The panellists also noted that the omnipresent small shopkeepers should not only focus on price-cutting but adjust their marketing strategy by, for instance, maintaining their special relationships with their clients to survive the fierce competition from the arrival of giant international retailers.

At yesterday's seminar on the retailing industry, Suchada Ithijarukul, president of Siam Makro Plc, said: "Don't invest in anything that you are not good at." She cited her company as an example. "People keep asking me if Makro will follow Tesco by investing in smaller stores with 100 or 1,000 square metres. I can confirm that we won't do so, because we know we are only good at managing 10,000-square-metre superstores."

The panellists agreed that this year was set to be a tough one for retailers because of declining purchasing power resulting from rising oil prices and the uncertain political situation, which has dampened the mood of shoppers. Moreover, household debt has doubled from a decade ago, from Bt52,000 to Bt114,571 per household. This has crippled consumers' ability to spend.

Kanok Wongtrangan, chairman of Krungthep Thanakom Co Ltd, said the retailing industry depended on consumer confidence, citing the fact that the growth of the retailing industry lagged a year behind GDP growth. For instance, the country's GDP in 2003 grew at the high rate of 6.8 per cent. However, the retail industry growth in 2003 was only 3.1 per cent. Only in 2004 did it rise to 5.5 per cent, as a result of 2003 GDP growth.

However, compared to previous oil crises, the crisis this time shows that the Thai economy has become much stronger. Kanok said that the first oil crisis in 1974, when the oil price was US$11.1 (Bt423) a barrel, had sharply cut Thailand's GDP from 9.8 per cent the year before to 4.4 per cent. The inflation rate was 24.3 per cent. The second crisis in 1980, when the oil price was $30 a barrel, resulted in GDP growth of only 5.3 per cent, compared to 10 per cent in 1979. Inflation then was 19.7 per cent.

However, this oil crisis, when the price is $68 a barrel, has had less impact on the economy as GDP growth this year is likely to be reduced by only one percentage point from last year, Kanok said, and inflation is still manageable at 5.6 per cent.

The oil-price rise is a major concern for retailers because it has affected their costs, the most important element in managing a business, especially for small shops in the provinces.

Kiatpong Sirithanawongsakul, managing director of K&K Super Wholesale Co Ltd, based in the southern province of Songkhla, said that small retailers should carefully manage their costs.

"For instance, we have encouraged our members to share transportation because it's not worthwhile for small shopkeepers to pay for a whole truck to transport only a few items to their stores," he said.

He added that price-cutting was not the only way to survive the current economic difficulties.

"People thought that the small shops in the provinces were dying because they couldn't compete with the international superstore chains," he said, "but in fact many of them have adjusted their business well. Some even deliver their goods directly to their clients. Some use a shrewd marketing tactic by telling their clients that it's not worth paying the high petrol price to drive to superstores which may sell goods at lower prices and they can save more by buying consumer products from shops near their homes."

These simple yet clever tactics have maintained the traditional retailing trade.

Chatichai Tuangrattanapan, an advisor to the Thai Retailers' Association, said that of the Bt1-trillion turnover of the retailing industry, 55 per cent came from traditional retailers, the rest from modern or international retail chains.

Supaluck Umpujh, vice chairman of Siam Paragon Development Co, echoed the view. She said that, for example, the sales of Villa Supermarket opposite The Emporium, flourished even more after the opening of the mega-store.

"We were surprised by their rising sales," she said, "and we are trying to learn from them."

She found out that Villa had a legion of loyal clients because the staff remember every client by name. Villa also has strong niche in meat.

"We have to admit the meat available there is of very good quality," she said, "which is why it competes with us so well."

She added that the company was now keeping a close watch on the economic situation.

"We are affected by oil prices and the current political vacuum," she said, adding that she also agreed that retailers should be extremely cautious now and not invest in anything they were not good at.

"Our group concentrated on department stores with a high margin," she said. "That's why we won't go into something that we don't have expertise in, such as convenience stores."

Jeerawat Na Thalang

The Nation