34
DEC 2017
FOOD FOCUSTHAILAND
SPECIAL
FOCUS
• ConvenienceStores:
Conveniencestoreshaveshown thehighest
ratesof growth in investment of allmodern tradestore formatsandhave
also taken thegreatestmarket share from traditional retailers. 7-Eleven
(partof theCPGroup), large-scaleplayer,hasbenefited fromcontinuous
investment and expansion including branch expansion in PTT’s petrol
stationssuch that thechaincanachievecompletenational coverage. In
addition to 7-Eleven, new entrants havealsoappeared in themarket:
-Thaioperators fromother retailbusinesses (suchasLotusExpress,
Mini BigCandTopsDaily)whoengage instandaloneshopsandoutlets
in petrol stations in order to support demand from travelers and people
in communities; and
- Foreign businesses including 1) Lawson, from Japan, which is
engaging in joint ventures with Sahapat, amajor Thai manufacturer of
consumer goods and in 2012. Lawson took over Sahapat’s chain ‘108
Shop’; and2)Aeon, another Japaneseventure, has joinedwithMaxvalu
Tanjai, to distribute ready-mademeals and distinguishes itself from the
competitionbyoffering importedJapanese itemsaroundafifthof its total
range.
In2016,Thailandwashome to15,325conveniencestoresnationwide,
up from 14,292 in 2015 or by 7.2% The latest expansion include all
brands, led by 7-Eleven opened 773 branches (8.9%), FamilyMart 50
(4.6%) and Lawson108 52 (11.7%).
Despiteall of theabove, growth rateshaveslowedsince2013.Data
from theThai RetailersAssociation showed that for 2011-2013, growth
averaged13.3%, for2014-2015 itwas3.4%.For2016,KrungsriResearch
estimated that the rateof growthwas only 3.0%.
IndustryOutlook
Themodern trade sector is expected to see improving prospects over
thenext threeyears (2018-2020)as theThaieconomy recovers (Krungsri
Researchestimates that annual growthwill be in the rangeof 3.5-4.5%
fromaverageof2.4%during2013-2016),drivenby investment,consumer
spending,and tourism.Moreover,benefitswillalsoaccrue to theeconomy
fromgovernment infrastructuredevelopment inareassuchas transport,
airport expansion, and special economic zones in border regions, and
fromgovernmentmeasures tostimulate theeconomy.Retailerswill gain
generally from both increasing purchasing power as the rate of
urbanization continues to increase and a vibrant and growing tourism
sector.When theseareadded to theeffortsof theprivatesector todevelop
Thailand as a regional shopping hub
7
, the advantages modern trade
businesses gain from their extensivenational networks, and increasing
consumer demand for modern shopping environments, the near future
looksmuchbrighter for thesector than theexperienceof the recent past
might indicate. Indeed, forecasts for thenext threeyearsare foraverage
annual growth of 4-6%.
That said, the overall outlook for the sector is also for increasing
competition.Thiscompetitionwill bewith1)businessesoperatingstores
of asimilar type; 2) businessesof adifferent typebut targeting thesame
customer base; and 3) new playerswhowill see opportunities to seize
moremarketshare,especially for foreignbrandsandentrepreneurswho
will also wish to tap into spending by foreign visitors in Bangkok and
other tourist areas by opening and/or expanding retail outlets and to
exploit the long-termpotential of theeconomy for growth. Inaddition to
this, the rapid expansion of online shopping is expected to takemarket
share fromcompetitorsdespiteasmall proportion. E-commercemarket
in Thailand is anticipated to expand at 22% per year until 2020
8
as
consumers becomemore comfortable with online shopping and large-
scale foreign investorsengage ine-commercebusiness inThailand. To
counter this danger and to maintain market share, businesses in the
modern tradesector thusneed to implement strategies includingpricing
and cost-cutting policies to increase their competitiveness. Given that
operators are also investing in developments of their e-commerce
businessesalongside the retailoutlets, theywill likely face fallingmargins.
A response to this will be to expand coverage inmajor urban zones to
capitalize on the rising purchasing power of consumers in these areas
tomaintain revenue and long-term growth.
InvestmentwillContinue in theModernTradeSector inboth
ThailandandOverseas.
• Investments in Thailand will come from groups operating
shoppingmalls and department stores. Several will schedule to be
opened during 2017-2020. Investments in small retail outlets are
likely to grow at a slower rate. New stores will be opened in BMR
following the lines of newmass transit routes and in upcountry in
locations with real estate projects by large-scale developers or the
special economic zones.
• Investmentsoverseaswill increase. The level of outwardThai
investments in2016havemore thandoubled the level registered in
2012. They included thosegoing tootherASEANnations toprovide
increasing opportunities to enter new territories and to benefit from
new and opening markets which, given their size, increasing
purchasingpower, risingmiddleclass,and tourismgrowth inASEAN,
have significant opportunities for modern trade operators. Thai
retailerswill graduallyexpandmore investments to retail business in
neighboring countries. After 2016, Thailand’s private sector has
investedmore thanUSD 1 billion inVietnam.
However, risk factors that may put negative impacts onmodern
tradeshouldbemonitored.Forexample, theThaieconomic recovery
maydiffer fromexpectationsandpossible future taxhikes (particularly,
the value-added tax; VAT) will lift product and service prices.
Therefore,consumerspendingcouldbedampened. Inaddition,using
onlinestoreservice is likely to riseatanacceleratingpace in linewith
lifestyle of customers who utilize advance technology to apply in
businesses, suchasdirect debit payment, e-wallet, logisticssystem,
which help respond consumers’ demand. Therefore, frequency of
onlineshoppingandonlineservices isexpected to increaseand this
poses risks to small retail outlets and threaten their survival in the
long term.
Additional Information
1
Modern traders have significant bargainingpowers andcanundercut traditional
grocersand retailerssince theyareable tospecify termsof trade to theiradvantage
and tocollect a variety of charges from suppliers andagentswhowish tobe
stockedby anoperator. These include: charges for first orders or for providing
aproduct code; fees to support services or activities suchas rent for store space
andcharges forsignage,meetingsales targets,and transportation fromdistribution
centers tobranches;charges forpromotionsandmarketingsuchas those forprinting
leaflets, andsubsidizinggiveaways, anddiscounts, particularly for occasionssuch
asanniversaries,newstoreopenings, renovationsand festivals;providing favorable
credit terms to retailers, typically90-120days;andcontractswhichallow forunilateral
terminationof business.
2
Working in retail andwholesale is a restrictedactivity, according to theForeign
BusinessAct B.E. 2542andas such, non-Thai nationalswhowish tomake invest
mentsof less thanTHB100millionare required toseekauthorization from theForeign
BusinessCommittee.However, those investingmore than this limit needonlynotify
theauthorities and theywill automatically begrantedauthorization toengage in
retail andwholesale trade inThailandand thus the lawprovides anopening for
non-Thais toenter the sector.
3
TheStandingCommitteeonCommerce, IndustryandLabor, theNationalLegislative
Assembly.
4
CashandCarry storesare regardedaswholesalersandwerenot discussedhere.
5
Colliers International Thailand
6
Regulations on theestablishment of commercial buildings (retail andwholesale)
are, for instance, 1) thosewitha store floor spaceof less than300 sq.m.may be
located in theareawhich ispermittedandspecified in thecomprehensivecityplan;
2) thosewitha store floor spaceof between300-1,000 sq.m. should faceapublic
roadwithat least four lanes or over 20meterswide, andwitha front road setback
of at least 50meters frompublic roads; 3) thosewithastore floor spaceover 1,000
sq.mmust be locatedoutside theareaspecified in theurbancomprehensiveplan,
facepublic roadorover40meterswide, anda front roadsetbackof over75meters
frompublic roads.
7
Thai ShoppingCentersAssociation
8
DHLeCommerce (part of DeutschePost Group, aglobal logistics company)
