The rapid expansion of largely foreign-owned superstores selling products at discounted prices brought howls of protest from local rivals who had been accustomed to a captive market where they could charge top prices without fear of competition. A sign reads, 'No Makro-Lotus in Roi Et'.

That was the clear lesson learned in the retail industry over the past year, as discounters thrived in both sales and profits while old-style stores _ including some that seem to regard it as privilege for you to be served by them _ felt the pinch.

Largely foreign-owned discounters, including Tesco Lotus, Carrefour, Casino Group (Big C) and Makro continued to expand.

A large band of wholly Thai-owned stores ranging from small family firms to medium-sized players protested against the presence of the international retailers.

An armed attack on a Tesco Lotus stores on Rama IV Road and the Bang Na-Trat Highway in December aroused concern but it was unclear whether nationalism or a dispute among security guard firms over contracts at the stores were the catalyst. One of the alleged perpetrators was killed in a later stand-off with the police.

Soonthorn Kengvibul, the managing director of Osotspa Marketing Co, said the country had 260,000 retail outlets nationwide in 2001, of which 50% were modern in design and business practices.

Discount stores represented 30% to 35% of sales in the retail business, up from 10% to 20 % five years ago. In 2002, they are projected to account for 40% to 45%.

By the end of 2001, the country had 102 discount stores, with the foreign operators accounting for 100: Tesco Lotus 33, Makro 23, Carrefour 15 and Big C 29.

In 2001, new investments in the retail sector were estimated to top 11 billion baht. Of the total, four billion baht each came from Big C and Tesco Lotus and three billion baht from Carrefour, with smaller amounts invested by convenience stores, supermarkets and specialty stores.

DISCOUNT STORES

In April, the Bangkok retail scene was given a shake when the Tesco Lotus superstore on Rama IV Road became the first to open around the clock.

The store is located opposite an outlet of Carrefour, which decided against copying its rival.

Even so, the price war between the two attracted shoppers.

Shoppers at a Tesco Lotus store in Bangkok obviosly hold a different view.

However, later in the year Tesco Lotus opted to limit its opening hours to between 6 am and midnight after protests from local stores. One locally-owned large store, resenting the price-cutters, came up with a socialism-for-capitalists solution, suggesting that a law be passed that each product must be sold at the same price by all retailers.

However, the government stepped in to limit the proliferation of discount stores, pondering measures ranging from zoning to a ban on selling goods below cost, although none have yet become law.

A survey by AC Nielsen (Thailand) Ltd, a market research firm, said that in one month, 70% of consumers surveyed in Bangkok had made purchases at hypermarkets.

Praphan Iamrungroj, the executive vice-president of Big C Supercentre Plc, said the discount store business would mature in 2004 to 2005 with Bangkok likely to have an additional 50 new discount stores, doubling the ratio in the city to one per 100,000 people from one per 200,000 people currently.

In 2001, Big C built five new stores: three in Bangkok, one in Phuket and one in Ubon Ratchathani. It also plans to open five new stores a year between 2002 and 2004, including a 20,000-square-metre outlet in the Ratchadamri area.

Tesco Lotus wants 55 stores in place by 2004, building on the nine opened in 2001.

Cencar Co, the operator of Carrefour, opened four new stores in 2001 and plans to open nine more within the next two years. Makro opened one new store in Surin province in 2001. It had planned to open three at various locations.

Some discounters are also opting for smaller items handy to local communities. Leading the trend was Tesco Lotus which introduced Lotus Express stores, each about 400 square metres, at several hundred petrol stations nationwide.

Big C geared up for the launch of Leader Prices, a new type of store that would sell only house-brand products.

Industry sources said the new-concept stores of Tesco Lotus and Big C would lift the bargaining power of both companies.

Locally-owned retailers have had to accept that discounts and other incentives are the only way to win back a once-captive market. In dealing with the superstores, the only strategy is: if you can't beat 'em, join 'em.

SUPERMARKETS

The expansion of discount stores has not only affected traditional grocery shops but also foreign supermarket chains.

In the first half of 2001, the supermarket trade grew by just under 5%, down from 10% annual expansion in recent years.

Many shoppers were attracted by discount stores' promises to refund double the difference between their price and that charged by their competitor for any product, where their rival charged less.

Tops Supermarket responded by preparing to launch Tops City Store, aimed at selling fresh food, and small stores covering 600 to 1,500 square metres to take on Tesco Lotus Express. Both new concepts will be introduced in 2002.

From roadside stalls to superstores, the range of consumer products and outlets to choose from has never been so large.

Tops acquired the supermarket operations of Japan's Seiyu Group in three locations in early December, bringing its number of stores to 44. A new Tops supermarket was opened at Victory Monument on Dec 24.

At the same time, Belgium-based Food Lion open half a dozen new stores after changing its supermarkets to incorporate a fresh market selling food at comparatively low prices.

"We don't want to fight directly with discount stores and we've been affected by them in a minor way. We open our stores near residential areas," said Nares Changsamlee, the buying manager of Bel-Thai Supermarket Co, the operator of Food Lion.

Food Lion plans to open as many as 50 new outlets in 2003, up from 22 currently.

"In my opinion, the future of supermarkets is not as dim as many people expected. More new supermarkets will be opened soon," Mr Nares said.

DEPARTMENT STORES

Central Group, Robinson Department Store and The Mall Group have overhauled their business strategies.

Central has focused on including specialty stores such as Power Buy and Super Sport in its shopping blocks.

In the first half of 2001, the new store image of Central became clearer with four new specialty stores: Red Dot, Just 25, B2S and Home Work added to its range of outlets.

The Mall adopted a different approach with a big entertainment area in each of its complexes, and expected year-on-year sales growth of 15% to 22 billion baht in 2001. Its upmarket complex, The Emporium on Sukhumvit Road, is expected to continue to contribute major growth in earnings.

In November, The Mall announced a plan to co-invest with Bangkok Inter-continental Hotel Co to redevelop the group's hotel site in Bangkok as a six-billion-baht Siam Paragon retailing complex. The three-decade old Siam Inter-continental Hotel will be torn down to make way for the new complex, which will cover 250,000 to 300,000 square metres and is scheduled to open in 2004.

Central plans a shopping block of more than 200,000 square metres on Rama II Road.

GS Property Development Co, the operator of Gaysorn Plaza in the Ratchadamri area, embarked on renovations with financial support from Hong Kong Land. The property is due to reopen in May 2002.

Robinson worked hard to repay creditors and spent 250 million baht to upgrade its existing stores. Two new department stores will be opened in 2002.

Siam Jusco forged a business alliance with Central. Some 10,000 square metres at Jusco Department Store on Rattanathibet Road were leased by Central and doubled as a new magnet to bring customers to Jusco.

In 2001, Jusco expected sales revenue of four billion baht, the same as in 2000.