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BANGKOK — Retail traffic plunged as much as 40 percent and retailers sought to boost safety with undercover police patrols and searches of shoppers’ packages after eight bombs tore through downtown Bangkok on New Year’s Eve.

This story first appeared in the January 4, 2007 issue of WWD. Subscribe Today.

At Siam Paragon Shopping Complex, an upscale mall in the middle of the city’s shopping district, a force of 750 guards patrolled the parking garage and mall entrances while plain-clothes police kept vigil inside the mall, said public relations director Udom Suphpathorn.

Central Retail Group, the largest retailer in Thailand with three department stores, five specialty retail store brands and one supermarket chain with more than 200 locations, was searching customers’ packages as they entered its units throughout the city, said A.J. Wisuphithawornwong, vice president of public relations. Central Retail Group was also checking identifications of all employees, he said.

“Consumers were spooked when the bombs went off in the heart of the city,” said Kitti Nathisuwan, head of research at Macquarie Securities. “Everyone is shocked. It looks quite serious.” Nathisuwan estimated that retail traffic was down 30 to 40 percent after the Sunday evening bombs, and predicted consumer confidence would be hurt even more if there were more bombings.

“With the current overcapacity in retailing space, the true effects remain to be seen over the long term,” he said. Nathisuwan predicted retailers would have to “turn their inventory to cash” with markdowns and promotions to get customers back in the stores.

Retail analyst Suttatip Peera­sub of Kim Eng Securities did not think promotions would get consumers back in stores, however. “This is quite significant,” she said. “The government needs to find out who did this to build consumer confidence and security. I don’t think consumers will go back in the shops because of promotions.”

The Sunday evening bombs killed three people, injured 38 and forced the city to cancel New Year’s Eve celebrations. No one has claimed responsibility, but government officials have pinned the bombings on supporters of ousted former prime minister Thaksin Shinawatra, and not on separatists in the southern provinces bordering Malaysia. The conflict in the south between Muslim separatists and the Thai military, where bombings are routine, has killed more than 1,700 since January 2004. In a handwritten note released to Thai media, Shinawatra denied any connection to the bombings.

After Wednesday’s cabinet meeting, Prime Minister Surayud Chulanont told Thai media there were no suspects in the bombings. The National Police Office reported to Thai media that more than 1,000 people had telephoned on Wednesday to report suspicious packages in and around Bangkok, but that no bombs were discovered.

Investor and consumer confidence in Thailand’s economy has suffered several jolts in recent months. Thailand’s military seized control of the government in a Sept. 19 coup and established an interim appointed government. On Dec. 18, the Central Bank unexpectedly imposed capital controls on foreign investment in an attempt to contain the appreciation in the local currency, the baht. Those controls were rescinded within a day after Thai stocks dropped significantly.

Within an hour of Wednes­day’s stock market opening in Thailand, the first since the two-day New Year’s holiday, shares fell almost 4 percent, worse than expected, said Rakpont Chaisuparakul, an economist and market strategist with KGI Securities. Retail and tourism stocks were especially vulnerable because of the drop in consumer confidence, Chaisuparakul said. The Thai stock market closed down 3 percent for the day.

“We’ll have to wait for the second half of 2007 to see any improvement in Thailand’s economy,” he predicted.

The timing of the bombs was disastrous because this is Thailand’s peak tourism season and retailers count on high business volume between Christmas and Chinese New Year, which falls on Feb. 18 this year, said Somphols Manarangsan, a political economist at Chulalongkorn University in Bangkok.

“There’s not much department stores can do to recover,” he said. “It really depends on the government, which should be more offensive in reestablishing security.”

In addition to consumer confidence, tourism and the financial sector will take big hits from the recent events in Thailand, Manarangsan said. The government predicted revenues from tourism would reach $10 billion in 2007, and an official with the Tourism Authority of Thailand said on Wednesday that if there were no other bombs in Bangkok, it should be “business as usual in 2007.” Tourism accounts for 6 percent of Thailand’s gross domestic product and the country expects 12 million foreign tourists yearly. He reported that Thai tourism offices in Seoul and London had not reported any cancellations since the Sunday night bombings.

“It’s a bit too soon to tell what will happen, but so far there have been no cancellations,” said Chattan Kunjara Na Ayudhya, director of international public relations with the Tourism Authority. “We’re just hoping there are no further incidents.”

The U.S., the United Kingdom and Canada have warned their citizens against unnecessary travel to Bangkok.

Hotels reported cancellations on Wednesday of both business and tourist travel. At the Grand Hyatt Erawan, across the street from Gaysorn Shopping Center, by late Wednesday 140 nights had been cancelled, said Sammy Carolus, director of marketing. At the nearby Intercontinental Bangkok, three meetings scheduled for 2007 had been cancelled at a loss of more than 100 nights, said Bruce Ryde, area director of sales and marketing. “I’ve been talking to my colleagues across the city and we’re all seeing cancellations,” Ryde said. “It’s not dramatic, but it’s happening. They are just heeding travel warnings and taking precautions.”

The Four Seasons Hotel near Bangkok’s main shopping thoroughfare reported no cancellations after the bombings, said Annabelle Gaokaew, public relations manager. Most of the hotel guests over the New Year are from the U.S. and the U.K., she said. “They don’t feel any fear at all,” she said. “They feel the surrounding area is a safe place.”

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