Display mode (Doesn't show in master page preview)

30 Apr 2020

Services

2020 Retail Business to Shrink 5-8% … Entrepreneurs Face More Challenges Post COVID-19 (Current Issue No.3102)

KResearch views that the government's plans to gradually ease lockdown measures, including allowing small retail stores to reopen on May 3, 2020 and large retail stores on June 1, 2020 represent positive signs and offer an opportunity for retail businesses to generate earnings again via their premises. However, there will be many factors pressuring the retail business afterwards, in particular continuing weakness seen in consumer purchasing power despite the government measures aimed at shoring up consumer purchasing power. Moreover, consumers have no confidence about safety if there is a second wave of the coronavirus (COVID-19) pandemic. As a result, they will continue to be worried about the disease and may only go out shopping only if it is necessary. Therefore, retail entrepreneurs, including modern trade and SMEs, must accelerate efforts to build confidence in terms of hygiene and safety while also introducing marketing promotional activities, especially pricing, which remains vital for the retail business. Nevertheless, retailers must thoroughly consider the timing and worthwhileness of their marketing promotions. Meanwhile, retailers that offer rental spaces, especially modern trade, may need to continue their relief measures for retail tenants  (merchants who rent spaces in shopping malls) over the near term,  including rent discounts or freeze on rent increases, as well as assistance in hygiene, safety and marketing.

Meanwhile, under an assumption that Thailand can control the spread of the COVID-19 pandemic within 1H20 and there will not be a second wave of the COVID-19 pandemic, it is expected that the retail business may not return to normalcy, but gradually recover somewhat during 2H20. Given this, KResearch projects that growth in the retail business may shrink approximately 5-8 percent YoY in 2020 (bettering the contraction of 22 percent estimated in March). It is expected that retailers that focus on selling products that last for a long time or have high value per unit (non-essential/luxury products), namely shopping malls and specialty stores selling construction materials, furniture and home decorative products and fashion goods (cloths, bags and shoes), will be hard hit and they may not recover quite as fast as those selling essential/consumer products, such as supermarkets, online platforms of modern traders, product manufacturers and social commerce.

The operation model of retail business, however, is expected to change going forward post COVID-19 pandemic. The retail business is one of the businesses that will have to adjust quite drastically after consumers have adopted new behaviors that are now considered as new normal, in particular switching to online shopping and taking risk to purchase new product categories, such as foods and consumer products online. These behaviors may persist after the end of the COVID-19 pandemic and will likely cause retail entrepreneurs, including modern traders or SMEs, to revise their business strategies towards the online market at a faster pace because selling products at brick-and-mortar stores might not be worthwhile or allow them to gain sufficient income. In so doing, retail entrepreneurs may choose a platform that suits their own products and meets the needs of target customers, and create the most satisfying service experience to consumers by offering convenience, secure payment system, speedy delivery service, which are key factors for online marketing.   ​


Services