It is generally thought that consumers stand to benefit most from competition in the retail industry, being treated to cheaper products thanks to the penetration of hypermarkets and discount stores, which exploit their great size in dealing with their suppliers, who are pressured to lower their prices in return for a higher volume of sales.

These "modern-traders", mostly involving foreign investment, have brought in operational efficiency on the back of superior technology that traditional show huay shops have rarely thought about. This guarantees an end to shortages of consumer products such as Thais experienced decades ago when hoarding often made it hard to find a kilo of sugar.

But there are fears. What if these modern trade outlets wipe out traditional shops? Certainly they would then have a stranglehold over local suppliers as the latter would have nowhere else to place their products. What if the suppliers' profit margins were squeezed to the point where they could not compete? What if the local suppliers' products were imported from countries with already low labour costs? Where would Thai consumers be if all the foreign suppliers and modern traders went out of business? Yet if show huay prospered again, would it return bargaining power to suppliers, who could then demand silly prices as in the past?

These are pressing questions the Thai authorities, show-huay shopkeepers and local manufacturing companies are asking as the unprecedented and controversial retail-business law nears enactment.

It was drafted on the assumption that Thailand's retail industry is dominated by four big foreign players: Tesco Lotus, Big C, Carrefour and Makro, which threaten the viability of show-huay shops.

The Commerce Ministry, which has a direct duty to enforce free and fair trade practices in the local retail industry, believes that the near-monopoly created by big foreign retailers will sweep away small traditional shopkeepers.

It thinks this will have many side effects and long-term repercussions on Thailand, including the spread of consumerism based on the huge discount promotions of the modern retailers, which have already destroyed traditional rural trades along with the way of life that went with them.

Vatchari Vimooktayon, deputy director-general of the Internal Trade Department, said it was the duty not only of the Commerce Ministry but of everybody to find the right solutions to the problem.

"Almost 80 per cent of the new law will be the same as drafts made in 2002. It will in any case focus on the independence and strength of the regulatory body set up to administer the retail and wholesale businesses," she said. "Our idea is to create a business environment where all parties can pull together, enjoying sustainable economic growth and practising self-restraint, ethics and good corporate governance."

She said it would look further into the expansion of large discount stores which might damage existing retailers in an area, as well as the appropriateness of locations in terms of community economics and the number of existing retailers.

While modern retailers claim this gives the authority too much power over them, small and traditional retailers say they do not stand to gain either.

A source from a modern retail company who has seen the draft law, which will go to the Cabinet in the next couple of weeks, said it would stop big retailers expanding their outlets rapidly.

"The draft I have seen gives huge power to the Internal Trade Department to decide whether or not to give a free hand to modern retailers in the running of their stores," he said.

"In my view it is the consumers who will suffer in the long run as it will put Thailand back in the era of retail monopolised by major wholesalers and middlemen," said the source.

He said it would limit the choice of where to shop, because modern discount stores balanced the power of each stakeholder in the supply chain and without them wholesalers and suppliers could stockpile merchandise and control prices.

"In principle, we support the idea of having a law to regulate retail and wholesale, but the guiding principle of all law is that all concerned should be treated equally and fairly. What we should like to see is a law that clearly spells out the roles and responsibilities of all involved: suppliers, wholesalers and modern traders alike," said the source.

It should, he said, include specific measures to increase the competitiveness of mom-and-pop stores. Most important, this source said, the government should be able to explain in tangible terms how the law can serve the long-term interests of consumers. It would be a shame if it placed all the burden on the modern trader, which he said would be to the advantage of the suppliers and wholesalers and ultimately hurt both the small shopkeeper and the consumer.

Thanapon Tangkananan, president of the Thai Retailers' Association, who has also seen the draft, said the association would debate its effect on the trade.

"It allocates huge power to the authority over modern retailers and seeks to monitor and control some retailers, which is unfair," he said.

Peerapong Kitiveshpokawat, director of the International Retail and Franchise Business R&D Centre at Sripatum University, said a centre survey of the impact of modern retailers on traditional retailers in Bangkok found that almost 20 per cent of traditional retailers had folded and another 15.5 per cent changed to other lines of business as they could not compete with modern retailers.

He said the draft was not the only solution to the retail problem in Thailand and many other factors had been ignored by the authorities.

"I don't think it will give traditional retailers an advantage, though its objective is to allow both small and large retailers room to coexist," said Peerapong.

He said government should go beyond this with assistance and measures to improve the competitiveness of small retailers by the transfer of know-how on modern retail management, the development of retail sites and locations and opportunities for small retailers to do business in various formats.

Suppliers, wholesalers and landlords should, he said, also be encouraged to participate in the overall development of the retail system.

Kwanchai Rungfapaisarn

The Nation