History of retailing in Thailand:
Changing retail formats for changing needs
By Jon Fernquest |
Last week the Bangkok Post covered the history of condominiums in Thailand.
The history of modern retailing in Thailand is the focus of an article this week.
Today's article also helps students master the specialised vocabulary of retailing.
When you're finished, read another history of retailing in Thailand from last year.
Here is the article in full:
BY INVITATION
The evolution of Bangkok retailing
NITHIPAT TONGPUNMonday June 30, 2008
Modern Thai retailing began in the days of middlemen who would offer commodities in nearby neighbourhoods, often through their own small shops, known as cho huay. This was followed by clusters of shops in certain areas known for shopping, such as Sampheng, Banglamphu, Wang Burapha and Yaowarat. Bargaining between buyers and sellers was expected, as fixed prices were not yet common.
Central Wang Burapha, Thailand's first modern retail centre, opened in 1956, followed soon after by Thai Daimaru, located in Ratchadamri Arcade. The store ushered in the era of modern retail development in Thailand and offered fixed prices at a time when even the Central stores had elements of bargaining. Also, it contained Thailand's first escalator, which drew huge crowds. Two chains well-known today, Robinson and The Mall, followed. Competition and choices for Thai consumers increased as we became more comfortable with the format, convenience and price structure of these new retail centres.
In 1990, Makro was the first "big-box" store to enter Thailand, the first Asian location for the Dutch cash-and-carry operator. Soon after, CP Group launched the Lotus brand in Thailand, and they later formed a partnership with UK-based Tesco in 1998 to create Tesco Lotus. Also new to the market were Big C, originally from Central Group, and Carrefour, which started as a joint venture between Central Group and Carrefour.
Also growing in popularity during this time were supermarkets, as they successfully built a supply chain that soon offered the freshness of wet markets in a much more pleasant format. Early supermarkets were proprietorships, but the segment was consolidated when Tops Supermarkets (operated by Royal Ahold) purchased a number of supermarkets from the Central Group that were later bought back by Central. Tops can now be found in Central and Robinson department stores, or as the anchor tenants in neighbourhood centres.
CP Group is also very active in the convenience store segment. The first 7-Eleven opened in 1989 in Bangkok's Patpong area, and the format proved a huge success. There are more than 4,400 locations in Thailand currently. The Japanese chain Family Mart came to Thailand in 1993. Tesco Lotus's Lotus Express also operates in this segment.
Another segment in the retail sector is the so-called category killer, a specialised store designed to dominate a segment through a wider range of products and more competitive prices. The first ones were seen in Thailand during the mid-90s, with HomePro (home improvement) and Office Depot (office goods). These stores resulted from increased competition in the typical format as operators tried to distinguish themselves from shopping malls and superstores, and have driven many traditional retailers to either improve their offerings or exit the market. Power Buy and Index Living Mall are more examples of category killers.
The financial crisis in 1997 had a number of effects on the retail sector. We witnessed CP Group eventually ending its partnership with Tesco, while Central sold the majority stake in Big C to the French Casino Group as it decided to change its focus. However, Central later bought out the stake in Tops held by the struggling Ahold group of the Netherlands. Retailers became more prudent, with an emphasis on product offerings and niche launches. A number of second-tier department stores could no longer compete and were closed. Today, Central and the Mall Group are the dominant department store operators.
As the retail sector became more sophisticated, we saw a number of luxury malls such as Emporium and Gaysorn Plaza developed in the 1990s and retailers focused more on branding. Central Chidlom underwent extensive renovations and was soon Thailand's most upscale department store.
The success of The Emporium led to the launch of Siam Paragon, a joint venture between the Mall Group and Siam Piwat, which owns the Siam Center and Siam Discovery malls nearby. After Gaysorn Plaza finished its renovations in 2002, Siam Center followed suit, while Central has recently completed its renovation of the World Trade Center into CentralWorld. One quality all of these retail centres share is proximity to the BTS Skytrain. When the BTS originally launched in 1999, only Central Chidlom had a direct bridge connection to one of the stations. However, numerous retail centres have since added this feature, which has become a requirement for luxury malls given Bangkok's traffic and weather.
The latest wave of development has focused on neighbourhood centres, which are essentially scaled-down malls built around an anchor tenant, usually a supermarket or Cineplex. Siam Future Development (SFD) is one of the leaders in this area. Most neighbourhood centres are located in residential areas on the outskirts of the central business district, and they have grown in line with changing consumer behaviour, as they are much more convenient and satisfy most shoppers' daily needs. Popular neighbourhood centres in Bangkok include J-Avenue and La Villa.
In just two decades, retailing in Thailand has evolved from a traditional model to the global model seen today. Retail centres have become increasingly sophisticated as consumers have become more aware of their options. In the near-term, we expect to see continued development of neighbourhood centres in Bangkok, as they provide the most logical solution for the needs of residents.
Nithipat Tongpun is Director and Head of Retail Services of CB Richard Ellis. This article is the second of a weekly series examining the evolution of the Thai property market to mark the 20th anniversary of CBRE in Thailand. For more information, please visit http://www.cbre.co.th.
(Source: Bangkok Post, business, 30-06-08, page B12, NITHIPAT TONGPUN, temp-link)
Vocabulary:
retailing - the sale of goods from a fixed location, such as a department store or convenience store, in small amounts for direct consumption by the buyer (See Wikipedia)
the evolution of - a process of change and improvement that takes place over long periods of time
middlemen - buyers and sellers of goods and services between producer and consumer, between factory and store (See glossary)
a commodity - a uniform product bought in bulk (raw materials such as cotton, cocoa, silver or cooking oil – but can also describe a manufactured product used to make other things, for example, cloth) (See The Economist glossary)
uniform - every unit is the same
clusters - a small group of people or things located close together
bargaining - negotiating about the price of goods to be bought, discussing the price before agreeing on the price of goods sold
ushered in the era of Y - greatly changed things, so that a new situation Y existed after this event
an escalator - a moving stairway, to make moving between the floors of a building easier (See Wikipedia)
chains, retail chains - several stores in different locations run by one company
a format - an arrangement, plan, or design
a retail format - an arrangement, plan, or design used for a retail store (for example, a large store like Big-C selling a wide variety of goods with parking or a small store by the side of the street selling a small selection of necessities)
became more comfortable with the format, convenience and price structure
"big-box" store - a very large single floor chain store with a lot of floor space, and a lot of goods for sale (See Wikipedia)
a cash-and-carry operator - a large wholesale store in a warehouse, selling goods in large quantities at low prices to customers from other businesses, no credit (cash) and no delivery (carry)
the popularity of Y - how much Y is liked by the public
wet markets - traditional old-style open air markets found in Thailand and other Asian countries
offered the freshness of wet markets in a much more pleasant format - just like traditional style Thai markets, the vegetables and meat are fresh, but the store is inside (not open air), air-conditioned, and more comfortable
a proprietorship - being an owner of a business
a segment, a market segment - a smaller market with specialised needs within a larger market (See glossary)
consolidated - strengthened to make more effective and secure
the segment was consolidated - the market segment became larger, stronger, and more important
convenience store segment - small neighborhood stores like 7-11 and Family Mart (See Wikipedia)
a category killer - a retail chain offering a wide selection of goods at low price in a specialised area (office supplies, home repair, gardening supplies) (See Wikipedia)
improve their offerings or exit the market - sell better products or stop doing business
renovations - repairing and decorating an old building so that it is in good condition again
underwent extensive renovations - did a lot of repairs to improve the condition of the building
upscale - high quality expensive products (for customers in higher social classes or incomes)
proximity to - near to, close to
latest wave of development - the most recent period of increased activity
a tenant - someone who rents real estate from an owner
an anchor for Y - makes Y stable and secure
anchor tenants - tenants that make the retail development stable and secure (people will be drawn to the site because of this big important store, for example Carrefour upstairs and smaller stores downstairs in a mini-mall)
scaled-down - reduced in size
scaled-down malls built around an anchor tenant - a mall with small stores next to or downstairs from a larger store, like Lotus or Carrrefour
the outskirts - the parts of a town farthest away from the center of the town
the central business district (CBD) - the downtown area of a city, often where the offices for the biggest and most important businesses are located, the commercial and often geographic heart of a city (See Wikipedia)
on the outskirts of the central business district - at the edges of the city's downtown area
in line with - agreeing with, following (See glossary)
grown in line with changing consumer behaviour - follow changing consumer behaviour in its growth
