The Health Of High End Consumerism In Thailand
Thailand has always been associated with shopping—a place where you can bargain and find an extensive array of products at much cheaper prices than in other parts of the world. But what of high-end luxury goods? In the past few decades, the kingdom’s malls have seen an increase in haute-couture labels and international brands available on the racks, due mainly to the country’s increasingly savvy young affluent middle and upper classes, who provide a target market for luxury goods based on a more refined lifestyle. People no longer have to traverse the continents to indulge their appetite for expensive brands and despite socio-economic obstacles and the fact that some companies have closed down in the past, the remaining haute fashion distribution companies in Thailand seem to be doing well. We decided to get some insight into their world by talking with the executives of four major Thai distributors: A-List, BF Fashion, Pacifica Group and PP Group.
As a result of the global economic crisis Thailand’s economy plummeted in 2009, recording its steepest drop in 12 years. That said, three years ago Asia as a whole saw a significant jump although in Thailand things have moved more slowly. Recently, the passing of HM the late King Bhumibol Adulyadej has had a major impact on people’s emotions and sensitivity. “There is no doubt that with His Majesty’s passing and the one-year mourning period that followed it, many people lost interest in shopping, dressing up and going to parties,” says Pranapda Phornprapha, or Pam, founder of BF Fashion. This hiatus in lifestyle clearly had an effect on the fashion industry.
In the past seven years, A-List, importer of brands such as Jimmy Choo and Chloe, has seen an average growth rate of more than 30 per cent but major events affecting people’s behavior can certainly impact its cash flow. When His Majesty passed away it would have been quite easy for A-List, a company that both imports international brands and runs its own local labels, to create a number of black clothing styles for the occasion and thus increase its sales and profits. But that was not something the company was willing to do. “With the late king’s passing, we found it hard to focus on the work,” says Danai Sorakraikittikul, CEO and founder of A-List. This kind of strong cultural factor can be complex and can bring about a marketing reaction that is different to what would have been normally expected.
After a period of economic stagnation, where is the Thai economy heading? Nobody truly knows and in this regard, Orand Puipunthavong, vice president of PP Group, highlights the importance of adapting. “We need to come to terms with the fact that the recovery of our economy will take longer than expected,” he says. “This definitely impacts us because local spending constitutes 60-65 per cent of our total business. What we need to do is adjust our strategy to focus on customer relationship marketing. We need to better understand their way of thinking and their behaviour to effectively fulfill their needs.”
Indeed, consumer behaviour has evolved considerably over the years. According to Danai, an increasing number of people in Thailand have developed more refined tastes in luxury goods. He also believes that in particular it is the younger generation that seems to have a larger appetite for spending. “Honestly, I don’t know where these kids get that kind of money from,” he says with a laugh. Interestingly though, BF Fashion’s Pam believes that younger consumers are more skeptical and careful when it comes to spending large amounts of money. “I think millennials today feel it’s not very cool to spend 150,000 baht on a dress,” she says. “People are more conscious of spending now. In general I feel they have less of an interest in owning things, which is a challenge for us.”
So the perceived increase in taste and desire for luxury goods seems to be something of a double-edged sword. While the will to buy is there, there is no guarantee that visits to uber malls will increase. Constant advancements in technology have also paved the way for the emergence of online shopping platforms and marketing through social media outlets. “There has been a huge surge in people opening Instagram stores, which to be honest is quite unfair,” says Pam. “They don’t have to pay taxes. They can get goods because they are carrying them in themselves. They don’t have a storefront or staff to worry about and can sell the things we sell at lower prices. ”
It has been 14 years since the establishment of PP Group. Today, it represents international brands such as Givenchy, Celine and Roger Vivier. “We now also have a sister company called PP Glam, which is the distributor for TOD’s and MCM,” says Orand. Online shopping is an issue that seems to affect everybody differently. While it may put some businesses at risk, others seem to be doing just fine. Luckily for Orand, PP Group is still in the safe zone. “Online shopping is a big topic in luxury retail today,” he says. “As of now however, our key customers are mostly above the age of 35 and still prefer to buy offline.”
Sopana Lavichant, director of Pacifica Group, points out that although there has been a boom in online shopping in other parts of the world, Thailand has been slow to keep up. “With such a fast-pace lifestyle, people here no longer have three or four hours to spend at the mall,” she says. “The online shopping trend is coming for sure. However, I feel this doesn’t necessarily mean consumers will always shop online. We still have a lot to learn in this regard and there’s still plenty of work to be done with online shopping platforms in Thailand, be it through websites or applications.”
Another challenge for many distributors is filling the culture gap between two worlds. Pam sees the need to make imported brands better understand the Thai market. “I think a lot of them have a tendency to lump countries in Asia together,” she says. “They don’t always understand that due to our innate culture and lifestyle we might not be able to achieve the same growth figures as some other Asian country.”
Danai of A-List agrees. “A lot of the time international brands look at emerging markets like Thailand, Vietnam and Cambodia and think we are all the same, when in fact you really have to go micro when looking at markets in Asia.”
Sopana has also had her fair share of disagreements in this regard with international labels. “We have had numerous divergences of opinions on how to market the brands here,” she says. “It can be a challenge sometimes to convince our clients about why certain marketing campaigns, while beautifully put together, do not always match the Thai market.” As she explains, embarking on a business relationship with a new brand can be tricky at first. It takes time to find the middle ground, to learn to trust one another and to create a long-lasting relationship.
Despite these challenges change can also be positive. It should be noted, and as our interviewees also highlight, that much of the growth in the luxury sector is supported by the government’s push for the country to be a key luxury shopping destination. “We are lucky,” says Sopana. “In terms of the retail market here, we benefit from both local and tourist spending. When local spending is low, we have tourists to compensate.” Pam agrees. “We welcomed over 30 million tourists last year,” she says. “Half of our sales are from international clients. This counters any loss from local spending.” She adds with a smile, “You win a few, lose a few right?”
Danai, however, is also mindful of the fact that even within those tourist demographics we are beginning to see changes. “Tourism from China increased drastically in the past three years but seems to have tailed off now. Chinese consumers are still coming but they are making more of our culture as part of their trips, exploring the country as opposed to simply shopping in malls.” In addition, he says that although there has been a decrease in group tours, there has been a rise in individual high net worth travellers who are spending more, including those from neighbours such as Vietnam, Cambodia and Myanmar. He also says that the number of people from other parts of Thailand coming to shop in Bangkok is on the rise.
Retail may seem like a fun business but with so many societal changes that can abruptly impact the industry, how does one stay afloat? Pam is not one to dwell on the negative. “It’s actually an exciting time for our company,” she smiles. “We brainstorm together all the time. I think adapting is the best way. Since consumers don’t necessarily feel the need to go to the mall to buy anymore, why spend two to three million dollars opening a new store when you could stick to one store and enhance and diversify your customer service and have delivery at home instead,” she says. Currently, her company FB Fashion holds notable labels such as Christian Louboutin, Hackett and Missoni. And Pam is not afraid of mergers and takeovers. “If it makes sense for us, we are open to it. I think brands switching distributors is something everybody is fearful of and yet for me, I think if it does happen, there’s a good reason. I actually think more of this will occur and there will be fewer players left.” She repeats that adapting is the key. “Our initial plan for one of our brands was to roll out 50 more stores but then we figured why not just 20 targeting key spots? The rest of the investment could then go into ramping up our online sales.”
Looking to the future, Pam is considering expanding regionally and focusing on high-end labels that cater to the masses. “I prefer luxury mass products because they are scalable,” she says. While she’s always up for new challenges and changes, the one thing that will most likely remain constant is the fact that she tends to work with family heritage brands. “These brands are more interested in doing things in the long term, rather than simply ramming out a few stores here and there.”
For Orand the emphasis now is to focus on improving the retailing and store experience. “There will be less traffic in the stores and we cannot change that,” he says. “So we need to give an impressive and memorable experience to our customers when they do visit our stores.” For him the keys to success are product, people and passion.
Sopana admits they have made faux pas in the past, but like every other business, one must learn from them and grow. Currently, for the Pacifica Group, it’s about implementing diversity. “How we cope with all these changes is by trying to diversify in terms of product categories,” she says. “We distribute luxury, medium-luxury and mass brands and deal with ready-to-wear, bags, shoes and accessories and we’re now trying to go into cosmetics.” Indeed, Pacifica is importer and distributor for Coach, Max Mara, Camper, Keds and American Eagle Outfitters, among others, and recently added Nyx cosmetics, which rapidly became one of its fastest growing brands.
But Pacifica isn’t the only one to step out of the box. Last year A-List entered the camera market by acquiring the rights to distribute Leica and things are looking good. “The first compliment I got from my family was when we took on Leica,” says Danai with a laugh. “Probably because we were able to achieve more than double the sales we were targeting. We saw an increase of Instragram followers from around 120 to 8,000 in less than six months.” The company is currently going through the process of enhancing its IT and stock systems. “Hopefully soon we will be ready to take on more brands and maybe become a key distributor.” The thing with A-List, as opposed to some of its competitors, is that it is also in charge of its own local brands, including more street wear labels and Disaya. “Clearly we have more control over our own brands but it is also more work,” says Danai. “For our own brands we have to do everything from sourcing fabrics to design to manufacture and so on.” He’s a busy man but enjoys the learning curve his job entails. “I learn new things daily.”
Perhaps it’s safe to say—sluggish economy or not and constantly changing consumer landscape aside—much like the evolution of mankind in the wider sense, the key to survival is learning to adapt with caution. While fashion retail may seem like a glamorous ride, as our interviewees have shown, it also comes with huge responsibilities, burdens their companies will continue to shoulder one way or another so that we continue to have the luxury of choice.