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3 Mar 2006

Services

Retail Business, 2006: Stable ... Amid Risk Factors

คะแนนเฉลี่ย

In aggregate, the retail business in 2005 exhibited a growth of 7 percent which was worth some THB1.6 trillion, according to a report of the Bank of Thailand. Still, the growth slowed from the record of 18.6 percent seen in 2004. In 2006, KASIKORN RESEARCH CENTER (KResearch) forecasts that growth in the retail business will be quite stable at around 8-12 percent due primarily to public investment, marketing-related activities launched by retailers and the upbeat world economy. However, risk factors include rising interest rates and inflation which will put greater burdens on consumers in terms of their debt settlements and spending. Meanwhile, the expected higher oil prices domestically are set to raise production costs that will almost inevitably result in hikes in prices of goods and cautious spending among consumers. Worse, volatility in the local stock markets since late last year will adversely affect the wealth of middle-class consumers. Other risk factors also include the Southern violence and domestic political volatility as well as possible reemergence of the bird flu. Under these circumstances, the Thai retail business is unlikely to continue the stability of last year.

Meanwhile, competition in the retail business is set to be tougher. Among the tactics expected to be employed by many retailers are branch expansions, price competition and differentiation in products and services to win consumer purchasing power in the midst of high cost of living. Accordingly, 2006 is not a year in which retailers in Thailand can stand still because they will have to adjust themselves through tactical strategies in order to be ready to counter the competition and for the purpose of maintaining their customer bases. Moreover, they will have to create new target groups as well. Big retailers are able to adjust themselves and are better able to absorb and adjust to the higher costs compared to small retailers. This year, therefore, is going to be a challenging period for small Thai operators because they must try their best to restrict operating costs and seek new channels to stock goods in appropriate quantities. If the cost of investment is not too high, there will be a chance to make reasonably good profits. In addition, small retailers will have to seek alternatives ways to offer satisfactory, fast and flexible services, as well as studying more closely the particular demands and preferences of their target groups so as to be able to adequately respond to their dynamic lifestyles and for the purpose of maximizing satisfaction.

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