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Business

Thai conglomerate pursues 'old school' expansion in Europe

BANGKOK -- Ubiquitous in Thailand, leading retail chain Central Group has joined the modest ranks of Thai companies venturing abroad, opening stores in China, Vietnam, Indonesia and, soon, Malaysia. Across Asia, its footprint showcases familiar features, from everyday brands to high-priced luxury goods, all displayed in brightly-lit modern buildings.

Vittorio Radice, vice chairman of La Rinascente, is in charge of developing international department stores.

     In Europe, though, Central's path seems decidedly old school. Flagship stores in Italy and Denmark are iconic, old world throwbacks that challenge practically every aspect of Central's signature malls in Asia.

     Despite any apparent contradiction, the differences are intentional, said Vittorio Radice, vice chairman at La Rinascente overseeing the group's plans for a signature store in Rome. Central also has an eye on other leading capitals including Paris, London, and perhaps Tokyo.

     Radice, a London-based Italian whose resume includes running iconic U.K. retailers Habitat, Selfridges and Marks & Spencer, says he wants to create cathedrals of commerce, modeled on the landmark department stores that flourished in city centers before online shopping and mega-malls.

Global scout

"Brands go up and down in popularity," he said, noting that signature department stores with expansive inventories and exquisite personal service define great cities. "They are there, an essential presence." 

     Crucial considerations for Central, according to Radice, are being the grandest store, in the best location, in gateway cities. Eschewing the copycat qualities of modern malls, to embrace and showcase the unique flavors and heritage of every city in which they operate is also important.

     "When you come into the store, you should feel where you are. When you walk into one of our stores in Italy, what do you want? You want to feel Italy," said Radice, who was chief executive of Italy's grand La Rinascente group before it was acquired by Central in 2011.

     Radice stayed on to oversee the international development of luxury department stores, becoming among the most senior executives at Central, one of Thailand's oldest and most successful family-run companies.

     Radice mapped Central's aggressive plans for Europe, including possible key acquisitions in Paris and London, in a recent interview in Bangkok. "We plan to be very opportunistic," he said.

     "We're looking at several places," he added, noting that Paris would be ideal, with its rich history and architecturally stunning historic department stores. "I'd also love to have a store in London -- I make my home there," said the 57-year-old son of a furniture retailer from near Lake Como.

     Central is scouting the globe. "There are probably 50 cities around the world as big as countries. Look at Tokyo. There are 37 million people."

Must-visit shopping meccas

The goal is to find premium properties in gateway cities, where cashed-up Central can acquire distressed downtown emporiums, as it did in Italy and Copenhagen. "Cities that attract a lot of visitors, that are tourist destinations," he said, emphasizing that the group would refurbish historic landmarks into must-visit shopping meccas.

Central Group bought the Illum department store in Copenhagen in 2013.

     Radice's vision for Europe contrasts not only with recent Central openings in Vietnam and Indonesia, but also with Central stores across Thailand, whether mega-malls or luxury brand showcases like Bangkok's new Central Embassy, where he was sitting. In some ways, the move toward a global perspective is a tribute to Central's origins as a retail store founded in 1927 by Tiang Chirathivat, a poor immigrant from China's Hainan Island.

     Nearly nine decades later, Central Group has evolved into Thailand's dominant retailer. It has vast holdings in real estate, shopping malls and resorts, as well operating Tops markets and a FamilyMart convenience stores. The group's combined revenue last year topped $8 billion. Its property development and management arm, Central Pattana, is listed on the Bangkok market.

     The company has been family-run in true dynastic style since foundation. From 2013 the chief executive has been Tos Chirathivat, a grandson of the founder. As part of a new wave of third-generation executives, he took over a company that was still expanding rapidly throughout Thailand, but knew that to sustain double-digit growth, overseas expansion would be necessary. "Growing both internationally and regionally is critical for this company," Chirathivat said in an interview last year.

     Tos Chirathivat spent over a decade as chief executive of Central's retail-development division when the company first ventured abroad, opening three department stores in China in 2010 and 2011. Results have been disappointing, he conceded in the interview, noting that further expansion in China had been put on hold.

     Instead, he turned his attention to high-growth areas in Southeast Asia. The group launched the first two of its new Robins stores last year in Hanoi and Ho Chi Minh City, in Vietnam. A Central department store opened at Grand Indonesia Mall in Jakarta last November. He said Central would open in Malaysia in 2016 or 2017.

     Over the next 15 years, Central Group plans to spend nearly $4 billion to finance about 30 malls in Vietnam, Indonesia and Malaysia. Other regional locations, including Myanmar, are under review, Chirathivat added.

Deep pockets welcome

Chirathivat admitted that the company had made some mistakes in China. It had plunged into the saturated retail market too late, after all the best locations had been taken. One lesson learnt was the need to secure good partners. "But things move super-fast in China these days, and building those relationships takes time," he said.

     "China has been very difficult, and not just for us, for everyone in our industry," he added. Recent campaigns by the Communist party leadership against ostentatious luxury spending, especially by officials, has also hurt. "There's just too much over supply. Over the last five years or so, everyone overbuilt," he said.

     The jury is still out on Central's strategy for Europe, where it bought Illum department store in Copenhagen in 2013, and spent an estimated $370 million to acquire La Rinascente, a household name in Italy, where it launched in 1865. La Rinascente was struggling for survival in 2005, when a consortium of private equity and real estate funds provided a lifeline, Radice came aboard to oversee restructuring.

     The plan from the start, he said, was to close smaller stores and gear up for new ownership. "We had to look at stores that made sense." Basically, any property that was not in the city center, and dominant in the market, was shuttered.

     Many in the industry questioned the Thai-Italian synergy of Central's acquisition, but Radice praised the fit. "They are a family that has been in this business a long time, with a great history," he said. "They will keep this for generations."

     Central's deep pockets have been welcome. Already, 50 million euros ($56.6 million) have been committed to the five-year refurbishment of the stately 19th Century Illum department store in Copenhagen. Central officials said they would spend 200 million euros to spruce up existing stores in Italy, and on landmark new locations in Venice and Rome.

Long-term outlooks

Radice conceded that the costs will not quickly be recouped, but noted this was a long-term revitalization of a storied brand. Central is almost entirely privately held, with the exception of two listed arms, Central Pattana and Central Plaza Hotel, and the group does not disclose exact figures. However, Radice noted that revenue in Italy had grown by 5% annually, even with the reduction of stores. "Profits have grown even more," he said.

     A dapper Radice rejected what most accept as conventional retail wisdom, disparaging any suggestion of online outreach. "If you want to buy a product, you go online. If you want an experience, you go to a store." In the cutthroat world of retail competition, he promised: "We will win the war by building experiences. We will lose the war by just trying to sell products."

     Yet he also acknowledged that adaptability was essential. "What you're selling today is not necessarily what you are going to be selling tomorrow. Change is crucial."

     Still, he espoused a formula blending tradition with modernization. The Rome store, which he said would open in 2017, is sited in a prime downtown location. A group of old houses are being rebuilt into a department store, with the design emphasizing the city's thousands of years of history.

     During renovations, workers uncovered a 2,000-year-old Roman aqueduct, which has been carefully preserved in the basement. It will be offset by old Roman baths, salvaged from another location and moved to the site. "We put glass in front, so shoppers can admire this as they visit the store," he said. "They can see something you can never see anywhere else."

     This is all part of his vision for the classic department store experience, but in contemporary style. Shoppers might look for socks, he suggested, then sip a signature espresso on the rooftop, overlooking the cathedral in the heart of Rome -- everything will emphasize the Italian flavor.

     "Maybe we will build a religious shop in the store -- the first in the world!" he said. "This wouldn't make sense in Copenhagen or anywhere else. But here, you could buy souvenirs, images and postcards of the Pope."

     At 12,000 sq. meters, the store is set to become a new landmark for Rome. Then, he chuckled as he pointed out the window in the executive lounge of Central Embassy, where nearby Central's flagship Chidlom department store could be seen. "That's 60,000 sq. meters."

     The sizes and approaches may contrast, but Radice said the Thai and Italian sides of this internationally expanding group were perfectly synchronized. "Our philosophy is the same -- we want to build cathedrals of shopping throughout the world."

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