The new retail therapy
Although the most challenging period for retailers seems to have passed, a high degree of uncertainty in Thailand’s 3.6-trillion-baht retail market is expected to remain until next year.
Business in some categories such as food and restaurants started gradually recovering after restrictions were eased from May, but many sectors such as fashion and garments have yet to improve as expected, according to Supaluck Umpujh, chairwoman of The Mall Group Co, operator of The Mall, The Emporium and Paragon Department Store.
A source at the Thai Retailers Association (TRA) who asked not to be named said overall consumer spending power in the remaining months of the year is unlikely to recover because shoppers are still fretting over the country’s economic situation and a possible second wave of the coronavirus. Even worse, the unemployment rate remains relatively high.
“From now until 2021, there are not as many new retail projects to be opened compared with previous years because of Covid-19,” said Surachet Kongcheep, managing director of Phoenix Property Development and Consultancy. “Projects to be opened during the period will be mostly shopping centres, while other retail projects, especially community malls in suburban Bangkok, are expected to encounter great difficulty, as most existing tenants failed to continue their business because of the serious impact of Covid-19.”
According to Mr Surachet, occupancy rates in some retail projects, especially small projects or projects with few rental spaces, such as community malls and hypermarkets, have begun to drop.
Phattarachai Taweewong, associate director of Colliers International Thailand, said total retail space in Bangkok and surrounding areas totalled 8.89 million square metres in the first half of 2020. Over 400,000 sq m of space is under construction and is expected to be complete in 2022. New retail supply in Bangkok and surrounding areas will come from retail space that supports office building projects.
Tareetip Wongsaengpaitoon, senior vice-president of Kasikorn Securities Plc, said the retail business bottomed out in the second quarter of this year, so retailers are expected to beef up store expansion in the remaining months. Some, however, are still postponing expansion to next year, Ms Tareetip said.
The number of new 7-Eleven convenience stores, earlier seen at 700 this year, is likely to be lower. Ms Tareetip said Big C also expects to postpone its new store expansion in Cambodia but will open more Mini Big C and Food Place outlets at home in the remaining four months of this year.
Home improvement companies such as HomePro, Do Home and Global House, are likely to continue opening stores in the second half.
Malls added new hygiene safety measures as a part of standard services. (Photo: Eric E Surbano)
“The retail market is expected to recover in the fourth quarter, but it is not as good as the fourth quarter of last year,” Ms Tareetip said. “The recovery in the retail market will be at a slower pace as long as the number of tourist arrivals is yet to reach a similar level to the pre-crisis period.”
Ms Supaluck said The Mall Group remains committed to its expansion as earlier planned.
“But our spending focus will be put on store renovation,” Ms Supaluck said. “The Mall Bangkae, Tha Phra, Bangkapi and The Emporium will undergo renovations during 2021-23 with spending worth several billion baht.”
She said that while the retail market will be different from before, the company believes that large-scale shopping complexes will stay afloat because of their integrated products and services.
“Thailand has strong infrastructure, particularly in tourism,” Ms Supaluck said. “If a vaccine is made available, we believe that Thailand will recover fast because the country is a key destination for many international tourists.”
Neeranuch Kanokvilairat, manager of research and consulting at Edmund Tie in Thailand, said the Covid-19 crisis will remind people of the need for social distancing and wearing masks in public.
The trend of working from home has transformed lifestyles and underscored the importance of hygiene and safety to support the “new normal”.
With the realisation of customers’ requirements for safety and hygienic shopping, landlords are likely to spend on technologies in common areas such as automated sanitised equipment and systems, virus-detecting air conditioning, sensor technology and efficient air ventilation systems.
For tenants, payment channels like direct debit, credit card, Rabbit Line Pay and True Money Wallet to support a cashless society will be widely available at shops to offer convenience to customers and accelerate the digital shift.
Other trends in the retail market in the second half of 2020 include rest areas inside petrol stations, horizontal shopping malls and stand-alone shops.
“We will see a blend of nature, green energy, technology, environmentally friendly design, safety and health inside new retail malls that will support the ‘new normal’ society in the post-Covid period,” Ms Neeranuch said.
Jariya Thumtrongkitkul, head of advisory and transaction services for retail at CBRE Thailand, said retailers have to change their business operations to match the drastic drop in footfall and accommodate a new way of shopping.
“Retailers must be adaptive and boost their e-commerce penetration to survive in the second half of this year because of the significant shift of landlords, retailers and consumer behaviour,” Ms Jariya said. “We saw that retailers who used to rent a bigger retail space became familiar with using online platforms and are now refocusing their businesses online after the crisis, resulting in resizing or cancelling their current rental spaces in many retail centres.”
She said the Covid-19 outbreak has accelerated the growth of online retail business, so developers could reconsider the development concept of new malls to better suit the changes in shopping behaviour and better adapt to any unexpected events in the future.
Convenience, hygiene, flexibility and online channels will be highlighted at future retail developments in the post-pandemic era, Ms Jariya said.