Superstores in Thailand 1

Running head: SUPERSTORES IN THAILAND

Superstores in Thailand:

Are they good for Thailand and Thai consumers?

Atcharanan Anakevirot (ID:504 33050 26)

Amarisa Sirilerkpipat (ID:504 32976 26)

Sawitree Laoprapassorn (ID:504 32880 26)

Soranan Pibulthammasak (ID:504 32867 26)

BBA, Chulalongkorn University

 Superstores in Thailand 2

Abstract

There have been several arguments on whether superstores are good for Thailand and

Thai consumers. Over decades, giant superstores, which are originally owned by

foreigners, started to operate in Thailand and expanded throughout the country. Many

advantages and disadvantages of these hypermarkets have been brought up;

nevertheless, a conclusion has not been drawn. The purpose of this paper is to discuss

the claims of people who are in favor of superstores and then rebut them in order to

persuade the readers to believe that superstores are not good for Thailand as a whole.
 Superstores in Thailand 3

Superstores in Thailand: Are they good for Thailand and Thai consumers?

On Wednesday 5 September 2007, a crowd of over one thousand Pranburi

residents blocked the main road in Pranburi, Phetchakasem Road and the Pranburi

bypass road. The crowd was protesting against construction of Tesco Lotus and

Macro hypermarkets in Pranburi. The car traffic came to a standstill. The leader

Admiral General Bannawit announced that local residents were against construction

of Tesco Lotus and Macro hypermarkets in Pranburi, which were at Wangyao Village

and in front of Pranburi District respectively (Dechapanya, 2007, ¶ 1). This event is

only a small picture of what has been happening in Thailand ever since superstores

started to expand. In 1989, Macro, the first hypermarket was established in Thailand,

and a few years later, superstores such as Big C, Tesco Lotus and Carrefour started to

come along. The rapid growth of these superstore chains has led to an ongoing debate

between supporters and protesters: supporters believe that superstores benefit both

Thailand and Thai consumers whilst protestors believe the drawbacks of these

multinational stores outweigh their potential benefits. From our point of view, we

believe that although Thai consumers gain from the opening of superstores, Thailand

as a whole does not.

Supporters believe that taxation from superstores’ revenues benefits Thailand

a lot and that the government can collect higher taxes from such businesses than from

local ones. They claim a large amount of money from taxes can be used to develop

the nation and increase the welfare of people.

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However, Thai people do not really gain, even if superstores pay taxes. Most

superstores are multinational companies, so nearly all the profits they make from

selling to Thai customers are sent back to their home countries; money flows out and

fails to benefit Thailand as a host country. Although the government does receive

taxes, money derived from taxation is not even close to funds that are taken out of

Thailand. Consequently, the more people spend to purchase goods at superstores, the

higher the revenue the firms make, and the larger the outflow of money. Thailand's

consumer goods sector generates an annual income of about 600 billion baht, half of

which goes into the pockets of mega store owners (The Bangkok Post, 2006, p. 7).

According to SG Investment Bank, the total percentage of foreign ownership of

hypermarkets in Thailand as at year end 2001 was 45%; of this, Tesco (UK) owned

75% of Tesco Lotus, Carrefour (France) owned 80% of Carrefour Thailand, and

Casino (France) owned 66% of BigC (as cited in National University of Singapore

[NUS], n.d., p. 9). As a result, a large amount of money, which can instead be used to

start new investments to improve the economy and increase individual income, is

removed from Thailand’s economic cycle.

Many superstores state that they help create new job opportunities for local

people and they have been using this argument to put up several large branches in

deprived urban areas. According to Tesco Lotus’s record in December 2006, the

company employed a total of 27,000 workers, 23500 of which worked at branch

stores, 2,000 at distribution centers, and the rest at the head office (The people behind

the scene, n.d., ¶ 3).

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However, the claim about superstores creating more job opportunities is not

actually true. First of all, extra jobs have simply evaporated due to superstores’

efficiency. These stores are very efficient, particularly when it comes to the

productivity of their staff, so while they grow, numbers of staffs do not grow as fast

(Friends of the Earth, 2005, p. 5). Thus, small local shops are better for employment

than having superstores since superstores do not provide as many new jobs for Thai

people as they claim. To illustrate, there had been an overall of seventy nine

hypermarkets opened in Thailand by 2001, according to SG Investment Bank (as cited

in NUS, n.d., p. 9). Considering this number, it should have resulted in a significant

increase in employment rate, but the figure does not add up. According to the

International Financial Statistics, unemployment rate in 2001 had risen by as much as

38.2% compared to the year 2000 even though several superstores were opened

during that year (n.d., ¶ 3). Furthermore, multinational stores have actually increased

redundancy amongst people who work for local firms as the giant stores compete with

local ones, causing their revenues to decline; as a result, small shops end up laying off

workers. According to Meesubkwang, it was estimated that superstores had caused

about 875,000 workers to be made redundant, while 107 superstores throughout the

country were only able to hire 80,000 workers (2005, ¶ 2). In addition, jobs provided

by superstores are sometimes not beneficial to Thai workers since the stores often

exploit as well as take advantage of them. For instance, two years ago, Tesco’s

employees protested that the company made them come to work during Songkran,

which was a Thai holiday, and refused to pay them overtime for work done

(Watcharapichart, 2007, p. 48). Also, wages paid to employees who work for the
 Superstores in Thailand 6

superstores are low; workers with bachelor’s degrees receive approximately two

hundred baht a day. Those who have worked for a long period of time and receive

higher salaries are often pressured to quit and replaced by new ones whose wages are

not as high (Watcharapichart, 2007, p. 49).

Supporters also believe Thailand benefits from new skills brought about by

these superstores since they employ local workforces and provide various training

programmes; as a result, employees are able to learn new techniques that can be used

to develop local Thai businesses in the future.

Despite the training provided, Thai people do not really learn any useful skills

from these multinational superstores as most employees they hire are low-skilled such

as workers at cash registers and customer service staff, not those at the top-level

management. According to Watcharapichart, over ninety percent of people employed

by superstores work merely as store staff, whose jobs are repetitive and do not require

anything other than labor (2007, p. 50). Therefore, training for these kinds of tasks is

not particularly different from that offered by Thai firms nor favorable for further

improvement of Thai business.

Many people who support the opening of superstores believe the stores help

stimulate Thai suppliers since superstores order from them. Giant retailers such as

Tesco Lotus, BigC and Carrefour usually develop and sell their own house brand

products that need to be specially manufactured using their own ingredients or

formulas in order to deliver local tastes. For instance, Tesco Lotus sells some of its

household products under the names “Tesco” and “Koomka”, skincare products under
 Superstores in Thailand 7

the name “Skin Wisdom”, and cosmetics under the name “All about Face”

(Roojikhajon, 2007, p. 87).

Nonetheless, Thai suppliers are often hurt due to superstores’ high bargaining

power. Large stores have forced local suppliers to cut prices; consequently, suppliers

have no choice but to sell their products at lower prices than before using long-term

credit (Srisukkasem, 2006., p. 5).

Still, the presence of superstores in Thailand provides some benefits that we

need to accept. First of all, they offer Thai customers convenience. Superstores

provide a lot of parking spaces for customers. Customers like this since they can buy

larger quantities of goods more frequently (Tokrisna, n.d., ¶ 1). When customers walk

into superstores such as Tesco Lotus, Carrefour, and Big C, they can find many

restaurants inside, which mean they can enjoy their meal and do shopping in one visit.

Product diversity is also an advantage of superstores. When shopping at superstores,

customers get what they desire for and spend less time searching for goods they want

since several brands, sizes and colors of products are available and arranged into

categories. According to Tokrisna (n.d., ¶ 3), usually, both husband and wife of Thai

families in urban area worked, so their time opportunity costs were considered high.

They shopped once a week and preferred to buy from convenience places. Another

positive aspect involves prices. Most products in superstores are cheaper than those in

traditional stores, so customers spend less money buying the same things.

Consequently, they can save their money for other purpose, which indicates they are

better off. Moreover, these hypermarkets offer customers various promotions which

encourage customers to buy more. In addition, customers are able to pay using credit
 Superstores in Thailand 8

cards at superstores while they cannot to do this in most Thai local stores. We can see

that most benefits the entry of foreign-owned hypermarkets brings are mainly to

customers and shoppers.

On the flip side, however, customers of multinational retailers have lost touch

with the traditional way of life. For example, while employees of superstores may

greet clients with robotic manners, customers of superstores have lost the opportunity

to build lifelong relations with shop-owners in the way that their parents did.

Furthermore, giant retailers have changed the Thai people's way of life by creating a

continuous demand for new goods, such as refrigerators or microwaves which leads to

a strong trend of consumerism in the country (Srisukkasem, 2006, p. 5).

There are also other areas damaged by superstores, and these are much more

severe and exceed all the possible benefits they may provide in the first place. First

of all, superstores cause environmental problems to local community. Large stores are

extremely inefficient in terms of energy use. According to Friends of the Earth (2006,

¶ 10), taking into account the average size of buildings, the amount of climate

changing emissions from superstores compared very badly to those of local

businesses, emitting three times more carbon dioxide than a greengrocers, per square

foot; it would take more than sixty greengrocers to match the carbon dioxide

emissions from a single average superstore. Also, superstores consume a much larger

amount of electricity compared to traditional stores. Moreover, the deliveries of

superstores’ inventory also causes consequent noise and traffic disruption, especially

to those who live in the nearby areas (Jitpleecheep, n.d., ¶ 9). Additionally, in some

provinces, giant superstores are built on acres of land, making soil infertile: it affects
 Superstores in Thailand 9

the environment as a whole as trees and plantation are cut off for this purpose

(Siriocha, 2006, p. 20). Thus, this reduces the availability as well as the quality of

land farmers grow crops on.

The second area in which superstores negatively affect involves politics.

Multinational superstores in Thailand have become more powerful and are able to

influence government’s decisions. Josh Sweeney stated that:

“They are too big and powerful for us. If we try and deny them, they will appeal, and

we cannot afford to fight a planning appeal and lose. If they got costs it could

bankrupt us” (as cited in Friends of the Earth, 2005, p. 6).

Similarly, this concept also applies to the situation in Thailand the same way in does

in Britain. One example is when a group of opponents against foreign retailers

requested the government to call for a halt in the expansion of superstores. After the

order was passed out, some companies such as Tesco Lotus refused to follow; they

continued the construction of their new branches, and the government was afraid to

use the power it possessed to make them stop. Ministry of Commerce claimed that

documents from their headquarters abroad were required in order to make them stop

and that Thai government had no authority to force multinational retailers

(Watcharapichart, 2007, p. 47). Also, superstores can sometimes use aggressive

tactics to get their own way with the government. For instance, Tesco prepared the

ground, purchased land and got agreement with council officials well before it sought

planning permission, making it hard to refuse (Friends of the Earth, 2005, p.6).

Lastly, superstores pose many negative impacts on Thailand’s economy. They

drive many local firms, especially grocery stores, out of business. Over the course of
 Superstores in Thailand 10

the three-year “hypermarket invasion,” more than 300,000 small retailers had closed

(Public policy programme, n.d., p. 5). According to the Commerce Ministry, in 2004

alone, approximately 175,000 local retail operators, particularly family-run shops,

ceased operations (as cited in Jitpleecheep, n.d., ¶ 12). This is because small local

firms cannot compete with giant retailers, which have a huge amount of capital on

hand, in terms of prices; they cannot afford to sell as cheap as superstores.

Consequently, customers turn to buy from superstores, where products are less

expensive, instead. Local shops are left deserted and are eventually forced to close

down due to declining revenue. A joint Bank of Thailand and Ministry of Commerce

report had found that traditional retailer sales had fallen by 41%-60% since

superstores stared operating in Thailand (as cited in NUS, n.d., p. 5). For instance,

Boontham Thipprasong of the Chiang Rai Chamber of Commerce said that at the time

when BigC and Makro were set up in Mae Sai, Chiang Rai, they caused retailers to

lose about sixty to seventy percent of their income; several million baht in Mae Sai

district and nearby areas was directed to these superstores, and only a few baht

remained for retailers (as cited in Meesubkwang, 2005, ¶ 4). The establishment of

new branches of superstores all over the country does not affect only small local

shops but also medium-sized stores as well. For example, Korat, Thara and Noris

City, which were department stores owned by Thai investors, went out of business

due to

the expansion of Big-C, Carrefour, Makro, and Tesco Lotus (Pongpaiboon, 2007, p.

19). This causes the economic structure within districts and provincial level to be
destroyed, and the impact will continually extend to a broader level and eventually

ruin the entire national economy (Phuangngam, 2006, p. 29).

Superstores in Thailand 11

As you can see, there are many advantages and disadvantages of superstores

on Thailand and Thai consumers. Superstores provide Thai consumers with a more

convenient place to shop and offer goods at lower price, making consumers enjoy the

luxury of these superstores instead of small local shops without realizing that their

traditional ways of life have been altered and large amount of money they are

spending will eventually flow out of the country. As customers turn to superstores, a

large number of traditional stores have to lay off their workers and many are forced

out of business. Moreover, they have had negative effects on politics and environment

of the country. In order to solve these problems, Thai government may have to

introduce measures such as location restrictions and minimum distance between each

superstores, limited opening hours, and price controls. Overall, superstores are not

good for Thailand because the adverse impact of the presence of multinational

superstores outweighs their possible benefits, especially when considering the country

on the whole. Thus, we believe that any further expansion or new establishment of

superstores in Thailand should not be allowed for the future of the country itself.
 Superstores in Thailand 12

References

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Friends of the Earth. (2005). Good neighbours?. Retrieved March 28, 2008 from

http://www.foe.co.uk/resource/briefings/good_neighbours_community.pdf

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Superstores in Thailand 13

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