Thailand's draft Retail Business Act:
The stakeholders it doesn't address
By Jon Fernquest |
Yesterday's Commentary in the Bangkok Post discussed the draft Retail Business Act.
The draft Retail Business Act was an attempt to radically change Thailand's retail sector.
Unlike the many other bills that were passed at the last moment by the NLA (the legislature of the interim post-coup government) this new retail law never made it into law.
(See photo on right of protest banner in front of small mom & pop shop in Maesai, Chiang Rai, should read: Lotus Go Home).
This draft law would have had far-reaching consequences since Thailand's retail sector is so huge:
Best industry estimates are that modern trades and traditional [modern and traditional retail] account for 40% and 60%, respectively, of the 1.2 trillion-baht-a-year retail business volume that represents 14% of Thailand's GDP.
There are many different stakeholders in Thailand's retail sector: traditional retailers, consumers, wholesalers, suppliers, as well as the operators of hypermarkets, supermarkets and convenience stores.
The proposed retail law addressed the interests of only one of these stakeholders, the traditional retailers.
The modern trade sector (hypermarkets, supermarkets, convenience stores), represented as destroying the livelihoods of traditional local retailers by consumer advocates, actually plays a key role in modernizing the Thai economy, providing both employment, reliable government tax revenue, as well as opportunities for Thai manufacturers to develop new markets both in Thailand and abroad:
The modern trade industry as a whole provides direct employment for 700,000 people, and the numbers easily exceed one million if third-party support staff are included. As much as 95% of products on modern trade shelves are local products and involve more than 5,000 suppliers and manufacturers. Their businesses come under the government's tax system, contributing tens of billions of baht a year to the state's coffers - a sharp contrast to traditional retailers, some of whom use shady accounting practices.
The proposed law also "infringes on the consumer's right to choose where to shop." The provisions of the proposed law are seen by many as quite onerous:
Its definition of "modern trade" which is subject to restrictive regulations is quite outrageous, covering virtually all kinds of retail establishments, even optical stores, which the ministry is single-mindedly trying to curb. Any establishment with a combined space of 1,000 square metres, belonging to a firm with annual sales of one billion baht and run under a franchise, comes under this draft law.Any new superstores, hypermarkets and discount stores can only be set up at least 12km away from the rim of a municipal area where there is a population of not less than 100,000.
These establishments are restricted from opening for more than 12 hours a day. Supermarkets will be allowed to be set up at locations not less than 5km from a municipal area with a district community of not less than 50,000 people and can run for no more than 12 hours a day. Apparently, this prohibitive bill will restrict consumers' access to where they shop for groceries and goods, limiting their choice of shops and granting some traditional retailers and existing modern trade operators an unfair advantage in a captive environment.
The editorial implies that under the restrictive new regulations, customers would suffer because smaller mom and pop shops have failed to adopt the innovative new practices of hypermarkets like Tesco and Lotus:
Under that scenario, consumers would inevitably end up at some mom & pop stores which have not adopted good business practices, customer services or competitive pricing which have become the norm being offered by modern trade operators these days.
Actually, even though large hypermarts are often late at night they often seem to be notr more responsive to customers than mom and pop shops.
Furthermore, hypermarkets effectively have a local monopoly because of their gigantic size that may actually lead to bad service.
Does Tesco actively seek customer suggestions on how to improve the service they offer? Do they act on customer suggestions? There is little evidence that they do.
For people who shop at night, for instance, all of the following detract from the shopping experience:
1. Fitting rooms for clothing purchases close at 9 pm
2. No ground pork [Thai: mu pot] later in the evening
3. On weekends food center effectively closes at 9pm even though stated closing time is 10pm
4. To purchase something as trivial as a prepaid phone card is impossible after a certain hour because they have been stored away.
In the case of local mom and pop stores you just talk to the owner, but how does a customer provide feedback to large hypermarkets on store policies and the way stores operate?
For further reading, check out previous Bangkok Post articles on retail and consumer credit.
(Source: Bangkok Post, Op-ed section, 16-01-08, temp-link)
Vocabulary:
draft - not the final version, still may be rewritten and changed
retail - selling goods directly to consumers (opposite of "wholesale" selling to other companies)
mom & pop shops - a small local store run by a family
radically change - make big changes, change completely
at the last moment - shortly before an even occurs
far-reaching consequences - affect a great many things
x accounts for %y of z - x is %y of z
GDP - Gross Domestic Product, "a measure of economic activity in a country. It is calculated by adding the total value of a country's annual output of goods and services. GDP = private consumption + investment + public spending + the change in inventories + (exports - imports)" (See The Economist Glossary)
stakeholders - "all the parties that have an interest, financial or otherwise, in a company, including shareholders, creditors, bondholders, employees, customers, management, the community and government (See The Economist Glossary)
traditional retailers - the small family run "mom & pop" stores that existed before large retailers like Tesco, Carrefour, Big-C, and 7-11 entered the market
wholesalers - companies that buy goods from producers and resell them to retailers (who in turn sell directly to customers)
convenience stores - small neighborhood stores like 7-11
demonized - representing someone as evil
represented as - described as
livelihoods - what people or families do to earn money and support themselves (purchase food, clothing, and shelter)
consumer advocates - public defenders of consumer rights against powerful business interests, makes important information about products and services publicly known
reliable - works or behaves the way you expect to work
the state's coffers - where the government keeps its money, the state treasury
shady - dishonest or illegal
shady accounting practices - dishonest or illegal recording of a company's sales and finances
infringes - break or disobey a law or rule
provisions - the details of an agreement
onerous - displiked because it is unpleasant or difficult
outrageous - very shocking and unacceptable
virtually all - nearly completely true, so can be regarded as true
optical stores - stores that sell eye glasses and contact lenses
single-mindedly - have only one goal and is determined to achieve it
curb - stop or reduce and activity
a franchise - selling proven methods of doing business for a fee and a percentage of sales or profits (See Wikipedia on franchising)
municipal area - the area around a town that the town's government has authority over
apparently, X - have heard that X is true, but not yet certain
granting - officially giving
an advantage - being in a better position than other people
a captive environment - when a few participants control everything (since entry into the industry is restricted)
under that scenario - in that situation
inevitably - will happen for sure
effectively X - has all the same features as X so must be X (even if it doesn't seem like it)
a monopoly - when a company has enough market power to decide the price of the products it produces (contrasted with perfect competition in which no single company can affect the price of the products it produces; See The Economist)
gigantic - very very large
