In Shops

30 years of change in the Thai Retail Market

What's the future of retail?

Retail property is one of the most complicated types of real estate development because of the constantly changing behaviours, tastes and needs of consumers.

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The Thai retail property market has changed enormously over the last 30 years since CBRE established an office in Bangkok and change continues at an even faster rate especially with the growth of E-commerce.

30 years ago, the Bangkok retail property market was limited to a handful of department stores and a few typical shopping centres like Central Plaza Ladprao completed in 1982, Amarin Plaza completed in 1985 and the original Siam Centre completed in 1977.

The rest of the retail sector was shophouses and wet markets.

There are now almost 7.5 million square metres of modern retail property in Bangkok split between department stores, shopping centres, big box stores and other new formats.

There has been rapid growth and change in the range of retail formats and types of tenant.

The first 7-Eleven convenience store opened in Thailand in 1989 and there are now 10,268 stores in 2018.

The first big box store was Makro Ladprao in Bangkapi district in 1989 and now Big C, Tesco Lotus and Makro have over 450 big box stores in Thailand.

Over the last 30 years we have seen an increased move from traditional retail in wet markets and shophouses to modern retail formats ranging from convenience stores and community malls to giant regional shopping centres such as Central Westgate.

The modern retail format has spread throughout Thailand with many provincial cities now having modern shopping centres.

The Thai retail market is, like the rest of the world, facing the new challenge of E-commerce.

In the UK, E-commerce sales are expected to account for 18% of total retail sales in 2018 and 9.5% in the USA.

Currently E-commerce sales account for less than 1% of total retail sales in Thailand but this is expected to grow rapidly as E-commerce platforms and infrastructure, including payment systems and distribution have now been established.

Big players are currently entering the Thai E-commerce market such as Alibaba investing $320 million as well as JD forming a $500 million joint venture with Central Group.

Retailers will have to adapt to best serve customers in stores and online.

Retail developers will have to improve the customer experience through design, decoration, events, tenant mix and customer service.

Retail landlords will have to create a unique environment that focusses on customer experiences. Landlords can achieve this through placemaking in which transforms retail space into “destinations” and “lifestyle centres” to draw more consumers to the area. Landlords may also choose to shift towards greater food and beverage based tenants, such as restaurants, as they provide an experience which cannot be replicated online.

“clicks” will not totally replace “bricks” but will mean that retailers and retail property developers will have to change.  “Simply building a nice glass box and filling it with brand names, won’t work anymore. “said Ms. Jariya Thumtrongkitkul, head of retail services at CBRE Thailand.“

Many retailers are trying to pursue an omni-channel approach with both online and offline channels that are fully integrated whereby the digital and physical options complement each other.” Landlords will need to fully integrate the omni-channel approach in which to provide consumers with a frictionless experience across online and offline channels. AI will also have a big role to play in collecting data. Through using interactive apps or customer order history, businesses will also be able to form a more accurate customer profile in which they then can use to personalise their marketing campaigns as well as improving their operations and sales. The use of data can also help retailers better keep up and understand consumer trends and expectations.

The continuous change in consumer behaviour means that retail property development is much more complicated than office development.  It requires hands on management and constant innovation and improvement.

The level of commitment and expertise needed is very high and unlike hotels it is rare to subcontract management to a third party in Thailand.

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Even though the economy is improving retailers, retail landlords and developers face big challenges in adapting to the changing environment caused by E-commerce.

The shopping centre is one of the most successful business models and will not fade away but the competition from E-commerce means that the model will have to evolve to survive.

Jariya Thumtrongkitkul is Head of the Advisory & Transaction Services – Retail, CBRE Thailand.  She is responsible for coordinating with local and international retailers, and selling and leasing retail premises in Thailand. Jariya has been involved in the retail industry since 2003 and has successfully handled many retail projects including J Avenue, The Esplanade, La Villa, Nawamin City Avenue, Suzuki Avenue and The Street Ratchadapisek.

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