Central Retail, which operates a consumer portfolio across Thailand, Vietnam and Italy, began trading Thursday on the Thai stock exchange, in an initial public offering that raised 78.12 billion Thai baht, or $2.48 billion at current exchange, valuing the company at 253 billion baht, or $8.06 billion.
The firm is a subsidiary of Central Group, the influential Thai conglomerate owned by the Chirathivat family, and is its latest division to go public. The company’s other two subsidiaries, operating in the shopping mall development and hospitality, are already listed on the Thai stock exchange. After listing, the Chirathivat family still holds 70 percent of CRC share ownership.
“CRC is very proud to make a new mark with a success in becoming the country’s largest IPO ever, as well as being the world’s second-highest-ranking IPO offered by retailers,” Yol Phokasub, chief executive officer of CRC, said Thursday.
“Notwithstanding ongoing challenges that bring short-term impact to Thai capital market, the remarkable deal reflects investor confidence in our long-term potential and growth opportunity driven by our strong and stable fundamentals that propel organic growth through expansion and stores’ renovation of our leading retail banners in Thailand, Vietnam and Italy, with plan and target number clearly set,” he said.
In addition to investing further into omnichannel strategy and store renovations, Phokasub highlighted that CRC would use the raised funds “to explore opportunity for inorganic growth through constant acquisitions of promising retail businesses in Thailand and overseas with prudently disciplined investment strategy.”
As of Sept. 30, 2019, CRC operated 1,922 stores in Thailand plus 133 stores in Vietnam and nine department stores in Italy.
The main brands under the portfolio include Central Department Store, Robinson Department Store, Rinascente, Super Sports and Central Marketing Group, its international fashion and beauty distribution business, which works with Guess, Topshop, Polo Ralph Lauren, Clarins, Aesop, Lee and Wrangler. In addition, it operates grocery, convenience and electronics stores.
With almost 32 million square feet of retail space in Thailand, Central is the largest retailer in the country. The Central Group is delisting its Robinson plc subsidiary, offering a share swap to the shareholders of Robinson, with no cash alternatives. There were more than 50 Robinson stores as of the end of 2019.
The proceeds from the IPO will further help drive Central’s growth and compete against the other two big retail players in Thailand, The Mall group and the Siam Piwat group.
Retail is crucial to the Thai economy, accounting for around 15 percent of gross domestic product in 2018. In the country of 70 million people, retail has proven a huge draw for the large number of tourists, estimated at more than 40 million in 2019, and growing at 10 percent a year. Street and night markets are a big draw for low-priced merchandise, especially apparel, luggage and beauty products, as also are weekend markets such as Chatuchak, in Bangkok.
But the malls in Thailand also stand out for their quality, which often tops global standards because of their focus on well-known brands combined with offering local, handmade goods and interesting food options.
“Thailand, and Bangkok in particular, is one of the world’s most competitive and most attractive retail markets. If you look at the concepts being put out by the shopping centers, owners and operators, the design, the tenant mix, the positioning it is world class,” Andrew Gulbrandson, head of research and consulting at Jones Lang LaSalle Thailand, told WWD. “You can find pretty much anything here whether you’re an aficionado of American brands, European brands, Japanese brands. Really a lot of what you don’t see a lot of yet — but they are coming — are Chinese brands.
“Competition for space in malls like Siam Paragon is so fierce — big brands will do what it takes to be in the top centers,” he added.
Significant change in 2019, including a new democratically elected government and a new king, hit consumer sentiment and slowed economic growth. But analysts believe growth should rebound in 2020 to 2.7 percent to 3.7 percent, and the consumer outlook should improve.
But Jariya Thumtrongkitkul, head of retail services, Thailand, at CBRE, believes the real change in retail is being driven by changing consumer preferences — their need for variety, innovation and new concepts. She said retailers were fast to adapt to changing times. “People are getting bored of the typical retail and they don’t want to go to the typical department stores and the shopping malls and see the same thing,” she said.
“A lot of the big malls have done big renovations — for example, Central malls over the past two years and they are keeping on with this renovation. What we are seeing is that they are taking out the boring stores, and bringing new concepts, like multisports brands, and bringing in auditoriums, spa arena concepts. Shops are not selling products any more, they are creating experiences for people,” she added.
Bangkok has more than 80.7 million square feet of modern retail real estate, usually with an occupancy of more than 95 percent, according to CBRE. The Siam and Sukhumvit areas are the capital city’s main shopping districts.
The year of festivity and celebration over the crowning of the new king drew consumers out of their homes, and pulled tourists into the country, including in December when the celebrations reached their conclusion.
A month earlier, in November, there was a set of celebrations to mark the one-year anniversary of Iconsiam, the mega-mall from the Siam Piwat group.
Built at a cost of 54 billion baht, or about $1.6 billion, and covering 5.6 million square feet, is resplendent with art and new global retail tenants, including Japanese department store Takashimaya as the core tenant and the first Apple store in the country. Playing in luxury on the one hand, with the longest pleated glass facade in the world, Siam Piwat planned out Iconluxe with a separate luxury zone, while Sook Siam, an indoor floating market, offers local flavor.
Included in the plans for the mall were hotels and residences, a waterfront park, an Iconsiam heritage museum and a 3,000-seat auditorium, each of which is slowly being completed.
“We expect to draw 150,000 shoppers a day,” Chadatip Chutrakul, owner and ceo of Siam Piwat, said at the time. “We have brought together 500 retailers in the same venue. For more than 20 percent of these retailers, it will be their first presence in Thailand, including Takashimaya and the first Apple store.”
While Siam Takashimaya is the retailer’s largest outside of Japan, JD Sports also opened its first flagship in Thailand, a 10,600-square-foot unit on the mall’s second and third floors.
“JD Sports is a multibrand sports-fashion store. It will support Bangkok’s appeal as the retail hub of the Asean Economic Community, helping make the city a favorite shopping destination for the world,” said Supoj Chaiwatsirikul, ceo of Iconsiam.
Other stores at Iconluxe include Alexander McQueen, Louis Vuitton, Saint Laurent, Versace, Cartier, Celine, Christian Louboutin and Coach, while other zones at the mall offer units for H&M, Zara and Uniqlo.
Charoen Pokphand Group, one of Thailand’s biggest companies, and Magnolia Quality Development, well-known in the property segment, each owns 25 percent of the Iconsiam venture with its audacious plan of opening on the less visited side of Thailand, in Thonburi, and creating a destination. Siam Piwat owns 50 percent.
The retailer’s plans include an investment of more than $60 million to help build a subway line connecting the present network with a monorail, and donate it to the city, the first such investment by a private company.
A little over a year since its opening, it is clear that the plan has worked. The Chao Praya is resplendent with boats with Iconsiam headlining them, and boat operators estimate an increase of more than 10,000 people a day in people visiting the location via the river.
The daily footfall is an estimated 80,000 to 100,000, having touched 300,000 in a single day on a major event.
Siam Piwat’s other malls include the successful Siam Paragon on Sukhumvit, which is owned 51 percent-49 percent with Thailand’s Mall Group. Their other malls Siam Discovery and Siam Centre have also been a success, with the three (including Siam Paragon) covering about 807,000 square feet in the heart of the city.
Although Siam Piwat has worked together with the Mall Group in creating retail, the two also are competitors. The chairman of the Mall Group is also a woman, Supaluck Umpujh.
Like Chadatip Chutrakul of Siam Piwat, Supaluck Umpujh is heir to the retail empire that her father, Supachai Umpujh, founded. He was among the 50 richest people in Thailand in 2019, with a net worth of $2.1 billion.
Along with Siam Paragon, the Mall Group is known most recently for developing the more luxurious Em District, redoing the Emporium mall, inaugurating Em Quartier, and work is still going on at EmSphere. All three buildings will have a total area of 2.5 million square feet of mixed use retail space.
The group has held sway over the luxury market with Emporium, a six floor shopping center opened in 1997 in the Khlong Toei District, on Sukhumvit soi 24, which houses a selection of global luxury brands including Dior, Fendi, Ungaro Paris, Van Cleef & Arpels, Burberry and Bulgari, and fashion brands, including Guess, Adolfo Domínguez, Aubade, Birkenstock, Ben Sherman and Barker. It was Bangkok’s first luxury lifestyle mall, which later became a blueprint for others — with a department store, luxury shopping, dining, entertainment and a supermarket, and a direct connection from the skytrain into the mall.
Emquartier, which is on the opposite side of the road from Emporium, opened in 2015, has more than 1,000 international and local brands. Luxury brands such as Louis Vuitton, Dior, Valentino, Fendi, Chanel and Prada are on the lower floors, and higher up are high-street brands such as Uniqlo, Zara, H&M and Gap.
The space is divided into three zones: the glass quartier, the Helix quartier and the Waterfall quartier. Drawing shoppers in are also more than 50 restaurants in the Helix quartier.
EmSphere, the third mall, in the area is expected to open within the next year.
Analysts noted that sales for 2019 for the group were expected to be an estimated 60 billion baht, or $1.98 billion (up from 58 billion baht, or $1.91 billion, in 2018). The other retail brands that the group owns include The Mall, Power Mall, SportsMall and BeTrend, with more than 500 million customers a year.
Major renovation is in the works for The Mall group as well, with 100 billion baht, or $3.30 billion, to be spent on renovation and for an ambitious new project, the Bangkok mall, in a city-within-a-city concept in the Bang Na-Trat road area. The renovations include The Mall Ngam Wong Wan, The Mall Ramkhamhaeng, The Mall Thapra, etc.
Bangkok is also home to other innovative retail concepts — imaginatively planned and executed, like Terminal 21, at Asok, in the Watana District, which opened in October 2011, and has subsequently opened in other cities, including Pattaya. The mall brought the dream of traveling the world to downtown Bangkok, the experience of having flown into an airport terminal housing the world — each floor represented by a city, such as Rome, Paris, Tokyo, London, Istanbul or San Francisco.
Owned by LH Mall & Hotel Co., the company intends to grow its retail concepts, with plans to open two more shopping complexes in Bangkok, and two hotels from 2019 to 2021.
Comparing retail across other Asian countries, Lee Fong, director, Asia-Pacific Research & Consultancy at JLL, noted that global brands continue to be drawn to retail in Bangkok.
“One of the broader strokes you will see is that the mall developers are doing a better job of attracting retailers, adjusting the tenant mix well, and really drawing in the consumer and finding ways of increasing footfall, and working on the overall experience to consumers. They are not only targeting bringing people into the doors but also looking at their online presence as well. That’s one of the big trends that has been happening over the last few years. Food and beverage has been growing quite a bit over the last year, and that is drawing in more consumers,” he said.
Jariya Thumtrongkitkul noted that another trend is the growing common use spaces.
“In terms of the retail projects we have seen a lot of big green common areas, which have been converted into a common space. Earlier every square meter was rented into a shop because it could generate money, but now space doesn’t count in that way, and the newer shopping centers don’t see a lot of chaos all over the place. Like MBK was in the old concept where every square meter brought in revenue. But now, people can just buy the same products online from China, from Vietnam, the sources are the same. So now you will see more statute landmarks inside and outside. The shop that sells products only, they cannot survive. They have to adapt, or die. There are a lot of brands closing down everywhere, that is because they cannot just evolve,” she said.
Another trend is to have more temporary shops as against permanent shops, which convert from time to time, rather than to rent to a fixed tenant, and which do a lot of events to draw people in.
Other niche areas that have been growing fast, both in terms of design and in terms of their offering are sportswear related stores and malls, with a growing trend to make sportswear stores more participative. Sportsmall, owned by The Mall group, which covers more than 60,000 square feet in Emquartier, stocks more than 300 brands. The Mall group plans to makeover its sports mall stores across the country with an allocation of 1 billion baht from 2019 to 2021. The 55,000-square-foot Sports Mall flagship in Paragon Department store was relaunched in November catering to the fast growing ath-leisure trends and with more than 200 brands. Company officials expect sales at Sports Mall at Paragon to grow by 50 percent within a year, to 1 billion baht.
But even with all the brick-and-mortar activity in the country, e-commerce also is growing fast in Thailand, as it is everywhere. The Thai Retailers Association estimates that more than 10 percent of Thai households used online shopping channels in 2018 and that online sales growth will be in the 15 to 20 percent range annually.
“E-commerce has been reshaping the way the major bricks-and-mortar are approaching the business,” Gulbrandson reaffirmed. “There is significant mobile penetration here. Thailand’s adoption of various services, whether e-commerce or digital wallets, social media uptakes — it is number one in the world. Thais are very savvy when it comes to the digital space.”
According to the Electronic Transactions Development Agency, the value of Thai e-commerce grew by 14 percent in 2018 to about 3.2 trillion baht or $102.13 million. Meanwhile, retail sales only grew by 3 to 4 percent year-on-year. ETDA noted that Thailand has about 51 million Internet users.
Millennials make up a majority of the Internet penetration in Thailand, at 57.4 percent. They spend an average of 53.2 hours a week online, and Thailand is the regional leader in mobile commerce, with more than 50 percent of online transactions via mobile devices.
A Google Temasek study predicts that Thailand’s e-commerce market will surge to $13 billion by 2025.