The impact of the pandemic and ensuing lockdowns has been hard on us all and the Thai economy is struggling to recover. With a tourism and retail-reliant economy, there has been a slow rebound as we continue to move past COVID.
The Thailand market saw changes in consumer purchasing behaviour as a result of the pandemic and several lockdowns to curb the spread of the virus. According to data from the Thailand Retail Association (link in Thai), the Retail Sentiment Index largely fell by 70% in July, its lowest in the past 16 months. This means that there is still a long way to go for the country to bounce back.
To get a better sense of what is going on in the market, we spoke to Chumphol Sivawettakul, Business Development Lead, eyos Thailand. A retail expert, he is well-positioned in the market to provide insight into the current state of the retail industry and what we can expect. He has over 20 years of experience in companies like Adidas, Johnson & Johnson, Symphony Retail AI, Expedia, and The Nielsen companies.
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In fact, according to eyos’s database also showed a decline in key category traffic (-8% in Aug vs. Jul) and spending per transaction (-5% in Aug vs. Jul) in this period. With the ongoing push for digital transformation, which is slowly moving ahead, we asked Chumpol to paint us a picture of the market.
Could you give us an overview of the Thai retail industry right now?
According to data from Thailand Retail Associate, customer confidence has dropped in the past 14 months and there is a decline in both customer traffic and spending per receipt. When we analyse our own database, we notice the same trends in the Northeast region too where there is a decline in many key categories such as shampoo, conditioner, detergent and fabric softener and their sales performance has been stagnant in Q3.
Since the pandemic, shoppers have started to rely heavily on their neighbourhood retail stores rather than commute to large modern trade stores. This has resulted in brands shifting focus to local trade channels as their primary sales engine now more than before, which means brands are more than ready and willing to capitalize on this opportunity.
We believe that the growth of the retail industry will rely on two areas:
- The customers’ confidence to travel to stores amidst a pandemic, that will be largely dependent on government measures, the daily number of new cases and percentage of vaccinated individuals, and
- The customers’ confidence to spend which will be influenced by the subsidy money/program launched by the government to boost total country spending during the New Year season.
It is anticipated that retail performance will spike during December as it is the festive season and the government will lift controls. We expect to see a stock up purchase trend in December for their in-house celebration and consumption. For smaller stores in the communities, they can consider running “Volume Driven Promotions” to synchronize with the stock up pattern that may happen.
Based on the conversations we have had with local retailers in Thailand, there is still much to be done when it comes to understanding big data and utilising these insights. Some have started embracing big data which could help them understand the current sentiment and identify areas to improve on. But they often do not have the proper tools to build their own business intelligence report and generally opt for the reporting tools that come with their POS software. With this limitation, they would not be able to truly understand their customers’ behaviours.
What is necessary, in your opinion, to make sure it rebounds post-COVID?
It is a good opportunity for retailers to reinvent themselves and look for better shopper data management and utilization tools. This will help local retailers to better employ shopper data and learn how to create a better plan for their stores, especially with promotional campaigns that could attract new shoppers and allow them to build stronger ties with existing shoppers.
FMCG brands can help retailers kickstart this process. Retailers should ask brands for support, utilising their expertise and knowledge. These brands are already equipped with market data including shopper data and extensive research and will be able to share insights with the local retailers or help them identify blind spots that could help to improve business. This enhanced collaboration will definitely be a win-win opportunity for both parties.
Retailers can also look at social media tools that allow them to connect and build relationships with their shoppers. Additionally, they can utilize their own social media accounts like Facebook, Instagram or Line to connect more with their customers. Retailers can then create engaging content or activities that can help create discussions on consumer behaviour topics they would like to understand better.
Consumption behaviours and everyday lifestyles have changed during COVID, and we called this the ‘New Normal’, but as Thailand recovers from the impact of COVID, we are now looking at an even the ‘Newer Normal’. We’re expecting changing customer sentiments and needs as the country opens up and we resume lifestyles pre-COVID, and we can utilise social media platforms to help us understand these changes.
Could you explain the role of big data in Thailand’s retail industry?
Big data is used in bigger, leading retail chains to plan promotions that match their target shopper behaviours. The retail chains have their own membership system to collect their shopper’s purchasing behaviour ie. Lotus (ClubCard), Big C (Big Card), Tops (The One Card) and many more. Every time their shoppers make a purchase, their transactional details (known as a transactional log) will be recorded as unique shopper purchasing data in the retailer’s system. This kind of information gives the retailer insights like items purchased, purchasing frequency, basket size (both value and units), average price purchase, total purchase value per receipt, etc. These insights are extremely valuable to any retailer when they make decisions relating to the store. For example, what is the right basket size that they should run their next promotion on? How do shoppers make a cross-purchase across different items or categories? How can such insights be leveraged to offer the right promotion that matches their shopper’s behaviour?
Now imagine having access to similar insights not only from your own store but from the overall market. This is the power of big data in retail, and this is what companies like eyos are driving.
Independent grocery merchants represent the largest untapped data opportunity for sales insights, in-store marketing automation and offline ROI measurement in FMCG today. This approximately amounts to 1 trillion shopping trips p.a. in 50M independent grocery shops globally. However, due to a lack of data automation infrastructure, independent grocery merchants are a black box for FMCG sales insights, marketing activation and measurement. Providing access to the retail industry’s big data will open up a wealth of opportunities for both the retailers – of all sizes – and FMCG brands.
How should Thailand’s retail be adapting right now? Are there options for them to survive and even thrive during periods such as these?
There are three main points to note here:
- Retailers should continue to develop their new store formats, creating new shopping experiences to meet the needs of their shoppers and suit their consumption behaviour and changing lifestyle.
- It is quite difficult nowadays to launch new stores in a metropolitan area due to store size limitation, hence, retailers have capitlised on the opportunity and expanded into the local community area.
- Retailers not only need to understand customers’ shopping behaviour but also their lifestyle changes and identify a shopper’s inherent need to adjust their product offerings and mix to suit this.
The digital transformation has redefined the relationship between brands and retailers, calling for a more data-driven approach that drives business reviews and insights especially when brands would like to propose new initiatives.
From my experience working with eyos, local retailers should consider finding more consultative partners and get more “outside-in perspectives”. One initiative that they could do right away is to improve their collaboration with brands and reach out for support. Instead of taking the traditional way of conducting sales meetings to discuss brand inventory and order volumes, they should ask for more market or shopper insights based on their store performance. These insights can help retailers craft a strategy to retain their own shoppers and maximize profits.
One of the interesting aspects that retailers benefit the most from is assortment planning and the category review process where retailers use those insights to create the right product placement, category assortment or even build the connected category and are able to plan the traffic flow within their store.
For example, UHT milk is a key category that many retailers and FMCG brands focus on as parents always stock up on these items for their child’s everyday consumption. Thus, retailers will have to find the right purchase quantity, understand how many units that parent regularly purchases and determine if there is room to promote more units by pushing offers like bundle pricing from buying 4 items to buying 6 items instead at a lower price point. In addition to this, they can use a cross-promotion report (Basket Affinity) to understand the total consumption repertoire. What else do parents buy for their children besides UHT milk? They may also buy some snacks or food supplements like chicken essence soup which can enable retailers to effectively cross-promote other relevant products and increase the purchase on each bill.
What’s next for eyos?
Currently, we are focused on building market presence and growing our footprint for two of our solutions. Firstly, eyos connect that is directed at local retailers and secondly, eyos syntify that is directed at CPG brands – both of these verticals complement one another.
We are the link that connects FMCG players with crucial data from the fragmented retail market that not only benefits them in understanding their product performance, product categories, pack size movements, and so on much better, but also helps them help the merchants sell more. Through a consistently growing network of first-hand transaction data from local merchants, our insights and reports are as accurate as they come. This helps the brands make informed decisions and strategies.
We plan to more than double the number of stores from the current 260 stores in our Thailand network. We have plans to expand to Khon Kean, Udon Thani, Nakhon Ratchasima, Ubonratchathani because they have big retailers, and they are more technologically advanced/urbanized than the smaller cities.
With an aim to build a community and encourage local mom and pop shops to feel confident in adopting a digital system and reach their full potential, we will reach out to “Blue flag” or ธงฟ้า stores in Thailand and educate them through webinars and enable them to grow with eyos and potentially in collaboration with Thailand Retailer Association.
In 2022, we also plan on launching our third solution vertical, eyos retail, to expand our business in other sectors than FMCG as well as regionalise our business in SEA.
We plan to invest in people, especially in our data quality team, to ensure data from the retailer is being analysed and utilised in a secured environment, correctly and efficiently. Furthermore, eyos is invested in continuous product development for shopper insights through shopper ID tests (membership programs) to understand local shopper behaviour in the local market in Q4/2021.