Thai retailers have emerged as the most optimistic in Southeast Asia in terms of turnover and profit.

The survey gauges retailers' sentiment and examines factors that will affect the sector in the short to medium term, helping players to devise strategies. More than 160 prestigious retailers from a wide spectrum of trades in nine key Asian markets participated in the survey.

 In 2006, buoyant economic growth and rising income levels underpinned the retail markets in Asia. Almost two-thirds (63 per cent) of the respondents expect their overall trading to improve over the next 12 months, with only 5 per cent anticipating a weakening.

More specifically, three-quarters (75 per cent) of respondents believe their gross turnover will improve over the next 12 months. This compares favourably with the second survey in 2005, in which only 65 per cent of the surveyed retailers expected turnover to strengthen.

However, retailers in Asia are more guarded about their profit expectations, with slightly less than half (46 per cent) expecting an improvement in profit margins.

Surprisingly, retailers in Thailand are the most positive in Southeast Asia in terms of prospects for gross turnover and profit margin. Most of them feel that the recent political transition has improved the outlook for retail, following several quarters of uncertainty having hurt sales.

Political issues aside, however, retailers in Thailand, particularly in Bangkok, are facing challenges common to many retailers around the region, including lack of suitable locations and escalating occupancy costs.

Retailers are expecting same-store sales to improve and help deliver higher revenue numbers. Roughly a quarter, however, are guarded regarding competition, believing more retail outlets would hurt same-store sales.

In terms of recent developments, the renovation of CentralWorld and the opening of Siam Paragon have done much to boost the Ploenchit-Siam Square area's profile as Bangkok's key shopping promenade.

Nevertheless, none of the retailers surveyed believes this area to present the best opportunities. The majority sees community shopping centres offering the best opportunities, while certain retailers expect additional retail development to limit their prospects given potential cannibalisation of sales.

While retailers across the region are upbeat about the outlook, some trades are more optimistic than others, the survey found. Home and interior retail has emerged as the most optimistic sector, with 100 per cent of the respondents expecting improvement. This is followed by sports apparel and equipment, department stores, and jewellery and food retailers.

"Our latest survey results have highlighted the broad retailer optimism across Asia," the company's head of research, Jane Murray, said.

"Subsequent discussions with retailers endorsed our belief that strong regional economies would drive sales and improve revenues. A number of retailers are tempering this optimism with a clear understanding that increases in costs in other areas could certainly affect their profit margins."

 According to the research, retailers now have more ambitious expansion plans than they did just a few years ago. The vast majority of respondents (92 per cent) have plans to expand over the next 12 months. Among those with plans to expand, increasing store numbers is the preferred choice (90 per cent), followed by increasing product range or services (80 per cent).

 Interestingly, 44 per cent of the respondents have plans to merge with or take over another company.

Merger and acquisition (M&A) has become a popular trend for retailers who want to expand rapidly in a new market or get stronger power within an existing one.

Retailers see M&A as a method to achieve economies of scale, share support resources and take advantage of more locations.

 On the other hand, 80 per cent of the retailers who have plans to expand foresee difficulties in locating suitable sites. Cost and a lack of quality supply have been identified as the major hindrances for retailers to secure suitable sites for expansion.

 Retailer confidence is clear in their future plans.

The positive view many firms have of M&A demonstrates both the confidence that they have the skill sets to make such strategic moves work and the understanding that as the market and competitive landscape evolve, organic growth alone will not be the way to deliver on profit expectations, Murray said.