Undaunted retailors keep expanding
THE FLAGGING purchasing power of medium- and low-income consumers helped limit retail sales growth to 3.2 per cent last year, missing the Thai Retailers Association's 5-6-per-cent projection.
However, companies in all retail categories have continued to expand their outlets, reflecting the confidence of the private sector in the government’s policy directions and their sales prospects, Jariya Chirathivat, president of TRA, said yesterday.
The association projects the retail industry to plough ahead by 6.3 per cent this year, the same rate as in 2013, to top the Bt3 trillion mark. It expects retail sales to start recovering in the third quarter assuming the government “pushes the button” to fire up its infrastructure projects this month and money starts flowing into the hands of consumers in April or May.
“Investment in infrastructure is crucial this year. Besides trains and railways, investment in IT and digital (infrastructure) is very important because they will help make an efficient retail sector that can support the government’s policy to make Thailand a logistics hub,” she said.
Speedy infrastructure investment and budget disbursement was one of the four recommendations that TRA proposed to the government during its annual press conference.
The others were introducing measures to stimulate domestic consumption such as making Thailand a shopping destination for foreign tourists and propping up demand of medium- to high-income earners; developing high-end domestic tourism to lure this group of consumers from overseas travel; promoting “Thailand brands” to increase tourists’ spending and exports of “unique” Thai products such as rice berries and other organic goods; and jointly promoting Thai goods with governments in overseas markets, as Thai retailers have started to venture abroad.
In its prepared statement provided to the press, TRA’s agenda also included a suggestion for the government to cut the value-added tax by 1-2 percentage points to alleviate the “continued weakened buying power” of consumers for a short duration of some six months. The VAT reduction would help boost domestic spending by 3-4 per cent.
However, Chatrchai Tuongratanaphan, executive director of TRA, said the VAT proposal was omitted at the last minute because other TRA directors were concerned it could affect the government’s tax revenues and inflation targets.
Based on an estimated 0.8-per-cent gross domestic product growth last year, GDP growth for the wholesale and retail industry is projected at 1.2 per cent and for retail consumption at 1.5 per cent in 2014.
TRA’s retail sector index compiled from figures from its 113 members showed growth of 3.2 per cent last year, dropping from 6.3 per cent in the previous year.
According to the TRA index, consumption of durable goods rose by only 2.7 per cent last year, a sharp slowdown from the previous year when it jumped by 8.5 per cent.
“The durable goods sector, which includes building materials and electric appliances, grew slower, partly due to changes in technologies especially the fact that digital TV was not booming as expected, and there was nothing that new in the IT and computer product category, except for smartphones,” he said.
Consumption of semi-durables, including fashion goods, cosmetics, leather goods and luxury brands, was up by 3.4 per cent last year, only slightly off of 2013’s 5.5-per-cent pace, thanks to steady demand from mid- to high-income consumers.
“Growth came down only slightly because consumers have medium to high purchasing power. The department store industry was not slowing down much, and there was more demand from the tourism industry as arrivals began to pick up in the fourth quarter,” he said.
Consumption of non-durables, including daily necessities such as food, beverages and and apparel, grew 3.1 per cent last year, compared to 4.5 per cent in 2013, reflecting weakened demand from medium- to low-income consumers, especially those upcountry.
By retail format, supermarkets showed the strongest growth at 6.5 per cent last year, followed by convenience stores at 4.0 per cent and department stores at 3.4 per cent. Specialty stores and hypermarts expanded by the lowest rates of 2.7 per cent and 2.6 per cent.
Most retail formats added branches last year – department stores from 61 to 69, home improvement stores from 162 to 178, health and beauty stores from 980 to 1,146, hypermarts from 328 to 341, supermarkets from 361 to 428, and convenience stores from 11,632 to 12,451.
Only IT and electric appliances stores reduced their outlets from 1,466 in 2013 to 1,435 last year. “Operators closed down some branches because sales of IT and notebook products had not grown as expected,” he said.
