RETAILING

Surviving the onslaught

Sukanya Jitpleecheep

The establishment of Allied Retailed Trade may fail in the end due to the difficulty in competing with the strong distribution networks and working capital of the giant chains.

IT'S DIFFICULT, say experts, but not impossible. Small, independent retailers can survive in the Thailand's highly competitive retail industry by modernising their stores and adding a wider range of carefully selected products to serve the particular needs of their customers.

Goods with higher sales turnover, particularly food, help generate higher profit margins which can in turn fund store's renovations and investments in technology to increase management efficiency.

The establishment of Allied Retailed Trade (ART) and the Thailand Retail and Wholesale Association, intended to help shophouse-based retail operations buy consumer goods at lower prices in order to help them compete against discount stores, may fail in the end due to the difficulty in competing with the strong distribution networks and working capital of the giant chains, experts say.

The government can support local retailers by:

uSetting up a database to provide information and statistics related to the retail business.

uOffering tax breaks for technology investments, both software and hardware, and technical support in order to encourage more efficient management.

uEncouraging retailers to invest in better logistics through incentives similar to Board of Investment privileges.

uHelp family operators form alliances with food suppliers to expand their food product lines.

uOffer soft loans for investing in computer technology and supporting shophouse pay-point services.

Apart from local retailers, the government should do more to help Thai manufacturers stay competitive by promoting the country as a base for outsourcing consumer goods.

Tax incentives for Thai suppliers could help them win orders from international discount store chains to purchase local goods for sale in their overseas networks, industry executives say.

Otherwise, discount store chains will pull out of the country the moment they find new production bases with lower costs. That could cost Thai suppliers in lost business opportunities and local suppliers may find themselves in a situation not unlike that faced by of small independent retailers.

The process of tax refunds should be shortened and duties on imported raw materials should be reduced to enhance Thailand's competitiveness, sweetening the country's existing advantages in terms of cost, geographical position and lower skilled labour costs.

At present, several giant multinationals such as Procter & Gamble and Unilever have taken advantage of the country's favourable consumer manufacturing climate by setting up local manufacturing bases for hair, skin and sanitary napkin products. Such moves have been followed by multinational hypermarkets such as Carrefour, Tesco Lotus and Big C.

However, with instability across the board marked by both local and global political uncertainty, the winds of change may be blowing.

Analysts almost unanimously agree that foreign investors are now casting suspicious glances on Thailand, with uncertainties in the country sparking enthusiasm for China and North Asia.

Once the Asean Free Trade Area has done away with major trade barriers, it is believed that locally made products may not be able to compete on price. As well, Indonesia and Malaysia have more investor-friendly regulations.

Thailand's only advantages are its political and economic stability, but these can't help suppliers where price and quality are the key.

To help Thai suppliers become more competitive, a specialised team should be set up to study the feasibility of new products that could be produced locally.