Even the threat of being blown to bits didn't keep Thai consumers out of Tesco Plc's wide-aisled, air-conditioned hypermarkets last month.
A day after a bomb killed an employee and injured a shopper last month, 20,000 customers flocked back to the Tesco's Lotus Seacon Square Supercenter in east Bangkok. It was the second bombing in a month that police blame on a dispute between a Lotus executive and a former security firm.
"I'm not put off by the bombings," said Jiraporn Chaiyasarn, a manager at marketing firm eThailand Group, who escapes the hot and crowded streets to visit the store about twice a month. "I like shopping at Lotus. The atmosphere is good, and the prices and quality of goods are competitive.'' Britain's Tesco, SHV Holdings NV of Holland, France's Carrefour SA and other foreign retailers, now collect one of every six baht spent on groceries, household goods and other retail items in Thailand. Their success in a market of 62 million people, who spend 700 billion baht (US$15.4 billion) shopping a year, has local retailers crying foul and calling for controls.
"They are gaining market share very quickly and burying the mom-and-pop shops," said Vikas Kawatra, a senior investment analyst at Kim Eng Securities (Thailand) Ltd.
European-owned retailers swooped on Thailand's retail industry as local companies' foreign debt ballooned after the 1997 plunge in the baht. Tesco and SHV Holdings formed separate joint ventures with Charoen Pokphand Group, while Carrefour and France's Casino Guichard-Perrachon SA formed ventures with the Chirathivat family that owns Central Group.
Foreign retailers are now extending from Bangkok into rural capitals.
Tesco, whose 28 Lotus stores made 34 billion baht in sales last year, is investing US$92 million to open five stores this year.
SHV's Siam Makro chain, which reported sales of 38.5 billion baht last year from 20 outlets, plans to add seven by the end of next year. Casino's Big C Supercenter Pcl will spend US$120 million to increase its discount outlets in Thailand by fourth to 34 stores by the end of 2002.
The number of locally owned grocers has declined almost two thirds since foreign competition arrived five years ago. They are asking the government to protect their business with zoning restrictions. So far the government has been lukewarm.
"If a new law was to be promulgated, it would never be retroactive," said Prime Minister Thaksin Shinawatra.
"It's not that we won't welcome the international retail stores." Thaksin said planners should put large superstores outside of metropolitan areas to prevent traffic jams and protect people's lifestyles. "We would like to see the way of life of the Thai who lives in the central area of the city, who lives upstairs and sell products downstairs, to survive."
For Bangkok consumers besieged by heat, rain and some of the worst traffic jams in the world, escaping to the spacious, air- conditioned superstores has become a new way of life.
Shopping carts have trolleys on top and play cars below to keep the kids amused, while playgrounds and cafeterias make visits more of an outing than a chore.
European retailers are trying to downplay their foreign ownership.
"I pay taxes and we run stores with 10,000 Thai people," said Yves Bernard Braibant, chief executive at Casino's Big C Supercenter. "We want more and more stores so if there are new rules we will follow those rules." Sriyan Piertsz, executive director at SG Asia Credit Securities Co. in Bangkok, expects the government to only put a few barriers up "to appease local retailers but at the same time keep the door open to attract more foreign investment."
The Tesco explosions, in a sense, show how integrated European retailers have become.
The Bangkok Post and other newspapers said police arrested the mastermind behind the explosions.
They blamed a business dispute that arose after Thai army Colonel Chamnarn Masamran, deputy chairman of Tesco's Thai unit, demanded payments to renew a contract with a security company run by an army officer.
Tesco said only that investigations are proceeding well.
"Thailand is much more politically and economically stable than say the Philippines or Indonesia, where the penetration of the modern retail sector and spending power of consumers are comparable," said Wannapa Asavatevavith, an analyst at Indosuez W.I. Carr Securities.
Tesco is so confident it plans to start issuing credit cards to customers earning as little as US$110 a month, after a one-year trial with 100,000 Lotus customers went well.
"The trial showed spending by customers with the credit card was significantly higher," said Michael Raycraft, chief executive at Tesco Lotus.
It could be a risky strategy. The prospects for Thai retailers as a whole are deteriorating as the central bank forecasts the economy to grow as little as 2 percent this year, from 4.4 percent last year.
"It's one of the better segments in the Thai stock market and Thais have a propensity to shop but I will sell when I see figures showing there's slower growth," said Reungvit Nandhabiwat, managing director of Ayudhya JF Asset Management Ltd., which invests about US$618 million in Thailand.
Shares in Casino's Big C Supercenter gained 16 percent since January 23, when it brought in Braibant as CEO, while Thailand's key stock index lost 6 percent. SHV's Siam Makro, meanwhile, lost 11 percent in the period as investor's worried it was losing market share.
Siam Makro achieved only 3 percent same store sales growth in 2000 compared to Tesco Lotus's double-digit growth, said Indosuez W.I. Carr's Wannapa. The company, regarded as being the first to introduce bulk retailing in Thailand, isn't resting on its laurels.
"Most major retailers have invested large sums of money, and those who can't adapt will suffer as the market modernizes," said Arnold Tobac, president of SHV's Siam Makro until he retired at the end of June.
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