BANGKOK -- Thai conglomerate Central Group is starting to turn its attention to slower-developing ASEAN countries, building stores along Thailand's borders in anticipation of brisk international trade stemming from lowered barriers throughout the region.
Central Group is narrowing its focus to border regions this year, Chief Executive Officer Tos Chirathivat told a news conference Monday.
The company also released a business plan for the year calling for 37 billion baht ($1.15 billion) in investment. Although this includes 300 new supermarkets and SiamFamilyMart convenience stores, a significant portion of the funds will go to such major projects as department stores and shopping centers.
Central Group intends to open six shopping centers this year, although no details were disclosed. While three are planned for the Bangkok suburbs, a leading market, the three other locations in outlying areas draw particular attention. The group intends to construct stores in the eastern provinces of Buriram and Rayong, as well as the northwestern province of Tak.
Buriram, on the Cambodian border, is relatively close to the inland portion of the Southern Economic Corridor that crosses the Indochinese Peninsula. Rayong has a coastal industrial zone and lies along the corridor's coastal portion. And Tak contains part of the East-West Economic Corridor and is a key location for cross-border trade with Myanmar.
With the Association of Southeast Asian Nations slated to integrate as a single market at the end of the year, countries are widening roads and building bridges along these corridors and are expected to make immigration and customs proceedings more efficient. Lowering hard and soft trade barriers will not only make trading goods easier, but also boost shopping and tourism demand from neighboring countries, according to Tos.
Central Group built large stores last year in Mukdahan and Udon Thani provinces, on the border with Laos; Songkhla Province, on the Malaysian border; and Chiang Rai Province, located near the Chinese border. Some of these areas overlap with border regions where the government plans to develop special economic zones.
Group sales have swelled more than threefold over the past decade. Sales rose 7% to 249.5 billion baht in 2014, and Central Group aims to boost the figure another 15% to 286.7 billion baht this year. At group real estate developer Central Pattana Group, January-September sales climbed 14% on the year to 17.7 billion baht in 2014, while net profit advanced 20% to 5.5 billion baht. Retail is the core profit center for the group as a whole.
Overseas acquisitions have driven this swift growth. The group has bought venerable European department store operators, including Italy's La Rinascente in 2011 and Denmark's Illum in 2013. In Southeast Asia, it opened department stores in Vietnam and Indonesia in 2014 and is building shopping centers in Malaysia as well.
Opening stores locally may well be enough to draw customers in Malaysia, where incomes are already high, and in Indonesia and Vietnam, where spending is booming. But consumer markets have yet to reach their potential in Cambodia, Laos and Myanmar. Rushing into investment in these countries carries serious risks.
Central Group's strategy of opening stores in border regions of Thailand is aimed at alleviating these risks while capturing demand. A store that opened last year in Udon Thani Province has been thronged with shoppers from Laos, according to the company.
But Central Group is not the only business eyeing Thailand's borders. Rival department store giant The Mall Group enjoyed sharp same-store sales growth in Nakhon-Ratchasima Province, in northeastern Thailand, and is considering moving into Tak and Udon Thani provinces as well.
TCC Group, owner of Chang Beer maker Thai Beverage, made a foray into retail last August, selecting Nong Khai Province on the Laos border as the site of its first MM Mega Market.
Opening stores in Thailand to capitalize on demand from neighbors could be considered a version of manufacturers' "Thailand plus one" strategies, which entail focusing on labor-intensive methods and building plants in nearby countries where wages are lower. But retailers' cherry-picking with an eye toward future growth potential is already starting to lead to cutthroat competition.