Examining causes of major retail outlet closures

In early 2024, several news reports highlighted the closure of many Thai businesses, including numerous retail stores in provincial areas. 

If we consider the closures of retail branches in Thailand in recent times, they include the Fairyland mall in Nakhon Sawan, the closure of branches at Kad Suan Kaew Shopping Centre in Chiang Mai, Promenada Mall in Chiang Mai, and Tang Hua Seng in Thonburi. 

These events have led to an evaluation of trends in Thailand's retail market and an analysis of the causes behind these closures.

Thaninrat Phakdeepinyo, a retail business expert and shopping-centre manager, offered insights into parts of Thailand's retail sector that have closed down because of a combination of factors.

He emphasised that retail business and shopping-centre management must constantly consider several factors:

Effective management, including cash flow, revenue, and cost management, as well as personnel development and marketing activities that meet the needs of customers from all professional backgrounds.

Strong capital management, with the ability to manage finances appropriately and adapt to changing situations.

In-depth knowledge and experience from senior management and their teams, ensuring a deep understanding of the retail business.

The location of the shopping centre, which must be at the heart of a large community with a balanced mix of customers from various professions.

A clear understanding of the target customer group and a deep insight into customer behaviour in each location.

The retail business is constantly evolving, requiring the management team to closely monitor all aspects to maintain the sustainability of the shopping centre's operations.

Kad Suan Kaew Shopping Centre

Kad Suan Kaew Shopping Centre, with a total area of about 48 rai, is a mixed-use project that has operated for 32 years, located in a prime area at the heart of Chiang Mai. In the past, it was highly successful as a shopping centre. However, business operations must continuously evolve, with close monitoring of both domestic and international factors. 

The company may have overlooked these aspects, resulting in a decline in popularity among the surrounding customer base.

Kad Suan Kaew can be revitalised and grow by integrating a new management team alongside experienced retail professionals.

Promenada Chiang Mai

Promenada Chiang Mai, with an area of about 58 rai, has been operational for only nine years, a relatively short period. It is located on the second ring road of Chiang Mai, targeting upper-class customers in densely populated residential areas and supporting the upcoming second airport of Chiang Mai.

The shopping centre’s architecture is quite beautiful, appealing to both new generations and those from the 70s to 90s, providing a pleasant atmosphere. 

In its early years, the management achieved significant success. However, changes in top management led to inconsistent management policies and a failure to keep up with competitors, who had more experience across all aspects, including setting rental rates that were below the cost per square metre. The management team also lacked expertise in the retail business.

Despite these challenges, Promenada has the potential to recover thanks to its excellent location, attracting customers from outer areas who prefer not to enter the city, and accommodating the city's expansion under local zoning laws.

Tang Hua Seng Thonburi

Tang Hua Seng Thonburi’s second branch opened in 1991 with an area of about 30,000 square metres. The mall retained its original shopping-centre format, without modernisation or renovation, failing to meet the needs of both new and old customer generations.

One of the main factors was its location in a densely populated area, which presented a significant opportunity. However, it struggled to attract clientele because of changing consumer behaviour. 

The shopping centre lacked marketing activities, customer relationship management (CRM), and corporate social responsibility (CSR) efforts to engage various customer groups. It primarily focused on an older demographic, particularly a niche group interested in sewing, which significantly limited its customer base and led to low traffic.

Both branches of Tang Hua Seng are located in prime areas with dense populations and have the potential to regain their standing. Joint ventures with capable shopping-centre groups possessing relevant expertise could be a viable solution.

Key Factors for Successful Retail Management

Capital, experienced management, and a knowledgeable team are crucial.

Efficient systems, networks with retailers of various sizes, and strategies to target all customer segments are essential.

The shopping-centre atmosphere, marketing activities, CSR, and CRM are also important.

Appropriate rental rates and cost management are necessary to ensure long-term success.

The analysis of multiple retail closures suggests several weaknesses in the business:

Failure to adapt to rapidly changing market trends.

Lack of crisis management planning for internal and external challenges.

Insufficient research into the needs of local communities.

High capital requirements for managing shopping centres, necessitating liquidity management to avoid long-term losses.

Frequent management changes, with some team members lacking retail business understanding.
Family-run business management approaches may delay necessary adjustments.