Retail Industry

Retail Industry – Overview 

Thailand is one of the largest economically stable countries in South Asia and the 2nd largest economy in South East Asia. The capital city of Bangkok is a social hub of Thailand with a booming retail industry market. Not only Thai residents, but it has also fascinated many multinational retail companies to make investments in the country. Its retail market is evolving swiftly to meet the demands of the consumers’ varying lifestyles who are greatly motivated by the internet today.  The economy of Thailand is greatly dependent on its exports that account for approximately two-thirds of its GDP.

With a population of almost seventy million Thailand possesses a thriving economy with extensive buying powers. Thailand’s retail industry is ever-evolving and responds to the growing demand of consumers where convenience purchasing is the key.  The wholesale and retail sector, together with the vehicle maintenance and household goods sector, contributed almost three trillion Thai baht to the GDP in Thailand. This was a good indication of the GDP contribution of the retail sector in Thailand had to offer.

The overall retail market in Thailand is poised to grow to USD 31,880.8 billion by 2023 with a CAGR of 5.3%. The sectors include various retails, like food, apparel, furniture, jewelry, and various others. The stores that we will be discussing today would be encompassing the convenience store, specialty retailer, internet retailing, and various others.

While the retail market in developed economies of North America and the USA are quite matured yet competitive, but in emerging economies of Asia-Pacific, the Middle East, and Latin America have been instrumental in driving the market growth. Health assessment of the retail market is defined by the consumer spend in each country which typically accounts for approximately two-thirds of the GDP. 

At present times, technology has stormed into all industries and Retail is no exception with the increasing trends of online shopping being the major driver. The growing mobile and internet penetration across Thailand is instrumental in continuous e-commerce growth. Also, the Internet of Things (IoT) is reshaping the retail industry. However, it remains to be seen how the price variations between online and traditional stores can challenge the retail market growth.

Thailand’s retail sector is anticipated to continue growing with the scenario of its stable political environment. The Thai consumers will keep on shifting from the concept of the traditional market towards the convenience store and other modern trends in retail markets. High-end smartphones and the growing awareness of technology in the young and tech-savvy population are expected to drive more growth in the retail online commercial market.

With the penetration of internet, digitization, and the increase in social media users in Thailand, the number of Thais was reported to be shopping online with their smartphones. Thailand is ranked in the top 10 on-line or e-commerce markets globally. Retailers are commencing to notice these trends and are moving towards multi-channel strategies to step into this flourishing market with the digitization of the platforms to afford new sales avenues. Numerous retailers have introduced mobile applications to prop up their new product launches and promotional offers and to generate new opportunities to attract customers.

The number of customers shopping online is steadily increasing. According to Statista, 12.1 million consumers in Thailand are expected to make purchases online this year. This number is projected to grow by 15% within the next five years reaching 13.9 million in 2021.

In Thailand, 4.4 million online shoppers are 25-34-year-olds and are followed closely by 3.9 million online users aged 16-24 years.

These two age brackets together make up two-thirds of all online shoppers and the ratio is projected to remain consistent in the medium term.

But e-commerce user growth in the Land of Smiles is not even the fastest in Southeast Asia. In Indonesia, e-commerce user penetration is expected to almost double from 2015 to 2021. However, the number of customers in Thailand are expected to spend on average online is predicted to soar.

In 2021, an online Thai buyer will spend $382 per year, which is 57% more than the expected spending of $243 per user in 2017.

According to the Digital Economy and Society Ministry, Thailand’s digital economy will play a critical role in every industry and is expected to reach 25% of gross domestic product by 2027.  The retail industry is no exception and is undergoing one of the most profound periods of technological transformation in history and operators must adapt themselves to remain relevant.

The continuously evolving retail landscape along with the changes in consumer behavior and changing lifestyle in Thailand has inducted new retail formats and adapted to new technologies. Brick and Mortar stores are forced to invest in technologies and take up a stance for digital transformation to survive the onslaught of competitors. The growing future supply in Thailand will be put on pressure to renovate and upgrade existing properties to remain competitive.  

To survive, big retail players are venturing into new retail formats such as mixed-use development and outlet malls to diversify their portfolio. However, smaller players who have constraints and concerns to reinvent themselves face a stiff challenge  

As of 2019, the total retail supply in Bangkok was almost 7.8 million sq m according to CBRE Thailand with a steady increase of 3.70% year-on-year. By the end of 2021, the total retail supply is likely to surpass 8 million sqm. with the majority increase in large mixed-use developments downtown.

Spending power will continue to rise and two-thirds of consumption growth in the period to 2030 will come from increasing per capita spending.

An interesting read could be Real Estate Scenario in Thailand.

The increasing impact of E-commerce is having a significant influence on consumers’ behavior as it can fulfill the choices and provides convenience which traditional malls cannot fulfill.

Despite the surge in e-commerce and other technology, a majority of consumers still believe and rely on the value the personal experience in a physical store. A study conducted by IBM and the National Retail Federation validates that 98% of Gen-Z shoppers still prefer to make their purchases in brick-and-mortar stores. Another recent retail customer research by Accenture also found that by 2020, the Gen-Z population will grow to 2.56 billion, and 98% will own a smartphone. These data points signify that retailers need to constantly adapt to new technologies and churn out innovative strategies to remain relevant in this ever-changing consumer dynamics. 

To mitigate the ever-increasing customer demands of consumers, retailers are forced to invest heavily in digital transformation. According to Gartner, global retail technology spending will increase by 3.65%, to $203.6 billion this year. New technology trends like data analytics, omnichannel, artificial intelligence, digitalized in-store experience, and personalization/customization are predominantly taken up by retailers to compete in the new age world.

The retail giant, the Central Group has been concentrating on building cloud-based consumer data with personalized loyalty based programs providing omnichannel experience to support customers. The biggest convenience brands like 7-Eleven have over 11,000 stores in Thailand have started embracing artificial intelligence to gain customer insights and personalized in-store experiences.  

A distinct convergence of retail and technology is noticed where retailers are arriving at a tipping point wherein they must reinvent themselves to align with technology to implement renewed strategies in conjunction with customer expectations. So technology predominance remains as the bottom line to be adapted to enrich customer experiences and preferences. 

Few Trends in Retail 

The year ahead could be a significant, transformational year for the Retail Industry. As technology continues to change the rules of engagement, consumers become more demanding than ever, getting consumers to notice your brand is definitely going to be a big challenge. Here are the top 3 upcoming yet impactful trends that can revolutionize the retail industry and stay competitive.

Hyper-personalization is on the cards.  It is a concept of procuring real-time behavioral data of customers to tailor products, services, and experiences according to their wants and needs. To achieve this, brands must have a thorough understanding of their products and customers.  They should work on a customized strategy blending data with technology. A recent study by Accenture revealed that 75% of customers are more likely to purchase from an organization that offers personalized services based on their individual preferences. 

With the attention span of an average person has declined to 8 seconds, it has become even more difficult to attract a customer’s attention. More so with the pile of information that’s already targeted to them. This calls for hyper-personalized information instead of a generic one to address their pain points and save their time.

Data crunching of Big Consumer data would be conducted to streamline the exact requirements and preferences of each customer. The world is no more where Retailers could use generic data and would advertise their brand promotions. Now it needs to be classified into much more segmented targets and promotions need to be pinpointed. As a retailer, instead of displaying what they offer, one needs to promise what they can deliver as per customer preferences. 

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Experiential Retail is coming to life. Brick and Mortar retailers can no longer pick up a model and expect it to work in every retail opportunity like big or small stores, pop-up shops, express stores, kiosks, etc. All of these essential retail fleets must compliment the way the customers want to interact with a brand today.  It must transform itself to be experience centers providing value addition to customer experience. The traditional retail sector is changing the industry landscape by imbibing technologies like voice technology and robots to increase customer comfort. In fact, according to KPMG, 78% of young consumers, specifically the millennials, prefer to spend money on an experience or event and share these experience-related purchases on social media. There is an emotional driver to this with 69% believing that attending experiences helps them connect better with friends, community, and people around the world.

Experiential retail creates :

  • An immersive and shareable experience
  • Prioritizes customer engagement – not sales 
  • Stimulates customer buying senses 
  • Leverages in-store promotions and services 
  • The store experience fulfills consumer expectations, engagement, and retention

The planet-friendly environment is on the horizon with greener retailing. Social responsibility is no longer an option. Since the retail sector is highly energy-intensive, retailers are left with no choice but to consider and adopt eco-friendly practices.  Measures are taken up to improve the retail value chain by eliminating waste, increasing efficiency, and reducing costs. The green influence would change and influence the pattern of consumer behavior to a better world. In a study conducted by Nielsen, we find that       66% of consumers are willing to pay more for sustainable goods. You may read a nice article about Green Retailing

Forecasted sales value of the retail sector in Thailand in 2023 – 127.2Bn USD

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.

Pie graph distribution total retail supply in Thailand by type chart

 

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.

  1. 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.
  2. 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

Thailand is a country located in the southeastern part of Asia. It is known for its beaches, historical monuments, and huge numbers of metaphorical temples of Buddha. Its economy largely depends on tourism and exports business. It is new to the industrial sector has an export ratio of around two-thirds of its gross domestic product. But, the Thai economy is currently hitting minimal growth that is expected for the year.

The World Bank has downgraded Thailand’s economic growth outlook for this year to 2.7%, but the latest revised figure is still higher than the bank’s growth estimate of 2.5% for 2019. … Last October, the World Bank predicted Thai economic growth of 2.7% in 2019 and 2.9% in 2020

The World Bank has warned that Thailand’s average annual economic growth will be stuck below 3% if there is no significant increase in investment and productivity growth.

According to the Thailand BOI (Board of Investment of Thailand), the Foreign Business Act of 1999 regulates the supervision of foreign investment in the country. Any foreign investor interested in investing either in the retail or wholesale sector in the country is needed to acquire a Foreign Business License from the Director-General of the Commercial Registration Department of the Ministry of Commerce and also get an approval from the Foreign Business Committee. There are certain exceptions to the above-mentioned license requirement in the case of foreign investment in the retail sector that have investment plans of more than 100million Baht and 20million Baht in the case of retail stores

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