Tesco expansion boosts Thai market growth
have a detrimental effect on local business, according to a new
report. In fact, hypermarket growth in Thailand has fuelled the
expansion of independent food retailers there as well.
New research from retail analysts M+M Planet Retail reveals that, contrary to popular expectation, international retailers are not precipitating the closure of Thailand's small retail businesses. Instead the reverse is true - hypermarkets and other large stores are actually encouraging the formation of new retail outlets.
Acting as a magnet, independents spring up in their dozens around hypermarkets in a bid to capture passing trade. Furthermore, international retailers are helping to remould the retail market. Whereas traditionally the Thai market has been supply chain driven, with small retailers unable to command competitive prices, the market is now becoming increasingly consumer driven, with international operators helping to drive prices down.
This benefits not only consumers but also the smaller retail operators, who find it cheaper to buy from a hypermarket rather than a wholesaler. Furthermore, independents are being encouraged to join buying consortiums to pool their resources and obtain more competitive prices.
The research, published in M+M Planet Retail's new report, 'Tesco adapts to Thai market', also shows that since entering the country in 1998, Tesco has asserted itself to become the country's leading player.
The UK chain has captured 12 per cent of the modern grocery market, ahead of foreign competitors Casino, SHV Makro, Ito-Yokado (via its chain of franchised 7-Eleven stores which are operated by CP Seven Eleven) and Carrefour. Growth has been achieved via acquisition and organic expansion - 13 stores were initially acquired as part of its joint venture with the Charoen Phokpand Group.
"What is particularly interesting from the perspective of an international player is Tesco's ability to adapt itself to the local shopping habits of Thai customers," comments Corinne Millar of M+M Planet Retail. "In particular, in Roi Et (an up-country area famed for its high proportion of spending on fresh foods) the British number one has experimented with a Fresh Market hall - an area adjacent to the main store which is operated by 14 local vendors selling a range of fresh fruit, vegetables, meat, ready-to-eat products and other local specialities. The area is designed to recreate the atmosphere and range of traditional wet markets."
Other new formats being tested are a supermarket, with a similar grocery offer to a hypermarket but with fewer non-food lines, and a resort store on the island of Koh Samui. The 6,500 square metre store is designed to be unobtrusive, with a low-rise, tiled gable roof, coconut palms and shaded, landscaped family recreation areas. In addition, Tesco is continuing to test the feasibility of its Express store format, opening both stand-alone outlets and forecourt stores in conjunction with petrol retailer Esso.
Although Tesco has already captured the market leading position, the report shows that Thailand still offers plenty of growth opportunities for Tesco, which is yet to tap into an additional 40 million consumers through a range of large-scale hypermarkets as well as smaller superstores, supermarkets, and convenience stores. In addition, the recent demise of Ahold could generate further real estate opportunities for Tesco should the beleaguered Dutch retailer beat a retreat, as some analysts believe is likely.
