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Thailand’s retail industry in resurgence?

Thailand’s retail industry is showing small signs of resurgence.

But while the retail sales growth rate is slowly regaining pace, it is still far short of the heyday of seven years ago, Thai Retailers Association (TRA) vice-chairman Tuongratanaphan Chatrchai said in a presentation to the C-star Retail Forum in Shanghai this week.

The changing demographic and lifestyles of Thai consumers, combined with a more connected and informed population, are overshadowing the economic volatility of Southeast Asia’s second largest economy.  

And connectivity is a recurring theme in Chatrchai’s list of key influences for the nation’s retail sector in the immediate years ahead. “Thai consumers’ lifestyles are continuously changing. Young customers are using their mobile phones and computers to shop online.”

Thailand had retail market growth of 9.2 per cent in 2010, a figure envied by some of its Southeast Asian neighbours. The following year it was 7.6 per cent, falling to 5.5 per cent then 4.4 per cent in the ensuing years before 2014’s rock-bottom 1.2 per cent – coincidentally, the year the military took control of the country in a coup.

Retail growth recovered to 2.2 per cent in 2015 and 2.4 per cent last year – still a far cry from the 8 per cent Chatrchai terms “normal”.

Industry transforming

But while growth may be sluggish, the industry is transforming in many ways with certain sectors outperforming others.

The health and beauty retail market grew 8.5 per cent last year, supermarkets by 7.5 per cent and both department stores and convenience stores by 3.5 per cent, well ahead of the industry average. Electronics and appliance stores were the worst performers, receding by 1.6 per cent.

Top of Chatrchai’s list of key trends in Thai retail right now is a blurring of segments.

“We have shoe shops selling coffee (My Shoe Cafe), coffee shops selling music, supermarkets selling loans alongside food, and department stores selling fashion and insurance.”

At the same time, there is a move from segmentation to fragmentation: the convenience sector is splitting into convenience-food retailing, convenient health and beauty, and “super-convenience”, which he describes as the evolution of hybrid convenience stores and supermarkets – larger format stores, often trading around the clock, like Aeon’s MaxValu and Mini Big C.

“Thai people usually buy a few things more often. We get bored going to hypermarkets… that’s why small stores are good in Thailand now,” said Chatrchai.  

Online shopping is gaining momentum, and the TRA is predicting growth of between 15 and 20 per cent over the next few years, sharply higher than the 3 to 5 per cent of the total retail market. Online accounted for about THB1 trillion in sales last year, compared with brick-and-mortar’s 3.4 trillion and TV shopping’s modest 20 million.

Slow to take off

Chatrchai predicts strong growth in online grocery shopping, but says food has been slow to take off because of the density, and thus convenience, of on-ground food stores.

Click and collect is also attracting more customers in Thailand.

“Click-and-collect services are becoming more common for the simple reason it’s more convenient for the busy shopper – and the retailer can draw the customer back to the store where upselling can occur.”

Chatrchai expects more online retailers to move into the physical retail space, following the example of stationery e-tailer Office Mate, which has opened 100 shops after nearly a decade online.   

And he expects more provincial retail chains to upscale and challenge the 40-odd large Thai retailers dominating the marketplace.

“Provincial retailers in Thailand account for just 15 per cent of the country’s retail sales. A new generation of Thais is taking over, and they’re starting to expand.”

He said modern-day retailing was becoming more and more complicated. “Customer demand is more dynamic. Demand forecasting needs by be accurate and speedy, and retailers need to make the most of big data.

“Customers want a seamless shopping experience.”

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