges of urban areas
and thestock range typicallyemphasizesvalueand lowprice.These
typesof outletsoperatedistributioncenters. In thisgroup,BigC, and
Tesco Lotus are themain players.
3.Supermarkets
focuson thedistributionof foodsandhousehold
consumergoods.Businessesmayeitheroperate free-standing retail
units (e.g. Foodland) or be found in department stores (e.g. Tops
Supermarket andHomeFreshMart).
4. Conveniencestores
are small retail unitswhichare rising in
popularity, takingmarket share fromolder style retailers.Consumers
prefer modern outlets which carry awide range of stock andwhich
are conveniently located in or near communities. 7-Eleven and
FamilyMart are notable examples of this typeof store.
5. Specialty stores
are found in large communities and retail
higher quality and higher priced goods, including the retailer’s own
brands. Boots,Watsons, andSupersports are examples here.
In addition, modern trade has developed new formats such as
category killer and single-price stores. Also, they expand their
branches tootherprovincesandpenetrate intocommunities, tambon,
and villages. Retail outlets have become a center of communities.
Modern trade; therefore,hascontinued to increaseamong intensifying
competition.
Situation
Modern trade has shown a tendency tomove in linewith consumer
confidence.Data from theThaiRetailersAssociationshow that,prior
to the outbreak of political conflict in 2014, modern trade grew at a
ratewhichwas inexcessof thatof theeconomy ingeneral,particularly
modern tradesuchas,hypermarkets,supermarketsandconvenience
stores. These stores have thus takenan increasingly large shareof
income and play an increasing influential role in themarket as they
have displaced older, more traditional outlets. However, given the
Thaieconomicslowdown from2013,domesticpoliticalconflicts, rising
levelsof householddebt,weakeconomic fundamental due to falling
prices foragricultural crops,all ofwhichconspiredsluggishdomestic
spending.Although thegovernmentattempted tostimulateconsumer
spending,modern tradehasseenasofteningofgrowth rates,atonly
3.8%peryearduring2013-2016,asharpdecline from the9.5%seen
in theperiod2010-2012. Inany case, largeoperators still managed
tomaintain theirmargins and continued to addnewoutlets.
The opening of retail space has sped up during 2013-2015,
particularly in department stores, shopping and community malls,
whichhavebenefited from continuing investment inboth the capital
and in regional centersacross thecountry.Thishas led to increased
retailercompetition.However,new investment in large-scalemodern
trade slowed in 2016. But investment in Bangkok and the outskirts
still rose slightly by 0.13million sq.m. Particularly in Bangkok, total
retail space were 7.5 million sq.m
5
. However, in the upcountry,
investmentsmadeby large-scale retailersoutsideBangkok focuson
provinceswhichare larger andmoredenselypopulated,whichhave
ready access to public utilities and which may also be in areas of
economic and trade centers or attracting significant numbers of
tourists, such asChiangMai, Phuket, UdonThani, KhonKaen, and
NakhonRatchasima.
TheSituation for Individual TypesofModernTrader
• Department Stores:
Flows of new investment inThai department
stores has been consistent for many years. 2012 and 2013were boom
years for theprovincesand this led to increasedactivity in landpurchases
and house building, which in turn opened opportunities for investors in
largemodern trade businesses and prompted a number of department
stores toexpandoperations in regional centersand in tourismprovinces.
However, following a slowing of regional economies (partly due to
falling prices for agricultural goods since 2H13), investors turned their
attentionback toBangkokMetropolitanRegion (BMR). Investmentswere
mostlymade in largedepartment stores, shoppingmallsand community
malls.
In2016, therewere77department storesoperating inThailand from
72 in2015.Thesefiguresare formajoroperators, i.e.CentralDepartment
StoreGroup and theMall Group only.
The sales growth of department stores in 2016was only 2.8%. This
is the lowest recorded level, lowereven than that seenduring2013-2014,
aperiodwhich sawextended street protests in theheart of Bangkokand
which culminated in a coup. This has naturally put pressure on profit
margins as income has fallen but fixed and variable costs remain high
and several leading operators have increasingly turned for investment
opportunities tomarkets overseas. This is due to their high potential in
thecaseofASEANmarketsand for their low investment costs in thecase
of Europe.
• Discount Stores/Hypermarkets/Supercenters:
Investing in
discountstoreshasbeen restrictedbyCityandTownPlanningAct, together
with additional regulations introduced in 2013 to strengthen the control.
Thismade it difficult toopenoutletswithincommunities
6
andso investors
have had to adjust their investment strategies for long-term growth.
- Investments inBMRwill focus on brancheswith a smaller footprint
andwillexpand theoutlets inalternativestore formats.Forexample,Tesco
Lotus is increasingly investing in itsLotusExpressandTaladLotusoutlets
to increase itspenetrationof lower-endmarketsandBigC isopeningMini
BigC stores to expand its potential market.
- Another route for expansion is the opening of upcountry stores,
especially in larger regional centerswhich are seeing urban growth and
inareaswhicharewell servedbycommunicationsnetworksandsowhich
functionas gateways to new geographical markets.
Discount stores have shown low levels of growth in income, a result
not only of the factors described above and increasing competition from
otherstore formats,namelyconveniencestoresandsupermarkets, through
which food and household goods are distributed, and specialty stores,
which stock non-food items. In 2016, discount stores were estimated to
haveexpandedbyonly2.0%, a fall from the10% rateof expansionseen
in 2012 and 2.6% average during2013-2015.
• Supermarkets:
Investment in supermarketshasbeen continuous
and ongoing both by the larger players which have been opening new
branches, although almost exclusively in Bangkok and its surroundings
or inmajor regional centers suchasChonBuri, ChiangMai andPhuket,
attractedbyconsumerswithhigherpurchasingpowerandwhoare typically
middleclass,withastrong tendency toshop inmodern tradeoutlets.Only
Talad Lotus has pursued an extensive policy of investment in more
provincialareas,with the result that in thisarea, it isnow themarket leader
in termsofboth thenumberofoutletsand total retail floorspaceoccupied.
In2016, therewere448 supermarkets in the country, up from424 in
2015. Tops opened the largest number of new branches, increasing its
portfoliowith 10 additional stores.
The general picture for supermarkets is one of strong growth as
compared toother store types, as theymanaged tocreatean impression
of beingmodern and of offering a selection of high quality, fresh items.
Moreover,attractingmiddle-andupper level customersandmeeting their
consumer demands requires reassurances of food safety. Marketing in
this territory allows retailers to regain some power in setting prices and
this has allowed these businesses tomaintain solid rates of expansion;
in2016, supermarketswereapproximated tohaveexpandedat a rateof
9.0%, comparable to the rates recorded in the past.
