They will face a blitz from November to February as traders seek to get more customers through their doors.

At a Krungthep Turakij round-table discussion, Likit Pahpyochon, president of the Thai Retailers' Association, blamed the lacklustre shopping mood on skyrocketing oil prices increasing inflation and interest rates, the three factors which effectively lead to lower purchasing power.

Exacerbating the situation is political uncertainty, said Likit. Not until a permanent government is formed will people gain confidence and resume investment and spending.

Despite the gloomy outlook, Likit sees a chance for retailers to grow because, despite tightening their belts, people still need to spend on essential items.

While high-end shoppers are not disappearing and low-end shoppers are going to malls for essential items, retailers are now seeing the disappearance of middle-income customers.

"To bring them back, we need activities. There used to be midnight sales and summer sales. Now there are end-season sales and year-end sales and many more. There will be a number of activities continuing until next year, while retailers need to work harder in building up relationships with customers," Likit said.

Nataphong Kitnitchiva, general manager for marketing of The Mall Group Co Ltd, echoed Likit's view, saying that the situation was tough but there were opportunities.

"Shopping malls are the least affected among retail outlets, but they must arrange activities. Shoppers could come for a meal, but other things could stimulate their buying impulses," he noted.

He sees the need to build up the mood for shopping, whereby retailers must come up with every means to make shoppers happy and spend, probably via coupons, sales promotions and, chiefly, below-the-line activities.

"We're lucky to have Siam Paragon, which attracts not only foreign shoppers but also domestic shoppers, who treat the complex as a tourist destination," he noted.

Nataphong said The Mall had been doing fine. High-end shoppers with monthly incomes of Bt70,000 upwards, which accounts for about 200,000 people in Bangkok alone, were still spending.

So far this year, its cosmetics department has been the best performer, with sales jumping more than 20 per cent, as women still buy top-five brands, no matter what the price.

Nataphong said families now regarded malls as a necessity that they should visit every weekend. As they like to eat there, large fancy food courts can be a great magnet, he said.

"I can say that, in the retail industry, malls have been hit the least. While high-end consumers are still there, low-income spenders are offered a great time to shop for cheaper items, as suppliers have been cutting their prices," he said.

Boonchai Chokwatana, president of Saha Pathanapibul Plc, which supplies a range of products to retail outlets, admitted that suppliers had been forced to maintain product prices, despite rising production costs.

At Saha Pathanapibul, raw-material costs have increased by more than 10 per cent. Last year, the company spent Bt200 million on transportation costs, but this year the cost could double, partly due to higher volume of sales but chiefly because of higher oil prices.

"The impact on product prices depends on the type of the products, but so far we have maintained our prices," Boonchai said.

He was not optimistic that the situation would improve next year, as oil prices were expected to stay high and political uncertainties could remain.

"Purchasing power should be the same as this year, but there are opportunities to grow, probably through snapping up others' market shares. Whatever, there will be no new investment. Now we should focus on fully utilising our existing capacity, as it will take a while to break even from new investment," Boonchai said.

In this situation, he said, it is necessary for suppliers to prepare themselves by adjusting production lines. At Saha Pathanapibul, some lines now use natural gas rather than bunker oil, which has pulled down the increase in production costs to only 5 per cent. "If any raw materials are too costly, we can switch to others with similar properties but lower prices," he said.

According to Likit, retail business in general is expanding but at a rate lower than last year, when sales jumped more than 10 per cent. This year, the growth rate could be comparable to the inflation rate.

As people cut down on fuel consumption, they prefer buying from retailers near their homes, which has led to better business for convenience stores but a drop for supermarkets, which people visit less often. Discount stores and malls are registering growth due to branch expansion.

"For survival, aside from activities, retailers must reduce operating costs. They have to look at everything to reduce expenses, from employment and logistics to inventories," Likit said.

Achara Deboonme

The Nation