April 10, 2014 12:00 am JST

Central Group sending 37-story message with new Bangkok landmark

TORU TAKAHASHI, Nikkei staff writer

Central Group CEO Tos Chirathivat stands with a model of Central Embassy. The shopping mall on the lower floors is to open in May; the tower will house a luxury hotel.

BANGKOK -- The latest addition to the Thai capital's skyline is not merely a building -- it is intended as a symbol. Central Group, the retail conglomerate behind the project, believes the 37-story structure will help in crafting an image of modernity and high quality. The company wants to impress not only locals but also the world, since it is bent on expanding abroad. 

     Upon completion, the shimmering, aluminum-tiled Central Embassy building will look a bit like a stalagmite, soaring up from the Ratchaprasong district -- Bangkok's answer to New York's Fifth Avenue and Tokyo's Ginza. The retail section, to occupy the basement and first seven aboveground floors, is scheduled to open in May. More than 200 tenants, including luxury brands and restaurants, will be spread out over 70,000 sq. meters of floor space.

     Opening later will be the tower portion, which will have an upscale Park Hyatt hotel with 222 rooms. All told, the project is expected to cost 18 billion baht ($553 million). Central Group expects 50,000 to 60,000 people will pass through the complex's doors every day, about half of them foreign tourists. Getting there will be easy, since the building is connected to a Bangkok Mass Transit railway station.

     The construction site is on land Central Group acquired from the British Embassy. Fitting, then, that the building will play an ambassadorial role. "It will be very symbolic, not only for our group but also for Bangkok and Thailand," said Tos Chirathivat, 49, Central Group's CEO.

Delayed but undeterred

The project was first put on the drawing board about seven years ago. It was Tos, as head of the retail division, who got it up and running. He remains confident Central Embassy will be a success, even though Thailand's political turmoil has put a damper on consumption. 

     The anti-government demonstrations, which broke out at the end of October, have already had an impact on Central Embassy. The grand opening of the shopping mall was originally scheduled for late last year but was pushed back to February. As the new date approached and the protests continued, the opening was delayed again, to May 8.

     Nevertheless, Central Group has dealt with unrest before -- and emerged even stronger. 

     CentralWorld, another massive shopping mall in Ratchaprasong, is the group's current flagship facility. In May 2010, when anti-government protesters clashed with security forces, part of the mall was set on fire. The damage was considerable, but there was one consolation: CentralWorld became world famous. When the mall eventually reopened, tourists flocked to it. 

     Now Central Embassy is set to take flagship status, and management expects synergies with other retail facilities inside and outside Thailand. The new building will be connected to an adjacent department store, The Central Chidlom, which opened in 1974. It will also house tenants recruited thanks to Central Group's forays into foreign markets.

To Europe and back

Central Group malls have been sprouting up around Thailand since the 1980s. The numbers attest to the company's overwhelming dominance of the Thai department store sector. It had 97 outlets in the country as of the end of last year -- 65 department stores and 32 shopping malls. The Mall Group, Central's main rival, had nine facilities. 

     Thanks to the steady pace of store openings, Central Group's retail segment has posted average annual sales growth of 15% over the past two decades. And with incomes rising in the nation's smaller urban centers, the company sees room for more new stores.

     Still, there are limits to how much the company can grow in a country of 68 million people. "We aim to keep growing by at least 10-15% for the next 20 years as well," Tos said. That makes foreign expansion a must. A decade from now, Central hopes to be ringing up 50% of its overall sales abroad, compared with 15% at present.

     In May 2011, the group shelled out 260 million euros (about $335 million at the time) for a 100% stake in La Rinascente, an Italian department store operator established in 1865. Though Europe is a mature market, consumers there have plenty of purchasing power, and Central figured the move would catalyze further growth. The group has 11 stores in Italy; it plans to open large new ones in Venice and Rome in a year or two.

     Last April, Central Group placed another time-honored European department store company under its umbrella: Denmark's Illum, founded in 1891.

     These European operations have brought Central Group closer to well-known fashion houses. This should pay off in Central Embassy, where brands lured from the European department stores will make up 35% of all tenants. Tom Ford apparel and Christian Louboutin shoes and cosmetics will become available in Thailand for the first time. 

     Tos calls relationships with brands the "key to success" for any department store operator.  

     Central Group is now turning its attention to a long-held plan to expand across Southeast Asia. Including Thailand, the region is home to some 600 million people, many of whom are joining the middle class. 

     In Vietnam, a Central subsidiary opened a Robins Department Store in Hanoi in late March and plans to set up another in Ho Chi Minh City in October.

    Over in Jakarta, the group plans to open a Central Department Store Grand Indonesia in September.

     And by the end of the year, it will break ground on a 5.8 billion baht shopping mall in the Malaysian state of Selangor, near Kuala Lumpur. The mall, called Central Plaza i-City, is to open in 2016.

     Over the next 15 years, Central Group intends to invest 120 billion baht to establish about 30 malls in Vietnam, Indonesia and Malaysia. Armed with European connections and a shiny new Bangkok landmark, the company can focus on gaining ground in those three key Southeast Asian countries.