Stephane Coum, CEO of Central Food Retail under Central Retail in Thailand, shares how the company has tackled the challenges brought by the COVID-19 crisis, its transformation plans and building resilience for the future. Central Food Retail operates across many different formats and banners: Central Food Hall, Tops market, Tops SUPERSTORE (which competes with hypermarkets), Tops daily and FamilyMart convenience stores.
Source: Central Food Retail
Overview of the COVID-19 situation in Thailand
Despite being among the first countries to have COVID-19 transmission, Thailand has done well in flattening the curve. This is due to the country’s strong healthcare system, cooperation from all involved, and on-going efforts to prevent the spread. The country is battling a second wave of infection that began in December, but expects the new daily to come down by the end of March. Still, the impact on the economy is an entirely different matter. Stephane described the year 2020 as a bit of a rollercoaster, with many ups and downs in different periods throughout the year.
“In Q1, things were normal and a good start to the year. At the beginning of COVID-19, with the lockdown and uncertainty, we saw a peak because of panic buying. Then, from June onward after we’ve flattened the curve in Thailand, we saw a bit of a drop in our activities due to the fact that Thailand, being a tourism dependent country, is faced with a major concern as tourists cannot yet come back.”
Tourism, which represents 18% of the GDP, has not returned in full swing, and the number of tourists has plunged significantly. This will have a negative and wide-reaching effect on the economy as a while, due to the domino effect on the wide variety of supporting industries.
“In 2021, Thailand’s GDP is estimated to be +3.6% after being -7.8% in 2020. This was because in 2020, only around 8 million tourists visited Thailand.”
Managing a crisis, Central style
Thailand has faced many major crises before, from the devastating tsunami in 2004 to the great flood in 2011, so bracing for a sudden storm is part of company culture in Thailand. During the peak of the COVID-19 outbreak in Thailand, the biggest challenge for a company like Central Food Retail Group was how its supply chain could cope with the changing volume both online and offline. Even before the impact was felt, the retailer planned ahead and worked with its suppliers to adjust the volume, organize its warehouses to prepare for possible shortages, and find alternative ways to get products to its stores nationwide.
“Thai economy and the food industry in particular, need to be agile in order to react to any situation. In this crisis, we’ve been adapting to it since January 2020, even before the pandemic spread locally. For our company, with our different stores, with a specific model for each, the target was to adjust our commercial and business models accordingly during the crisis and always be ready,” he recalled. Stephane noted that supply chain management, in order for the business to cope with fluctuating demands during different periods of the outbreak, required solid cooperation from all involved.
“At the peak, if you order a lot of products, after that you will have to manage the stock, and that can create complexity in the supply chain. Our team has focused on four key aspects of our business: supply chain, merchandising, operation and marketing, ensuring every team collaborates seamlessly to make the right decisions at the right moment in this exceptional event.”
A shift in consumer behaviour
Not so surprisingly, the crisis has resulted in a major drop in spending power among consumers. People have become more cautious with their spending amidst such uncertainty.
“COVID-19 brings fear of being in crowded places, and this has a socio-economic impact. Consumers also have less purchasing power, and even for those who are not directly affected, they are more value-oriented. We have observed that promotion and price sensitivity are higher now in Thailand,” remarked Stephane, adding that this trend is happening around the world, as consumers globally are concerned about their financial future.
Another major trend is health and wellness. Consumer behavior changed significantly during the crisis, with a big increase in demands for health and wellness products. “We see more demands for organic products, and consumers care more about where the products come from. This is an opportunity to develop quality products, a selection of items that allow customers to find out where exactly the products are from just by scanning the QR code on the packaging,” said Stephane. Central Food Retail Group has already begun this since 2019, but the COVID-19 prompted the company to accelerate it further.
Driving omnichannel strategy
The lockdown period has been a catalyst in driving digital transformation as more consumers turned to online platforms to purchase necessary products without leaving home. While Central Food Retail Group was already among the strongest online shopping platforms in the country, its strategy is not just to migrate its business to online platforms, but to strengthen its omnichannel proposition.
“During the COVID-19, and even after the peak, we see higher traffic online, with many new customers. It’s obvious that customers choose to shop online in order to avoid going out. I consider this as an opportunity not to move online but to move omnichannel. It means we continue to reinforce our offline business and at the same time increase our online traffic. During this period, we’ve developed Click & Collect, Chat & Shop and Drive Through service to facilitate online shopping, and improved our home delivery to offer a faster experience. This is in line with our omnichannel strategy.”
Source: Central Food Retail
Call for convenience
Stephane observed something interesting during the crisis - convenience stores were not convenient enough for consumers during the crisis.
“This happened not just in Thailand, but also countries like Japan and the US. What customers wanted at that moment was neighbourhood minimarts offering commodities. They didn’t want to go to large and crowded supermarkets or hypermarkets – they wanted to shop within a 5-minute radius from their house, and be able to stock up their fridge.”
To cope with changing demands during the pandemic, Central Food Retail Group adjusted the assortment at its convenience stores - Tops Daily and FamilyMart - to ensure that consumers could always find essential products, such as cooking oil, rice and pasta, to meet their everyday needs. To offer even more convenience, it partnered with GrabMart, a major online grocery shopping platform, and LINE, a platform providing various services including delivery, to bring products to consumers without leaving home, in a true omnichannel manner.
“You have many more options to get what you want, when you want, where you want. It’s much more convenient for our customers.”
Source: Central Food Retail
Lending a helping hand
Central Food Retail Group’s mission has always been to support local communities, and there’s no more crucial time than now. Understanding that consumers today are more concerned about affordability, Stephane explained that we have leveraged on its existing “Locked Price” campaign, which maintains the prices of necessary items, to assure its customers that they can still get the products they need without price spikes.
“Our customers need to feel that there’s no inflation in selling price, and our duty is to show how we support Thai consumers to shop at the best price. The locked price initiative was launched in 2019 and was very successful, starting at some selected stores, and we decided during the COVID-19 outbreak to extend it to all stores. In the past three months, we also extended locked prices to cover more product categories. Our target is to help customers to shop with more affordability.”
Source: Central Food Retail
In addition to helping consumers, Central Food Retail also showed support to local farmers during this difficult period. Stephane explained that many farmers have been seriously affected by the pandemic as lockdowns have halted export, and Thai agriculture is quite dependent on export. Tops is the only supermarket in Thailand to commit to buying only 100% grown-in-Thailand garlic.
New paradigm, redefined strategies
Stephane concluded, "the COVID-19 pandemic has resulted in a new food retail paradigm, in which omnichannel platforms have become a pillar of success. At the same time, to develop our omnichannel platforms, our supply chain must be flexible and effective. The new retail paradigm is driving food retailers to redefine core strategies, but with our decades of expertise and our early start in the omnichannel strategy, we are confident we are ahead of the game and can meet the evolving needs of our customers today and into the future."
Learn more about its latest results and key plans for 2021 here.