Shift Towards Modern Retail Market Trends:
The retail market of Thailand has fascinated a wide array of both domestic and foreign retailers all striving to achieve their share of the consumer market. This has resulted in the creation of a highly viable environment. The economic growth of the country in the past years has brought about the quantitative extension of the retail sector. It has also made an elemental shift in customer liking, taste, and actions.
This move in the trend of malls and hypermarkets in Thailand is greatly influenced by similar developments across the country as multinational retailers keep on entering the market. But, it has been seen that the sales growth has been left behind that of the traditional convenience stores and supermarkets. However, the structure of the hypermarkets in Thailand is somewhat peculiar in an aspect as their products and market environment usually search for imitation of the old traditional markets. This is a strong point in the retail sector.
These casual domestic markets usually have a number of open stalls and vendors selling a variety of foods and eatables including meat; fish; fruits and vegetables and this stand as a tough competition for the newbie hypermarkets. But the marketing strategy of the hypermarkets also tends to beat the local sellers by offering all that is absent or not available in the traditional markets. The hypermarkets sell a wider range of new varieties and fresher qualities of food along with providing modern lifestyle goods and products.
Along with improving the stock of retail space expected to come up in the approaching years, retailers are also getting on a number of renovation tasks so as to attract new companies and consumers. A few of the renovation projects are Siam Discovery, MBK Centre, and CentralPlaza subsidiaries.
Various segments are contributing to Thailand’s retail market.
The retail industry of Thailand is basically divided into segments based on the product. The segments are:
- Home and garden
- Apparel and footwear
- Grocery items
- Consumer electronics
- Personal accessories
- Mobile and other electronic gadgets.
The food and beverage industry is undoubtedly one of the biggest retail segments in Thailand. In fact, Thailand ranked second in terms of the highest forecasted packaged food and drink sales value across South East Asia in 2020, after Indonesia.
- Food and Beverage: Food and Beverage (F&B) is one of the sections for a maximum of household expenditures. It is a key factor driving the retail sector of Thailand. The trend in food consumed is changing gradually along with the shift in the incomes of its population. The changes in the lifestyle as a result of the process of urbanization demand a broader range of food products in the market. Consumers are now looking for more processed foods in the hypermarkets and getting distanced from the traditional fresh foods available in open markets. Exposure to international ways of life and the popularity of foreign and processed food products is resulting in a greater demand for easily available, ready-to-eat foods.
- Consumer Electronics: The market of consumer electronics is expected to show a positive move in the coming years. Expected progress in the current political state and a possible revival of the export sector may enhance the purchasing power of customers. The consumers of the country will thus be able to buy quality products such as smart TVs and other electronic gadgets. The manufacturers are considered to introduce novel products with lower prices which will enhance market penetration amidst consumers with lower budgets. Thai people are keen on new technologies and trendy gadgets; therefore, the retailing of electronics and appliances is constantly on the rise. This is also forecasted to reach around ten billion U.S. dollars in 2023.
While the market is flooded with multi-products, the purchasing process also kept on changing. Types of modern retailers in Thailand include convenience stores, supermarkets, hypermarkets, and discount markets. These modern retailers are seen and accessible all over Thailand, especially convenience stores, which accounted for more than half of the market share of modern trade in 2018. In the same year, convenience stores also had the highest share of shopping outlets in Thailand. This was followed by discount stores.
In 2019 the biggest player in the retail sector in Thailand was CP All Public Company Limited, generating a revenue of almost half a trillion Thai baht from its store outlets. CP is the owner of the most distributed and well-known convenience store in Thailand, 7-Eleven. In the first half of 2019, 7-Eleven alone generated an impressive sales value of approximately 155 billion Thai baht in Thailand.
The retail sector in Thailand is highly competitive and numerous retail companies compete for a piece of the market.
Presently, large-scale modern traders in Thailand include 2-3 multinational companies and 3-5 local operators; they have an appreciable performance from strong revenue generation potential thanks to economies of scale owing to extensive branch coverage, financial strength, and diverse business formats that can respond to the needs of consumers.
The outlets in Thailand can be categorized into five types, each of which has distinct features.
1. Department stores are large-scale retailers with a store floor space of over 1,000 sq.m. and sell high-quality products, domestically produced as well as imported to medium to high-level consumers.
- Central Group has the largest number of branches and the greatest floor space. To help segment the market, Central Group has invested in various brands like Central, Robinson, Zen, and Central Embassy. Branch or store expansion is taking different forms according to their location. Robinson branches upcountry tend to take the form of a ‘lifestyle center’ that has a smaller overall area and that emphasizes rental space, whereas Central is investing in high-potential provinces. In addition, to better connect to a wider customer base, operators are also rushing to develop omnichannel businesses.
- The Mall Group has concentrated its efforts at the more exclusive end of the market, with investments in large, distinctive operations in central locations in Bangkok, such as Emporium, EmQuartier, and Siam Paragon. Its recent opening of The Mall upcountry shows a move into tourist areas and signals an attempt to capture the foreign market such as BluPort (Hua Hin) and BluPearl (Phuket-not yet opened).
- Other groups. Many other players exist in this area, with a significant number of Thai investors who operate in other sectors making investments in department stores. These investments typically take the form of developments in prime areas in Bangkok which are directed at middle- to upper-level consumers. Examples of these investors include Siam Piwat (Siam Discovery and Siam Center), Seacon Development (Seacon Square and Seacon Bangkae), Siam Retail Development (Fashion Island and Terminal 21), MBK Group (MBK Center and Paradise Park), Japanese JV (Tokyu and Isetan), Gaysorn Property (Gaysorn Plaza), Siam Future (Mega Bangna and Esplanade), TCC Group (Asiatique and Gateway Ekamai) and currently under construction Icon Siam, which is part of the joint ventures between the CP Group and Siam Piwat
2. Discount stores/hypermarkets/supercenters are a retail store with a store floor space of more than 1,000 sq.m. which primarily focuses on lower- and mid-level consumers. These stores mainly sell consumer products that are normally used in everyday lives. These typically emphasize low prices which is a key strategy of this type. In this group, Big C, and Tesco Lotus are the main players.
Operators have also adjusted their investment plans to maximize long-term returns by increasing the number of discount stores that they run, these being easier to operate than department stores thanks to their lower investment costs, although on the down-side they usually occupy a large area and at present, it is becoming harder to find suitable sites, while those that are available tend to be expensive, especially those in city centers. Investments are also hampered by town planning regulations that permit large retail and wholesale properties to be built only in restricted areas.
3. Supermarkets cover a retail floor space of more than 400 sq.m. and focus on medium- and high-level consumers. In addition, they distribute household consumer goods, especially various fresh foods; and imported products. Key players include Tops Supermarket, Gourmet Market, and Foodland.
Investment in supermarkets has been continuous and ongoing both by the larger players, i.e. Tops (Central), Gourmet Market (The Mall), Tesco Lotus, and Big C Market. The mid-range operators — Foodland, MaxValu, and Villa Market — have been opening new branches in more potential areas, after previously focusing only on Bangkok and vicinities as the main market. Bangkok Post declares that Tesco Lotus has more than 2,000 hypermarkets and convenience stores in Thailand under the Tesco Lotus brand. As the leading retailer in Thailand, Tesco Lotus now serves over 15 million customers each week through a network of over 1,800 stores around the country. There are 5 Tesco Lotus store formats built to meet different needs of customers: Extra, Hypermarket, Department Store, Talad, and Express. Meanwhile, Tesco Lotus has pursued an extensive policy of investment in second-tier provinces where the competition has yet to be intense. Big C is one of the largest chains of grocery and general commodities retailers in Thailand. As per Bangkok Post, Big C operates 153 hypermarkets, 63 Big C markets, and 1,018 Mini Big C stores with 900,000 sq m of leasable area.
4. Convenience stores/ Express/ Mini Mart are small retail units with a retail store space of more than 40 sq.m. and sell a range of daily life products that are based on the market price. This type is conveniently located in or near communities. 7-Eleven and FamilyMart are notable examples of this type of store.
7-Eleven, owned by CP ALL is the largest in Thailand with over 10,268, 7-Eleven stores across Thailand with 44% of these being in Bangkok and the rest spread across the country.
Convenience stores have shown the highest rates of growth in investment of all modern trade store formats and have also taken the greatest market share from traditional retailers as investment capital of convenience store business is less than other retail modern trade outlets’. They have continued investment and expansion of branches in communities, sub-lanes, and petrol stations to achieve complete national coverage. In addition to other existing businesses, new entrants have also appeared in the market:
Thai operators from other retail businesses (such as Lotus Express, Mini Big C and Tops Daily) who engage in stand-alone shops and outlets in petrol stations in order 12 to support demand from travelers and people in communities such as Lotus Express with Esso and Mini Bic with Bangchak
New players from non-retail businesses such as “Jiffy” operated by PTT; and “SPAR” run by Bangchak Petroleum
Foreign businesses including Lawson from Japan which is engaging in joint ventures with Sahapat, a major Thai manufacturer of consumer goods and in 2012, Sahapat’s
some branches of 108shop were renovated to become Lawson108s; and Aeon, another Japanese venture, has joined with MaxValu Tanjai, to distribute ready-made meals and distinguishes itself from the competition by offering imported Japanese items, which comprise around a fifth of its total range.
5. Specialty stores emphasize specific product categories with high quality. Boots, Watsons, and Supersports are examples here. In addition, modern trade has developed new formats such as category killers (such as HomeWorks, PowerBuy, and HomePro) and single-price stores (such as Daiso, Tokutokuya). Also, they expand their branches to other provinces and penetrate into communities. Retail outlets have become a center of communities. Global House is involved in the construction materials retailing company in Thailand. It operates around 42 stores throughout the country. Home Pro is an online retailing store that deals with home furnishings, interior assets, electronic items, and other household items.
There are other vendors as well that operate chains of stores in Thailand. Few to name are Adidas; AEON; Lazada Group; Nike; Seven & I Holdings;
The 3 richest families who are in the retail business having most of the retail brands under their group are :
- CP Group owned by the Chearavanont family
- TCC Group owned by the Sirivadhanabhakdi family
- Central Group owned by the Chirathivat family