Thai retail expands to India
By Jon Fernquest[Introduction|Vocabulary|Article]
[Reading Questions|Answers]
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In Thailand the word franchise often brings to mind foreign retail chains with branches in Thailand such as Sizzler, McDonalds, Lotus, Carrefour, or Oishi.
Nowadays Thailand has its own native brands. Now these brands are moving overseas.
Many will already familiar with the stylishly yet inexpensive modern furniture that the Thai furniture retailer Index produces.
In most cities in Thailand one can predictably find high quality furniture to furnish your house or condo with, if you find the Index brand name. Index already has brand recognition in Thailand.
Now Index is going to use the experience they've accumulated as they built their brand to expand into a new and very large market: India.
Yesterday's finalization of the Thai Airways management of airports in Bangladesh together with today's news clearly shows that globalisation can economically empower developing countries.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. In which Indian city will Index open its first foreign home furnishings chain next year?
2. What currently makes furniture exports to India difficult?
3. What development in India-Thai relations in the near future will likely make furnituire exports from Thailand to India more profitable?
4. In the Indian home furnishings industry who will Index work with?
5. What will the division of labor be between Index and its Indian partner?
6. Is this the first foreign franchise for Index?
7. What markets is Index targeting for the future?
Article
RETAILING / HOME FURNISHINGS
India franchise for Index mallsPITSINEE JITPLEECHEEP
Index Living Mall Co, the home-furnishings retail chain, has signed an agreement with an Indian partner to open a franchise in India next year.
Index Living Mall is expected to be the first foreign home-furnishings chain to open in Mumbai, which now has 20-30 small furniture shops.
''India has huge market potential, reflecting the boom of the overall economy during the past four years,'' said Kijja Pattamasattayasonthi, Index's managing director.
He said he expected the import tax on furniture in India to decline substantially in the future if free trade talks with Thailand were successful. India currently imposes a 30-35% import tax on furniture.
Mr Kijja said that under the memorandum of understanding, the two parties would collaborate on the development of home-furnishing products with an Indian company, which he declined to name.
''Our partner is a leading listed firm in the retail and industrial sector in India. We'll disclose the name when the time is proper,'' he said.
The Indian partner would make investments in outlets, while Index would supply products and expertise to the partner. Franchise fees have yet to be finalised.
Under the agreement, the Indian partner will open seven Index Living Mall outlets during the first five years. Each requires an investment of up to 300 million baht for a space of 6,000 to 7,000 square metres. The first outlet is expected to open in Mumbai in the first quarter of next year. The company expects to gain annual sales of about 50 million baht from the Indian outlets.
India will be the company's second foreign market after Indonesia, where it currently has six outlets. Dubai is also in its business pipeline.
For the domestic market, the company plans to spend 2.4 billion baht to open three new outlets next year. Construction of a 400-million baht project in Phitsanulok will start next week and work on a 500- million-baht outlet in Udon Thani will begin in the next two months. The remaining 1.5 billion baht will be used to expand an existing outlet on Rama II Road in Bangkok.
The new projects will bring the total number of Index Living Mall outlets in Thailand to 16 next year. Mr Kijja said expansion would stop in Thailand when Index had reached a total of 20 outlets.
Last week, it opened a 20,000-square-metre Index Living Mall in Chiang Mai, at a cost of 800 million baht, to capture the rapid growth of the housing and hotel industry in the North of Thailand. The company expects to break even within 10 years at the Chiang Mai outlet.
Apart from Index Living Mall, competing home-furnishing outlets in Chiang Mai, include Global House, Home Pro and Cement Thai Mart.
Mr Kijja was confident that its new outlet would see positive market response as it offered a good product range in both modern and traditional styles to suit various tastes.
''We're not worried about economic slowdown and rising oil price and interest rates because it is a normal cycle. We will worry if the oil price fluctuates too much as it would make it difficult to map out our business,'' he said.
The company expects its sales to reach six billion baht this year, with annual growth of 10-15% for the next three years.
Vocabulary (in discussion above)
brings to mind - makes one think of
native - originally found in a place, not brought to the place from some other place
brand recognition - people know
build a brand - market a brand so that it is recognized and used by more and more customers
empower - act in a way so as to give power to other people who are powerless
division of labour - specialising the tasks performed by different workers (so that they can work more efficiently)
retail chain - many stores that are owned by the same company and use the same brand name, sell the same products, and use the same marketing
market potential - customers that might buy the company's products
a memorandum of understanding - an informal agreement, "expresses a convergence of will between the parties, indicating an intended common line of action, rather than a legal commitment. It is a more formal alternative to a gentlemen's agreement, but generally lacks the binding power of a contract." (See Wikipedia)
collaborate on - work together on (See Wikipedia)
declined to - politely refuse to do
listed firm - the company's stock is traded on a stock exchange
in its business pipeline - future business that sales people are working on which they don't have yet
break even - not lose money, revenues at least equal expenses
positive market response - people would buy the products
product range - the variety of different products
map out - plan for the future of
Answer Key:
1. In which Indian city will Index open its first foreign home furnishings chain next year?
Mumbai.
2. What currently makes furniture exports to India difficult?
There is an import tax on furniture that is quite high at 30-35%.
3. What development in India-Thai relations in the near future will likely make furnituire exports from Thailand to India more profitable?
India and Thailand are currently negotiating a free trade agreement that will reduce import taxes on furniture in India significantly.
4. In the Indian home furnishings industry who will Index work with?
An Indian company that hasn't been named yet. The company is a "leading listed firm in the retail and industrial sector in India."
5. What will the division of labor be between Index and its Indian partner?
The Indian company will open outlets and Index will provide a franchise for furniture malls. Under this franchise agreement Index will supply furniture to sell in the malls as well as expertise on how to run the malls.
Index will receive franchise fees (inferred).
6. Is this the first foreign franchise for Index?
No, there are already six outlets in Indonesia.
7. What markets is Index targeting for the future?
Dubai in the Middle East.
