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9 Sep 2011

International Economy

Thai Exports Helped by China Retail Business (Business Brief No.3174)

China's retail business has registered double-digit growth since 2004. With continuing growth of 17.2 percent YoY in July, the Chinese retail business has captured as much attention as the nation's impressive economic performance.
The implementation of their 12th National Economic and Social Development Plan (2011-2015), aimed at promoting sustainable economic growth, is a key factor supporting growth and expansion of their domestic retail business into untapped consumer markets there. Consequently, goods will be distributed more evenly throughout their nation and this, in turn, should help Thai goods that are already integrated into their retail supply chain networks to expand as well. However, Thai exporters that have not yet gained access to such supply chains may consider other retail channels, especially e-commerce, to help bolster their exports to China. They may promote their products on popular Chinese online shopping websites, e.g., Alibaba, 360Buy, Joyo Amazon and Dangdang.
Ongoing adjustments by Chinese retailers to maintain their market shares on the east coast, where 62.2 percent of the Chinese retail market exists, and to capture a portion of the remaining 37.8 percent in fast developing rural areas and outlying provinces e.g., Yunnan, Tianjin, Ningxia, Anhui, Jiangxi, Guizhou, Hainan, Zhejiang, Hunan, Guangxi and Heilongjiang should allow Thai goods greater access to retail outlets there, especially via the supply chains of giant modern trade retailers (domestic and foreign retailers), because they are the most suitable channels for product placement. Meanwhile, producers of high-quality products will have greater flexibility in choosing retailers for their products, so Thai exporters of high quality merchandise may get a similar opportunity of such access to Chinese consumers.
Nevertheless, Thai exporters will have to brace for stiffer competition from foreign counterparts. As a result, Thai exporters must make sure that their product quality is better than local and international rivals. In addition, Thai exporters must work harder to penetrate regional and local retail supply chain networks,as Chinese retailers have been very protective of these conduits, making it very difficult for new suppliers to gain entry. A lack of expert understanding about the diversity of consumer behavior in China's regions can be a major setback for Thai exporters when competing against local and international retailers that have operated in China for a long time. Other restrictions involve their government's role in dictating retail business via product standards and erecting trade barriers against foreign products if such products are perceived as a threat to retail business and/or consumers there.

As a result, the most appropriate first step for Thai businesses that want to enter the Chinese marketplace is to use the trade channels provided by the Thai government, such as trade exhibitions. Currently, relevant Thai government agencies are placing great importance on China as a major export destination and thus a driver for our export-oriented economy. Businesses should also conduct thorough studies on Chinese consumerism and closely monitor the movements of their rivals.

International Economy