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Dear
friends,
When
large
grocery
retailers
such as
Makro,
Lotus,
Carrefour,
and Big
C
saturated
the
Bangkok
marketplace,
they
grew by
expanding
into the
provinces,
mostly
by
targeting
major
cities.
This
phenomenon
so
deeply
impacted
small,
local
grocery
retailers
that
some of
them are
now
facing
bankruptcy
and
closure.
While
being
vice-chairman
of the
House of
Representatives’
Economic
Development
Committee,
I heard
many
such
complaints
from
small
retailers.
My own
personal
research,
as well
as many
conversations
with
people,
has
allowed
me to
make 5
observations
about
the
impact
of this
hypermarket
expansion.
1)
Consumer
taste is
becoming
more
extravagant
Modern
retail
practices
are
changing
people’s
lifestyles
and
consumption
patterns.
A TDRI
study
titled
“Thai
retail:
The
impact
of
competition
by large
international
retailers”
found
that
consumers
have
adopted
more
excessive
shopping
habits
due to a
new set
of
commercial
practices
engaged
by big
box
retailers.
2)
The
sales
volume
of most
wholesalers
has
dropped
Between
1996 and
2002,
10% of
wholesale
stores
experienced
higher
sales
volumes.
However,
during
the same
period,
74% of
wholesalers
experienced
an
average
drop of
7% in
sales.
The
study
attributed
this to
the
bankruptcy
of many
small
retailers,
the
primary
customers
of
wholesalers.
Another
reason
was that
small
retailers
had
begun to
buy more
from big
retailers.
3)
Suppliers
have
decreased
negotiating
power
A 1997
study
found
that
even
though
44 Thai
suppliers
increased
their
sales by
an
average
of
20.8%,
the
overall
profits
of Thai
suppliers
decreased.
Huge
volume
discounts
given to
big
retailers
increase
their
negotiating
power.
This
reduces
their
ability
to
bargain
with big
retailers.
If large
retailers
do not
agreed
with the
conditions
of the
suppliers,
the
suppliers
will
lose the
deal,
and
their
sales
volume
will
drop
sharply.
4)
Competition
is
increasingly
unfair
Even
though
the Thai
marketplace
is
defined
as a
free
market,
meaning
it is
open to
competition,
suppliers
have
less of
a
competitive
edge
than do
big
retailers.
Competition
becomes
unfair,
for
example,
when big
retailers
benefit
from
economy
of scale
and also
when
they
undercut
competitors
for
extended
periods,
forcing
competitors
out of
business.
Oligopolies
are the
result.
In
addition,
big
retailers
produce
some
products
themselves,
reducing
their
distribution
costs;
hence,
big
retailers
can sell
the same
products
at
cheaper
prices.
This
forces
smaller
retailers,
who
cannot
afford
to sell
at the
same
prices,
out of
business.
Big
retailers
also
discriminate
against
others,
for
example
- By
collecting
product
entry
fees
from
suppliers.
They
will
charge a
different
fee for
the same
product
of a
different
brand
name or,
even
worse,
charge
no fees
to
suppliers
already
in their
chains,
- by
shelving
their
own
house
brand
products
at eye-level
position
but
placing
other
brands
in less
visible
places,
or by
removing
products
from
shelves
without
informing
or
giving
advance
notice
to
suppliers,
- by
demanding
higher
discounts
from
suppliers.
If
suppliers
disagree
with the
demands,
big
retailers
will
withdraw
their
product
lines,
- and by
forcing
suppliers
to put
retailer
names on
product
labels
rather
than the
supplier
logos.
5)
Profits
are lost
to
overseas
interests
In most
cases,
international
companies
transfer
their
profits
to their
headquarters,
located
outside
of
Thailand.
Statistics
from the
Bank of
Thailand
indicate
that
foreign
investors
drain
enormous
amounts
of
profit
to other
countries.
In 2005,
foreign
industries,
retailers,
and real-estate
companies
took
profits
of
192,789
million
baht out
of
Thailand.
However,
this
information
is
incomplete.
We
really
lack
specific
information
on how
much
profit
big
business
really
extracts
from our
nation.
These
effects
of
globalized
trade
are
having a
severe
impact
on
Thailand,
especially
because
our
nation
was
forced
to
embrace
free
trade
without
the
necessary
preparations
and
coping
mechanisms.
However,
on the
other
hand,
capitalism
is
bringing
greater
competition,
meaning
our
economy
is
becoming
more
efficient.
The
advantage
allowing
big
retailers
into the
Thai
marketplace
is that
consumers
benefit
from
lower
prices.
But the
government
should
heed the
concerns
of all
related
groups.
It must
prevent
monopolies
and
unfair
competition,
and
prepare
measures
to help
those
who will
be
negatively
and
unfairly
affected.
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