Winners and losers as belts are tightened

Belt-tightening by middle-class consumers hammered by red-hot inflation has created winners and losers among firms catering to them.

"I'm quite satisfied if we can achieve growth of 5 or 6 per cent this year," Boonsithi Chokwatana, chairman of Saha Group, said last week.

His target is in line with the sharp drop of more than 10 per cent in sales of branded apparel and footwear.

He said mismanagement by the government in trying to push up the interest rate to counter inflation would severely erode the purchasing power of consumers.

The baht's appreciation, on the other hand, would destroy exports and severely impact the incomes of people, particularly among the grass roots, he said.

"During this period of high inflation, consumers have been urged to adjust their lifestyles to cope with higher living costs," he said.

Jamorn Rummani, managing director of Thai Optical Eyewear Distribution, a leading importer and distributor of luxury eyewear, said the company had seen a great sales impact since this quarter due to the constant increases in oil prices, which have swept up prices for other commodities such as rice.

The current political instability is another factor, which has emotionally impacted local shoppers and their buying behaviour.

"Medium-range and lower-end brands of optical wear with prices ranging from Bt5,000 and Bt7,000 down to Bt3,500 and Bt4,000 are the two key segments seriously hurt by the current economic and political difficulties," Jamorn said.

Being hit by rising living costs, those middle- to lower-income people decided to delay their purchases of such brand-name products, including sunglasses and other optical-wear products.

"We had enjoyed strong growth of more than 30 per cent in the first quarter compared to the same period last year. However, we witnessed a big drop of 30 per cent in the second quarter," he said. "We cannot give any projection for the third quarter as Thailand's overall situation is still gloomy both in local politics and the fuel price."

The last hope for this year is the fourth quarter, which will be the peak sales season of the year, he added.

Many major eyeglass brands have recently hiked their retail prices by about 10 per cent on average to maintain their profit margin against the devaluation of the US currency, he said.

"Our strategy is to maintain the price standard for our branded eyeglasses and to focus on visual merchandising at all retail outlets," he said.

Thai Optical Eyewear Distribution has launched an eyewear line from Shanghai Tang, the first and leading luxury lifestyle brand emerging from China. The new collection features sleek, stylish shapes combined with modern interpretations of traditional Chinese adornments, creating a one-of-a-kind look.

Oliveero Bothielnelli, CEO for Asia at luxury watchmaker Audemars Piguet, said the economy had been better and will be better again.

"For strong watch brands, sales are still here. For Audemars Piguet, we always have complaints from our local retailers that they don't have enough stock," he said.

The first semester for the company has been good and the second half will be even better.

"Our Audemars Piguet is recession-proof. In the period of a bad economy, people who have a lot of money will be more careful in buying luxury goods and they will look for a product that offers them premium quality," he said.

Consumers wll purchase luxury watches as one of their alternative investments for the future and diversify their risks from conventional assets such as land, stocks, bonds and gold.

The high cost of living currently borne by consumers is expected to bring business to hire-purchase lenders.

Daniel Michel Philiponet, vice chairman and managing director of Singer Thailand, a leading seller of home and electrical appliances on instalment, said that during high inflation, which shores up the prices of all commodities, consumers, many of whom have not seen any increase in salaries, needed to manage their money very carefully.

Instead of paying cash, they turn to hire purchase, which would provide them more convenience in overseeing their financial affairs properly.

Companies providing hire-purchase services will benefit from the higher income and spending power of people among the grass roots. The government has injected money into the grass roots through its SML (Small, Medium, Large) programme.

Local farmers are also enjoying the increase in prices for commodities such as in rice, corn and tapioca, Philiponet added.