The Nation


year-end special

Low purchasing power to hit retailers in 2014

Traditional grocery stores are expected to feel severe impacts from the weak purchasing power of shoppers.

Traditional grocery stores are expected to feel severe impacts from the weak purchasing power of shoppers.

Growth forecast at 7-8%, little better than this year: Assoc

The retail industry is anticipated to grow by a relatively low 7-8 per cent next year amid huge concern over a sluggish increase of consumer spending power, especially among lower-income people.

The current political difficulty is not likely to be settled quickly either, and could drag on until some time in the third quarter of next year, said Chatchai Tuangrattanapan, director of the Thai Retailers Association.

He said the retail industry was projected to grow by only 6-7.5 per cent this year, lower than the average of between 8 and 10 per cent posted since 2002. The industry has also managed growth of between 8 and 12 per cent in past difficult years such as at the height of the global financial crisis in 2008 and the massive flood in 2011.

He said one of the most challenging factors for any retailer next year would be lack of purchasing power, especially among the lower-income earners.

The Office of the National Economic and Social Development Board recently predicted the growth of Thailand's gross domestic product to be only 2.7 per cent this year. The NESDB also anticipated GDP growth of about 4 per cent for 2014, which will be lower than the average 4.5-5.5 per cent seen in recent years.

"Purchasing power has declined significantly this year. I don't see any positive sign for the economy to improve. I also don't think consumers' purchasing power will get better next year," said Chatchai, adding that the government had done nothing to stimulate the economy.

He expects that the political difficulty will be settled late in 2014, maybe in the third quarter. As a result, the sentiment of Thai consumers would not improve until then.

He said 2014 "will be a difficult year for all retailers, especially those selling consumer goods, such as hypermarket and supermarket operators. What they have to do is to monitor carefully their expenditures, and some cost-cutting measures will need to be launched to compensate for declining revenues."

He added that healthy businesses would include tourism and border trades.

Buppa Lapawattanaphun, lecturer in strategic communication at the University of the Thai Chamber of Commerce, said individual consumers would be more rational when buying goods, rather than allowing their purchases to be driven by emotions. Most retailers will adjust their business strategy by cutting unnecessary costs.

She said the Fifa World Cup, the world's largest soccer tournament, which will be held in Brazil between June 12 and July 13 next year, would boost sales of some products, such as electrical appliances, especially LED TVs and satellite dishes, sports apparel and goods, beverages, fast foods and home-delivery items.

However, she warned that the live broadcasts of the World Cup tournament in Thailand would encourage some hidden businesses such as online gambling, which would result in money flowing out of the country.

A recent study conducted by the Sodsri-Saridwongsa Foundation in cooperation with the Mass Communication Lecturers Network for Gamble-Free Progressive Society found that young Thais, especially college students, had a liking for gambling activities and exposure to gambling information from friends, television and new media such as websites.

Suwit Kingkaew, senior vice president of CP All, operator of 7-Eleven convenience stores in Thailand, said the overall retail industry was anticipated to grow by about 10 per cent this year. Growth is as high as 17 per cent in the convenience-store segment, 4.5 per cent for supermarkets and hypermarkets, and about 3 per cent for traditional trade.

"The retail growth is in line with the expansion of residential areas within the cities, which have spread from urban to suburban, as well as the increase of condominiums. The current political crisis has only hit retail outlets in particular areas of Bangkok and for a short period of time," he said.

"We have not seen anything that will have a significant impact on the retail industry next year. The growth is expected to be the same as this year," he added.

Suwit said one of the big challenges for local retailers next year would be to expand their business beyond the domestic market, and not to serve just 65 million Thai consumers, but 600 million people within the Asean Economic Community.

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