Interview by Symphony RetailAI’s Paul Hoffman with Gary Hardy of Big C who presented on Retail in SE Asia at the Xcelerate Retail Forum 2017.
From your perspective, what have been the biggest changes in the grocery retail industry in the last five years or so? What do you see as the impact of those changes?
I can really categorize the changes into three areas. Firstly, Thailand as a market five, seven years ago, was a very traditional trade market whereby around 55 or 60 percent of the retail market was through what we call traditional trade. This is mom and pop shops, local supermarkets and then fresh food through areas like wet markets. Over the last five years, there’s been an explosion in convenience; modern trade convenience. Really four key players are opening stores: 7-Eleven – about 700 stores per year; Tesco – around 200 to 250 stores per year; ourselves (Big C) – about 100 stores a year and then other players like FamilyMart etc. So, there’s been approximately 1,000 to 1,500 convenience stores opened per year. This has shifted the dial considerably on modern trade, and so traditional trade continues to decline, but has declined probably around five, six percent over the last five years. So, this shift towards modern trade and convenience has created more demand around ready-to-eat and ready-to-cook products.
The second one is urbanization. Over the last five years, we’ve seen the younger generation becoming more mobile. As a result, the population is increasing in cities like Bangkok, Korat, Konkahen etc. This has created much more demand to modern trade, much more demand to convenience-type foods.
Lastly, the consumer dynamics are changing. The Thai people are becoming more sophisticated. The younger generation is traveling outside Thailand and becoming exposed to other markets like Japan and Korea, for example. Aligned with that, the way they communicate has changed significantly from traditional media such as newspaper and brochure. We’re seeing much more significant change in engagement through social media and digital. So, there’s these big three changes and the fact that the population is becoming much more cash rich and time poor, so demanding much more in terms of convenience.
Where do you see it all heading in the next two to five years?
First, we’ll continue to see the reduction in traditional trade – and for two reasons:
- the expansion of mini convenience stores as a priority throughout the major retail players (growing double digits across all the players) and
- a generational attitude shift. The younger Thai generation does not want to work in the corner shop that their parents own; they’re moving to the bigger cities and looking to develop different careers
Second, ecommerce. Even though Thailand is still a very small part of the market; it’s only around three or four percent, it is the fastest-growing area. To prove it, we’ve got major players like Lazada. We’re seeing an aggressive shift, albeit from a low base, to more ecommerce-type platforms – particularly in clothing and soft-line apparel, hard-line and electronics, and cosmetics – thanks to the broad exposure that a company like Lazada brings to the region. Underneath all of this, communication through digital TV, through areas like Facebook etc., is becoming significantly more of an investment for the major retailers. I think ecommerce here (in Thailand) in the next 5 years will explode significantly and likely catch up with countries like Korea, Japan and indeed Indonesia.
Lastly, the size of stores in terms of the hypermarket format will be scaled down. Hypermarkets that are being opened today tend not to be as big as ones that were open ten years ago. But equally, the big ones, both ourselves and Tesco for example, are now looking at downsizing and leasing out space within the store to other kind of supportive companies or chains. I think there will be a real shift over the next three years to digital, downsizing and convenience will continue to expand so fast.
Why did you agree to speak at the 2017 Xcelerate forum?
It’s always exciting to hear other speakers. Xcelerate is quite innovative and there’s a lot of good ideas, a lot of good discussion and networking happens. So, from a personal, selfish point of view, I saw it as a huge learning opportunity. But then from a Southeast Asia / Thailand point of view (I’ve got experience in Vietnam and Laos as well), I’d really wanted to share how we’re changing at a phenomenal rate. I worked in the UK for many years. I worked in US with Walmart for many years, but the pace of change today in Southeast Asia makes it a very exciting place to be. And that’s not just because of the retail players, but more about the geopolitical changes, the way consumer behavior is changing, the way disposable income is changing. I really wanted to share that.
For those who couldn’t attend Xcelerate, please summarize your presentation.
I shared a little bit about the Southeast Asia Peninsula, particularly the developing countries like Thailand, which is quite developed, but then Laos, Cambodia, Vietnam and now Burma, which has just started to open up. I mentioned how the countries vary, and their development status and the opportunities there. I went into a look at who the typical Thai consumer is. How this consumer varies behaviorally from other parts of the world. What significant change we anticipate in the next three to five years. It really varies by country; the fundamentals are so different. Take Cambodia, for example, the average age is 28, such a young market. In Thailand, it’s around 45. Or look as Laos, you’re in a four-million-person population concentrated around one city, but a country bigger than France. Burma today? They’ve literally just turned the lights on after 30 years. So, if you land in Yangon today, you need to turn your watch back 35 years to look at the retail market. I could go on… it’s very diverse. This part of the world will be developing much more than Europe and America.