AFTER ITS Bt189-billion acquisition mid last year by CP All, the local operator of 7-Eleven stores, Siam Makro - membership-based cash-and-carry trade centre chain - has drawn up a more active expansion strategy, investing Bt8 billion in the opening of 10
The expansion drive is in contrast to the overall state of the retail sector, which anticipates slower growth of just 2 per cent in the first quarter and 3 per cent in the second owing to political uncertainty.
This growth represents a significant drop from last year, when the sector posted expansion rates of 4 per cent in the first quarter and 5 per cent in the second.
Suchada Ithijarukul, chief executive officer of Siam Makro, said the 2014 investment was roughly double the normal level of between Bt3 billion and Bt4 billion set aside for new-store expansion each year.
“We will open about 10 new Makro stores this year, both in the classic and food-service format. Despite many uncertainties, both economic and political, everything remains in line with our plan. We will not reduce any investment as we believe in the strong fundamentals of Thailand. Such political difficulty does not affect the Kingdom’s fundamentals.
“The country is strong in its fundamentals, and has strong potential as it is geographically located at the centre of Asean countries. Thais are quite smart at all levels, from operational to executive,” she said.
She added that with the upcoming Asean Economic Community, local demand for foods and fast-moving consumer goods would increase dramatically, thanks to the number of people readily accessible, which would increase from about 60 million Thais to a regional population of some 600 million when the single market comes into effect next year.
Operating in Thailand for 25 years, Siam Makro now runs 65 cash-and-carry stores in 40 provinces.
The company opened seven new stores last year, and a further two so far this year. The company also plans to open a new Makro store in North Pattaya next month, followed by another in Mae Sai, in Chiang Rai. Under the expansion programme, the company will focus on upcountry provinces, especially in those where Makro does not yet have a presence. Each Makro store will require an average investment of about Bt500 million, including land, said the CEO.
Suchada said the company had achieved sales growth as targeted for the first quarter, which was close to the 12-per-cent growth posted for the same period last year. “We have been studying different formats for Makro stores to be opened in overseas markets. It requires a very high cost to open a physical Makro store in particular foreign countries. The online store format, which requires little or no space, may be more appropriate,” she said.
Suchada said that looking at Makro’s roughly 700,000 customers – largely retailers and restaurants – their businesses were still growing quite well.
Siam Makro also cooperates with its suppliers to support all small retailers and restaurants, increasing their competitiveness through product and service development and the use of innovative technology, she explained.
Piyawat Titasattavorakul, vice chairman of the executive committee at CP All, which operates 7,700 7-Eleven convenience stores in the Kingdom, said 7-Eleven had generated same-store year-on-year growth of just 2-3 per cent in the first quarter, as the market was hit by political and economic difficulties.
Growth was between 4 and 5 percentage points down on the average same-store rate achieved in normal economic and political circumstances, he said.
However, including new-store expansion, the company achieved 10-per-cent overall business growth in the first quarter, against the 12-per-cent figure targeted for the full year.
CP All opens about 600 new 7-Eleven stores every year.
Piyawat, who is also chairman of the Thai Chamber of Commerce’s retail and wholesale business committee, said that if the political problems were to be prolonged through to the end of this year, the retail sector would be seriously affected, with year-on-year growth of only 1 per cent projected for the third quarter and 2 per cent for the fourth.