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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,
contract enforcement law, employment laws, competition regulation, trade restrictions, tariffs, interest
rates, monetary policies and safety regulations etc. In the year 2010 Thai retailing business faces with
both economic uncertainties and political turmoil 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.
Moreover, the political risk is risks that do affect the business in such a way that owners or investors not
making much money as they expected and will lose money. Currently with new election campaigns
there has been an announcement for new employment wage to set at standard 300 baht/per person and
the salary for employee with Bachelor degree is set at 15000 baht.This can affect the retail companies as
well as other industries because if the rise in wages as well as rising in cost of material will absolutely
make the companies much harder to earn profit. If the companies pass those costs to consumers, it will
also affect the consumer to stop buying the product because they are getting very expensive. Sometime
with political decision can lead to the problem of Inflation in Thailand. This affects to every importance
business such as the investor fear to invest business which leads to no tourists and affecting tourism and
hospitality industry.
On the other hand, legislation environment do concerned with government protection laws that include
the prevention of an unfair competition as well as protecting consumers from unfair retail practices. For
example, if some company promotes their products by telling lies in their advertising and deceives
through their packages and through their prices will get penalty based on the rules and regulation.
2.2 Economic Environment
Economic is another important factor where the organizations in the retail industry must also give
enough attention to the nation economic stability. The economy of Thailand by retailer sector has been
active since the year 2002 with a sharp increase in new investment with both domestic and foreign.
However, with political uncertainty and the global financial crisis in 2008 has weakened Thailand’s
economic growth by reducing domestic and international demand for both its goods and services
including tourism. Currently, the retail sector is one of the important components of Thailand GDP
worth with approximately 1.4 trillion Baht. Moreover, Thailand’s economy and many business sectors
are controlled by foreign corporations especially in Retail industry by the foreign companies such as
Tesco Lotus, Seven-Eleven, Carrefour and Big C that entered to Thailand Retailing industry and have
been growing rapidly. Thought with the rapid growing of foreign retail companies has affect many of
the local stores to declare bankruptcy due to the fierce competition created by these huge companies.
Under economic environment, the increase or decline with interest rates, government spending,
unemployment policy, taxation, exchange rates and inflation rates can affect every business. This also
have great impact on retail industry in the food sector when importing from USA because If the
economics of the nation is declining can lead to decline in the currency of the exchange rate.
(The above diagram is indicative and varies between chains. Besides the above distribution channel, the
principal and manufacturer can also deliver food products directly to their distributor.)
This can further lead a great problem for the US exporter because it would be easier for Thailand to
rather do export. A decline in currency would also reduce the purchasing power of Thai baht when
import from USA. Moreover, a bad performance of the nation economic can make the government to
increase the tax rate on import product. This can affect the investor to stop importing and however it will
affect the USA economy too. Therefore, an increase or decrease in inflation rate, government spending
and exchange rate can have a great affect on import and export field.
According to Busaba Chirathivat (Thai Retailers Association president) “Thailand's retail sector is
expected to continue growing by 7-8 per cent by the end of this year as a result of the new government
which is expected to help boost the Consumer Confidence Index”. To attract additional foreign
investment, the government of Prime Minister Abhisit has promised to look for ways to expand
investment opportunities and focusing more on green technology and manufacturers. Looking on
another economic factor is the inflation rate. The inflation rate in Thailand was last reported at 4.08
percent
in July
of 2011.
U.S
Exporter Thai Distributor
U.S Trader Thai Importer
Retail Central
Warehouse Depot
Supermarkets,
Supercenters,
Wholesale outlet
From 2000 until 2010, the average inflation rate in Thailand was 2.51 percent.
Therefore, Thailand economy used to get benefits from low inflation rate but at currently thing is getting
expensive. Last year in 2010, Thailand’s retail market remain strong as Thai economy has improved
because of the foreign tourists’ return and the rising demand from Chinese and Indian economies which
help increase Thai export sector. 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 have provided steady increase with a large number of jobs like 135,526 workers working in
retail industry in 1990 while 195,299 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 around 12.6 million workers are in the service industry and the demand is growing
by 5 % per year.
It can also be seen that in 2010 with positive economy performance has increase a high competitive
environment in retail industry. The retailer like Tesco Lotus expanded with large scale on both large and
small format not only in Bangkok but also in provinces. On the other hand, Big C opened 4
hypermarkets, 2 Juniors, and 9 Mini Big C stores. Moreover, in 2010 Big C had acquired Carrefour’s
Business operation to become a leader of hypermarket operator in Thailand with similar to Tesco lotus
in 2011.
2.3 Social – Culture Environment
It must also take into a consideration for the retail industry that the social factors do affect the retail
business that comes in a broad range of categories. Most importantly there are key factors that retailers
must make themselves aware of when they trying to decide where to locate their businesses. Social
factors often include the cultural aspects, health consciousness, population growth rate, age distribution,
income and lifestyle of peoples. Unlike in U.K where a trend of getting internet access at home and
buying online is developing. Thai people would rather go with family to retail mall and shop everything
by themselves in one trip. With political decision about the policy to increase the wages of employment
to be 300 baht and worker with bachelor degree must be paid at minimum salary of 15000 baht. This can
help to improve the economy because the more income consumers have will make them spend more.
Therefore, it is important that the company must operate in accordance with the social systems in order
to gain good reputation and effective public image. Customer service has become a more visible
component of the retail business with stores offering incentive and loyalty programmes to improve
satisfaction of customers. On the other hand, cultural aspects are very important in order to understand
the various needs of different individuals that belong to different cultures.
2.4 Technological Environment
The most important factor that shape people's lives is technology. Technology plays an important part in
the retail industry. There are still many businesses that do shop online. Retailer companies with
advancement in technology can have a competitive advantage over the competitors’. The technological
factors are involved with the new inventions and ideas such as R&D activity, automation, logistic with
faster distribution channel in order to distribute product by the use of technologies to support
marketing information systems and manage good relationship with customer and providing an effective
services to satisfy them.
Big retailers like Big C and Tesco lotus use modern technology to enhance the experience their
customers by giving the loyalty cards that are as use as one way of technology in order to keep the track
consumer spending habits and buying trends. This technology help the companies to exactly know who,
what, when and how people are buying certain products and the companies can come up with their
promotional campaigns. Retail companies also uses technology to enhance their stores safety, security
and communication is through the use of radios that give retailers the perfect way improve their
communication and performance between themselves and customer by allowing the members of staff to
communicate over a wide area but they can be used as a health and safety tool so workers can report
accidents, check stock levels and stay in touch across the entire site from the shop floor to the
distribution area.
REFERENCES
http://www.nationmultimedia.com/2011/01/19/business/Chinese-storm-looms-over-retail-industry-
30146662.html
http://www.businessweek.com/news/2011-06-23/thai-banks-retailers-to-lead-stock-rebound-top-fund-
says.html
http://retailindustry.about.com/od/famousretailers/a/asian_2010_largest_retailers.htm
http://www.euromonitor.com/retailing-in-thailand/report
http://thairetail.blogspot.com/search?q=big+c
http://www.economywatch.com/world-industries/retail-industry.html