Who's scared of the giant, modern retailers? Certainly not Suwat

As he was setting up his first 80-square-metre Chorn Ngern (silver spoon) minimart in Pathum Thani province, a Tesco Lotus Supercentre, Lotus Express convenience store and 7-Eleven shop surprisingly emerged in the nearby area.

Although he was not scared by the competition, he had to switch from concentrating on reaching break-even point within a certain timeframe to thinking of how to make his business grow and survive.

"I studied the behaviour of my target customers, who live within one to five kilometres of my store. My selling point is maximising convenience for people so that they don't have to take a long time to buy goods," he told a seminar entitled "The way out for Thai traditional trade" arranged by Krungthep Turakij newspaper last week.

Suwat strongly believes that traditional retailers will not die and modern retailers are not his enemy - in contrast to those traders and experts who fear that the small fry will eventually be consumed by the giants.

"I'm not scared by the opening and spreading of supercentres like Tesco Lotus and Big C. I also buy goods from Tesco Lotus to sell at my shop. Traditional retailers look for any source that can minimise their costs so that they can maximise margins. They also buy goods from wholesalers," he continued.

He consistently adjusts his business strategy to tackle the change in consumers' behaviour. Shoppers like to visit modern stores, which have better operating systems, services, product displays and atmosphere.

Suwat exploits the advantage of being a small store to forge a close relationship with customers by constantly asking for their expectations and feedback.

However, the power of modern retailers, who have much more money and more systematic operations, is large enough to significantly affect many traditional traders and persuade the government to look at the problem.

From 2001 to 2007, the proportion of traditional trade to modern trade dropped from 70 per cent to 35 per cent. Total value of modern trade last year was Bt500 billion while traditional trade was worth Bt250 billion, according to Santichai Santawanpas, director of the Business Competition Bureau at the Commerce Ministry. Meanwhile, the number of traditional shops dropped from 300,000 to 200,000.

The government has tried to help by drafting a Retail Business Act and by setting up incubation centres and courses for traditional retailers in cooperation with many universities.

Yet, although the Commerce Ministry drafted the law in 2001, it still has not been enforced due to slow procedures and political change. The draft still has to be approved by the Cabinet and there are still many administrative hurdles to clear before the act can finally be enforced.

Retail business expert Porathep Sujaritkul told the seminar that modern retailers should help traditional retailers. "Instead of arranging other corporate social responsibility (CSR) programmes, I suggested they arrange a CSR programme with traditional traders by networking with them, helping them to manage shops and having them sell under the brands of modern retailers," he said.

He also suggested that traditional retailers should network to buy goods at big volume for cheap prices as well as arrange joint marketing campaigns.

However, Suwat said it was difficult in reality as traditional retailers were reluctant to share information in order to avoid leaking business secrets. He partners only a few nearby retailers.

He also expects all retailers to regard each other as friends who cooperate and compete with modern retailers amid deteriorating hopes that the government will launch measures to control the spread of modern giants and enforce the Retail Business Act.

Nevertheless, Suwat remains optimistic. "Traditional shops are born and die every day. What we have to do is to consistently develop while the government and private firms do their best to help traditional trade survive," he concluded.