Beyond anticipation, the economic crisis over the past few years has dealt a severe blow to all businesses, including retail sector. The financial crisis has shaken retail business in Thailand, intensifying competition especially among discount stores. Contrary to the stalling economy, discount stores have been mushrooming since it can respond to price-conscious consumers. To capture market share, new strategies have been developed. Competition is inevitable for existing retailers.

Discount, rebate and free gift. These popular promotion activities have been continuously developed and come in many forms, ranging from discount in special seasons or occasions, stamp collection, discount coupons, free gifts, and lucky draws.

The Thai Farmers Research Center (TFRC) Co., Ltd. views that the groups gaining the upper hand when it comes to this promotion strategy are those with firm financial base, competent management, and high negotiation power with suppliers. Most of which are foreign-based discount stores as well as large department stores. As a result, small and medium-scale retailers have to prepare strategies and investment capital to catch up with rising competition in the long run and to diversify strategies so as to meet demand of price-conscious consumers.

House-brand products are playing increasing role in retail businesses with better image and quality. Most retailers grasped the opportunity, when prices of imported products were marked up, by introducing house-brand products at cheaper prices. In the future, house-brand products should be diversified to capture wider target groups. It is likely that leading consumer goods may see their good positions in the shelves taken away by house-brand goods as retailers should find good positions for their products.

The TFRC anticipates that strategy to produce house-brand goods should generate handsome revenues for retailers. Adverse impact can be anticipated in the case of major producers due to competitive prices of house-brand goods, while minor producers enjoy greater earnings as supplier of house-brand goods. However, some producers may supply products to compete with their own goods. Consumers eventually enjoy more choices at cheaper prices.

Branch expansion. Foreign entrepreneurs, in particular, are trying to expand branches for the highest coverage possible. Even in certain locations where rival retailer has made a presence, if seeing potential, retailers will not hesitate to set up a new branch there. It is evident that all retailers keep their branch expansion strategy rolling.

The TFRC sees that demand for prime locations reflects keener competition in the Thai retail scene. The group with implicit expansion goal is discount stores, aiming to open up 3-6 new branches each year. The past few years saw over 20 new branches of discount stores. It is anticipated that major retailers may reduce the size of new branches in the future in order to reduce investment cost and enhance flexibility in reaching a community. Local grocery stores need to adjust their businesses. Otherwise, they would witness their market shares and revenues dwindling.

Credit card service is a new and popular strategy. In the past, suppliers extend credit to corner stores and their customers - - allowing them to make payment after sales. At similar concept, retailers today have teamed up with the leading financial service providers to introduce credit management program for consumption purpose. This program offers modern financial management and payment collection.

The TFRC views that credit card issuance by giant retailers should send big impact on minor businesses. This strategy would wipe away competitiveness of corner stores in term of credit extension. If credit card conditions were lax, notably minimum income requirement and initial fee, minor entrepreneurs would face a tougher time. Credit card service for the low-income would change their consumption behavior. In other words, they would have a tendency to spend more lavishly. It is advisable that consumers study conditions and charges on late payment as well as employ sound financial management to avoid ballooning debt. Relevant public agency should ensure fair consumer treatment, notably interest rate and fee.

Greater penetration of foreign retailers has posed a major problem, sending widespread impacts on Thai retailers particularly the small-scale. The government should study those impacts in greater details so as to tailor appropriate remedial measures. Zoning of retailers should be based not only on housing and residential density, but also other factors, such as traffic conditions and existing minor retailers. Rules and regulations of foreign countries should be studied regarding ways to control the operations of large-scale retailers, such as service hours and service scope. It is noted that the move should not contradict the international trade agreement.

Source: The Thai Farmers Research Center (TFRC)