Shop owner Srisuda Pitakthapanapong, middle, with her daughter, Sermsuda, and husband, Sermsak. They face an uncertain future.
At less than 50 square metres, Kuang Yoo is no superstore. But just a stone's throw from both a Tesco Lotus and a Carrefour on Bangkok's Rama IV Road, this traditional Thai general store is somehow clinging to life.
"I have more than Carrefour!" jokes owner Srisuda Pitakthapanapong. Her eyes twinkle merrily as she points to the boggling variety of items that chock her little shophouse - everything from baby powder and electric fans to a wide selection of underwear, linoleum floor covering, and hair dye in blonde, red and bright purple. "When people ask for something, they are surprised that we usually have it," says the youthful-looking 57-year-old, who tends the shop alone and lives upstairs with her children and retired husband.
Keeping shop has helped Srisuda put her daughter through college, as well as provided a contented way of life for some 40 years. "I enjoy this work - it's like a hobby. Otherwise I'd just be lonely and bored."
But it's doubtful that "mum and dad" shops like hers can much longer withstand the mushrooming growth of the big, new retail players. Srisuda's sales have declined by 30% since Lotus opened two years ago, followed by a Carrefour across the street. Neighbouring small stores have fared worse. Chai Yothin, head of Thong Thai Accounting, a small consultancy serving businesses in the neighbourhood, has watched sales among nearby stores plummet 80% since the hypermarkets came. One in 10 clients has closed up shop. "Business is dead!" he says bluntly.
But the big players keep marching in. Thailand, some experts say, is more open to foreign and large retailers than any country in Asia. A nation of shopkeepers and shophouses is fast giving way to the "modern trade" - deep-pocketed corporations, most of them foreign, that run hypermarkets, supermarkets, convenience stores, drugstore chains and office supply stores. British-owned Tesco Lotus, with 27 stores, plans to expand to 40 by 2003. French-affiliated Carrefour, with just four stores in 1997, will have 14 by the end of this year. CP 7 Eleven's 1,600 convenience stores, owned by Thailand's Charoen Pokphand Group, will grow to 3,000 by 2008.
Other big and growing names include Big C, Family Mart, AM/PM, Boots and Watsons. Investing heavily in information technology, distribution systems, store facilities and advertising, the large retailers are fast taking sales away from independent groceries, hardware stores, pharmacies, street vendors and wet markets. They are also outbidding smaller players for retail space. Their huge size, meanwhile, lets them squeeze suppliers. It's a lethal arsenal that is quickly killing off the small players in Thailand just as it already has in other countries. In 1999, some 70% of the Thai retail industry was comprised of local independent operators. This year, the big players will reduce the independents to just 60% of the business, according to Thai Farmers Research Centre (TFRC).
When the economy was growing 10% a year, there were few complaints about Thailand's red-carpet welcome for the modern trade, which started in the early nineties with the entry of firms like Siam Makro. Thai consumers have flocked to the low prices and wide selection. But now, amid weak growth and faltering exports, the economic impact is keenly felt. "The traditional retailers are getting squeezed out, but they are your domestic consumption. If you kill them, you kill consumption and slow down GDP growth." says a securities analyst, who asked not to be named. She estimates that independent shops are shrinking by 20% a year in terms of floor space, while modern trade space is growing by 10%.
Shop owners tend to be older - in their forties or fifties, sometimes much older. Age and lack of education makes it unlikely they'll find jobs in the modern trade when their shops go out of business. Thailand has no unemployment insurance system. "[They] have very limited choices when they shut their stores - maybe karaoke or cottage industry or bakeries. But the big players won't buy from them, so they end up selling on the footpaths. They are becoming marginalised," the analyst says.
The growth of modern trade makes it harder for the unemployed to get back on their feet, says Nipon Poapongsakorn, a Thammasat University economist at the Thailand Development Research Institute. "The easiest way to start again after losing your job is to start a small retail business. But if that sector is already occupied by big companies, there is no chance for people to become entrepreneurs, and the economy will lack dynamism. We need opportunities for people to own their own businesses. It's an important chance for people to move up the social ladder, but it won't exist now."
Some Thai entrepreneurs complain that the modern trade is closed to the smallest suppliers. Hypermarkets, with their large national distribution networks and demand for volume production, prefer big vendors, even in their food service areas. Pongsai Kunarak thought her track record as owner of a successful small restaurant would make it easy to open a noodle shop at the Lotus store on Rama IV. But managers turned her down.
"They thought my business was too small, with just 70 seats, and they told me I didn't have enough expertise in noodles. They didn't want to take a risk. Now every branch of Lotus has the same shops, and they are all chain stores - KFC, McDonalds, Mr Donut."
Tesco Lotus says it does accept individual food vendors and sources products extensively from local Thai companies.
Amid Thailand's feeble zoning regulations and enforcement, modern retailers can all too easily have a negative impact on a neighbourhood's quality of life, Nipon says. The hypermarket format, for example, was designed to serve suburban motorists, but these stores have now invaded densely populated areas in the middle of Bangkok, adding to traffic congestion and pollution. Districts zoned for business are open to the big players, but they are sometimes precisely the kinds of neighbourhoods that already have dense concentrations of vulnerable small shops.
The mushrooming modern trade may also soon pose a subtle, but real, threat to Thailand's tourism industry, a large and fast-growing source of jobs and foreign exchange.
Even as tourism officials strive to promote Bangkok as a city of exoticism and culture, the capital's historic districts are starting to be invaded by convenience stores and drug chains.
Visitors from Europe, America and Japan come in search of something authentically local, but increasingly confront the same mass retailers familiar back home. With their assembly-line exteriors, bright lighting and obtrusive signage, these shops are not adapting their designs to better fit in with the traditional look of old shop houses and neighbourhoods. Thailand lacks rules on signs and building modifications to protect these areas.
Large stores too may pose a preservation threat. As it stands, there is no law to prevent a hypermarket from replacing a block of old shops in venerable districts like Bangkok's Chinatown. "Once a big store is established, everything changes. When you go to Rome, you don't see big stores, just all kinds of small retailers," Nipon says.
France, Denmark, Japan and other countries around the world regulate the modern trade, especially hypermarkets, to reduce the negative impact on business and quality of life. Rules on zoning, signage and operating hours do not violate WTO rules, which cover trade, not investment-related sectors like retailing.
But Thailand is in a weak position to follow suit. Prime Minister Thaksin Shinawatra is under investigation for corruption, and some observers predict he will soon be barred from office. The shaky state of the economy makes it risky to rattle foreign investors.
When Thai officials began to propose amendments to the Retail Trade Act a few months ago, it quickly provoked an outcry in foreign business circles and the international media that Thailand was closing its doors to foreign investment.
As of June 1, no new rules had been announced, and many observers see the earlier proposals as trial balloons that are all but shot down.
"That's the trouble with Thailand - whenever we are pressured by international organisations, we tend to overreact. We do too much to protect the rights of the MNCs (multinational corporations)," Nipon says.
The nation's 300,000 mum-and-dad shops, on the other hand, are not politically organised. "We all work separately these days," laments Sermsuda Pitakthapanapong, the 28-year-old daughter of the Kuang Yoo shop owner.
"From my point of view, we didn't take preventative action when it started. No one cared when Tesco first came, but now people complain. The country should have officials who see the big picture and organise things appropriately."
Modern trade executives, for their part, are urging the government not to change retailing rules in ways that would hurt consumers or discourage big stores from continuing to invest in Thailand. Pascal Billaud, head of Carrefour Thailand, says Bangkok already has zoning rules, and that his firm complies. Carrefour, he says, is heeding local concerns about employment conditions, environmental factors, and its rate of expansion.
But even some big players concede the doors to modern trade may have opened too wide. Pittaya Jearavisitkul, executive vice chairman of CP 7-Eleven and president of the Thai Retailers Association, a modern trade group, admits he is surprised that zoning rules have allowed Tesco Lotus and Carrefour to open across the street from each other in the middle of Bangkok. "My guess is that the zoning is outdated. In the past it was not too crowded there, but now it has changed."
Pittaya says it will be hard to reconcile the many different points of view and interests involved in retailing rules, but that a reasonable compromise might bar large discount stores from dense neighbourhoods.
"If you put one in where you already have a lot of stores, it's like an atomic bomb." But he says the government's efforts should focus on improving the performance of smaller players, not limiting the modern trade.
Economist Nipon agrees that small retailers need to become more competitive, especially in using IT. "Just passing a law to protect SMEs won't work." Good policy on retailing should promote competition and consumer choice, he says, while also protecting the small players and neighbourhoods: "The main reason for protecting small retailers is not to protect small retailers per se, but civil rights - social rights, economic rights and environmental rights."