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Business winners and losers, and the lumpy recovery

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Business winners and losers, and the lumpy recovery | The Thaiger
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As we slowly start to emerge from enforced lockdowns, how have things changed? There have been early ‘winners and losers’ but the profound changes to our lives will now start to morph into lingering economic hardships and unpredictable business outcomes.

Different countries are going to restart their economies at varying speeds and retain some restrictions and drop others, depending on both health concerns and in some cases, political will.

Some of the world’s biggest companies have become even bigger. Small to medium size companies are running on meagre savings or government handouts. Mum and dad stores are struggling to re-open. Start-ups, in the early days of disrupting the bigger players, have been wiped out. Be assured that there will be no return to ‘normal’. Everyone is now charting new business territory.

Whilst the ‘lockdowns’ and travel restrictions around the world have, generally, slowed the infections rate – flattening the curve – they’ve also left the world economy in tatters. Central banks have thrown untold trillions at boosting their battered economies but all this has to be paid back, sooner or later.

But there have been a few winners who, more by luck than good planning, have had the right business model at the right time.

Amazon.com has had to hire more staff – a reported 100,000 – to keep up with a surge in demand from millions of house-bound consumers. It’s reported in Bloomberg that Amazon sales jumped 26% to a record US$75.5 billion, though actual earnings fell 29% compared with the same period last year.

Google’s revenue has exceeded analysts’ expectations for the first quarter. Facebook shares have soared on after results eased investor concerns about advertisers pulling their spend during the pandemic. And social media short-form video platform has been dragging users away from the former preferred Facebook and Instagram.

Even Apple posted a surprising 1% revenue increase in revenue during Q1 to US$58.3 billion.

In Thailand, food delivery services, logistics, online sales, insurance brokers, YouTubers and restaurants that quickly pivoted to the delivery model, have all survived and thrived during the country’s lockdowns. And April’s online traffic results show that most news media have increased their readership during the month as well.

People, stuck at home, have discovered a whole new world of online services. Surely online grocery shopping is going to become a new ‘norm’ in the future. Some businesses have discovered their staff have functioned perfectly well during the lockdowns making business owners take another look at their monthly office rentals.

But there is no doubt retail, restaurants, bars and entertainment venues, airlines and hotels are struggling. Some will simply never re-open their doors. And who’d want to be the owner of a cruise ship at the moment?!

We will see some of the companies that have been able to continue trading during the lockdowns pounce on opportunities to buy-up smaller, struggling competitors. Some of the legacy airlines that have been able to ‘hang-on’ will gobble up some of the lean and mean, but cash-poor, low-cost airlines.

Bloomberg reports that the pandemic could reshape the American economy in many ways. Some established companies will begin to teeter and corporate defaults are projected to soar in coming months.

Fears of a “consolidation wave” are leading US lawmakers to try and limit any opportunistic take-overs. The chairman of the House Antitrust Panel is calling for a moratorium on acquisitions in the US.

“As millions of businesses struggle to stay afloat, private equity firms and dominant corporations are positioned to swoop in for a buying spree,”

Two other US Senators are proposing legislation to ban corporate mergers while the pandemic persists. Meanwhile both Democrats and Republicans are raising concerns about the power wielded by big companies, particularly Google and Facebook.

As the pandemic accelerates Amazon’s grip on US online retail sales – its market share already around 40% – it could also permanently shift consumer behaviour toward online shopping, further dooming bricks-and-mortar stores and the traditional retail model.

Netflix, the online streamer, has seen subscriber numbers surge in the first quarter this year. Almost 16 million people created accounts during that period. That is nearly double the number of new sign-ups it saw during the same period last year. Amazon Prime and Disney streaming services have also seen big growth.

Video-conferencing start-up Zoom has benefited massively. Almost unknown before the outbreak, Zoom is an instant household name. The company’s sales and share price are already up over 50% this year. Webex, Skype and Teams are also seeing major growth.

In France, the chairman of cosmetics giant L’Oreal, Jean-Paul Agon, suggested they are on the lookout for weakness in their smaller competitors.

“It’s unfortunate, but it’s the Darwinian side of this industry. We are pretty sure to be able to get out this crisis even stronger. So will there be opportunities for interesting acquisitions? We will see.”

The ‘sextech’ industry has also thrived over the last few months. Experiencing massive spikes in online orders, from vegan condoms to erotic audio apps, online pornography to AI sex toys, the demand for services has never been stronger. Earlier projections that the international industry will grow to $122 billion by 2026 have been revised upwards as the industry has surged during the lockdowns.

And any businesses to do with health, from face masks, hand sanitisers and business PPE, to insurance ‘top-ups’ and new policies, have all thrived.

SOURCES: Bloomberg | BBC

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Crime

Prohibition activist criticises unequal enforcement of Thai alcohol laws

The Thaiger

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Prohibition activist criticises unequal enforcement of Thai alcohol laws | The Thaiger
PHOTO: The Thaiger

The head of the prohibitionist Alcohol Watch Network is criticising the Office of Alcohol Beverage Control and police for looking the other way after ML Piyapas Bhirombhakdi posted a photo of herself showing off a branded bottle of an alcoholic drink on her Instagram profile (the picture has since been deleted). Piyapas is not only a great-granddaughter of HRH Prince Nares Varariddhi, a son of HM King Rama IV, but is the wife of Chutinant Bhirombhakdi, an heir to the Boon Rawd Brewery fortune and executive vice president of Singha Corp. Her post showed her holding a new Boon Rawd product.

Kamron Choodecha argues that the bottle and brand were clearly visible and, given that Piyapas has a vested interest in Boon Rawd’s sales, her post must be construed as sales or marketing, violating the Alcohol Beverage Control Act, which prohibits any sort of alcohol marketing online. He claims the fact she has not been fined, even as police extract hundreds of thousands of baht in fines from ordinary people posting harmless photos of themselves enjoying alcoholic beverages, shows the inequality in Thai society and the privilege elites are given when it comes to the law.

Others may argue, however, that the hypocrisy of the incident illustrates only how ludicrous the law is. Sporadically enforced over the years, the law again made headlines this year when foreign-managed alcohol distributor Beervana was fined 50,000 baht for an online post describing one of its products as “refreshing,” which contravened a ban on adjectives in marketing copy.

In the days that followed reports surfaced across the country of the OABC and police summoning people and slapping them with huge fines for posts that had no connection to sales or marketing.

Most recently, a young woman in Thailand’s South was fined 17,000 baht for posting a photo of a beer she liked to a beer fan page. The page owner was so outraged that he paid 5,000 baht of the fine and met face to face with regulators to protest the law.

Even Kamron, an anti-alcohol zealot, admits that the law is being misused by police and authorities. He says simply using the word “beer” or posting photos of bottles or glasses does not break the law, as long as brands are not shown. He believes the law’s intent is only to prevent advertising of alcoholic beverages on conventional and social media platforms. He argues that if the poster had no commercial intent, no one should be fined.

“But if authorities are going to strictly interpret the law, distant royal relatives or any other elite member of society should be punished equally.”

By the way there is an alcohol ban on for the next two days.

2 Buddhist holidays, Asahna Bucha Day and the start of Buddhist Lent, fall this weekend, and as a result the government has added Monday, July 6, as a national holiday. There will be an alcohol ban on the Sunday (July 5) and Monday (July 6). No alcohol will be sold or served on these days.

Prohibition activist criticises unequal enforcement of Thai alcohol laws | News by The Thaiger

PHOTO: Nation Thailand

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Coronavirus (Covid-19)

Bangkok’s shopping malls struggle under tourist ban, fierce competition

Jack Burton

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Bangkok’s shopping malls struggle under tourist ban, fierce competition | The Thaiger
PHOTO: Nerdnomads

Suvarnabhumi, the name of Bangkok’s second international airport, means “realm of gold,” and was given by His Majesty the late King Rama IX to Bangkok’s eastern outskirts (technically in Samut Prakhan province), once a marshland called Nong Nguhao (Cobra Swamp). With its overtones of wealth, the name represents the hopes of developers, who are turning the area into a retail battlefield.

The problem is oversupply. In late June, multitudes of of shoppers eager for a new experience after weeks of Covid-19 lockdown came to the grand opening of Siam Premium Outlets Bangkok, a brand new mall less than 10 kilometres east of the airport, the main gateway to Southeast Asia’s second largest economy.

The mood was festive for the debut of the massive project, a collaborative effort by Thai mall operator Siam Piwat and US conglomerate Simon Property Group. The joint venture invested 4 billion baht to accommodate an anticipated 10,000 visitors per day in the mall’s 50,000 square metres of floor space.

Siam Piwat Simon’s managing director says “Premium outlet is a retail trend that still has potential to grow”. He believes that growth will reinforce Thailand as one of the world’s most popular tourism destinations. But given the effects of the Covid-19 pandemic, it’s hard to imagine a tougher time to open a mall. The foreign tourists whose spending would normally ensure the success of a new shopping complex are being kept out as the government still bans most international arrivals.

When tourists do return, their numbers and mobility may be limited, and competition among major retailers around Suvarnabhumi will enter a new, more intense chapter. Rivalries between central Bangkok’s many malls and those emerging around the airport will also heat up. There’s plenty of shopping for bored travellers waiting for flights inside the main airport as well.

Some analysts predict the “new normal”, requiring social distancing and limiting customer numbers that could result in significant shrinkage in physical store offerings. The head of retail advisory and transaction services at CBRE Thailand says retailers’ rental space requirement may be reduced by 20 – 40% from the levels before the pandemic. Still, nearly 1.3 million square metres of new retail space is expected in Bangkok by the end of 2023 – more than 25 times the size of Siam Premium Outlets Bangkok. That many commercial facilities opening in a span of just 3½ years is sure to add plenty of new challenges to the retail landscape. According to a spokesman for the Thai Retailers’ Association…

“Premium outlets are business in an upward trend, while duty-free shops are the opposite. In the future, there will be no tax because of free trade agreements. And tourist behaviour is changing. They don’t want to pay a lot of money for short-lifecycle goods. They would buy more goods from premium outlets rather than duty-free shops, where goods are more expensive.”

Thailand has been benefitting from growing overseas tourism, led by the Chinese with their formidable purchasing power, which was booming until the pandemic. According to a report by the World Tourism Organisation, in 2018 the kingdom was the ninth most visited country by tourists in the world, and second after China in Asia. Thailand’s visitors in 2019 were close to 40 million.

Bangkok's shopping malls struggle under tourist ban, fierce competition | News by The Thaiger

The turf war near Suvarnabhumi is essentially an extension of the fierce retail competition in central Bangkok, where retailers are also highly dependent on overseas visitors. Siam Piwat introduced mega mall Iconsiam on the east bank of Chao Phraya river, as a joint project with Thailand’s largest conglomerate CP Group and its property arm Magnolia Quality Development, in November 2018. Siam Piwat co-owns Siam Paragon with another retailer, The Mall Group, which also developed Emporium and EmQuartier department stores. Central Group, including Central Pattana, runs Central World and Central Chidlom.

More projects are in the pipeline. Magnolia Quality Development is working on one called The Forestias, scheduled to be completed by 2023. The US$4 billion (124 billion baht) project is on track to be the largest property investment in the kingdom’s history.

Whether in Bangkok proper or near Suvarnabhumi Airport, all major retail complexes have one thing in common: they’re counting the days until the foreign tourist inflow returns. The Tourism Authority of Thailand came up with a plan to promote domestic tourism packages to mitigate the impact from the lack of overseas travellers, but Thais’ spending power is limited compared to that of foreign tourists.

Although the coronavirus situation in the kingdom is well in hand, the risk of a second wave has the world on edge, even as some countries such as the US and Brazil struggle to rein in their first wave. The outlook for Thailand’s big bet on the return of inbound demand is fraught with uncertainty. The “Realm of Gold” that welcomes travellers may not be quite so precious for some time to come.

Bangkok's shopping malls struggle under tourist ban, fierce competition | News by The Thaiger

SOURCE: Nikkei Asian Review

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Chiang Mai

Chiang Mai International Airport sees more traffic

Jack Burton

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Chiang Mai International Airport sees more traffic | The Thaiger
PHOTO: mychiangmaitravel.com

Northern Thailand’s gateway airport is recovering some of its flight and passenger traffic. With the easing of travel restrictions enforced to fight the spread of Covid-19, the director of Chiang Mai’s international airport says traffic is picking up, and more flights and passengers are expected this month. On average, the airport received 40 flights and about 4,000-5,000 passengers per day last month. The number of flights is expected to rise to an average of 68 a day, and passenger figures are predicted to jump 50% this month.

Currently, flights operate only on domestic routes including those between Chiang Mai and other hub airports: U-Tapao, Hat Yai, Ubon Ratchathani, and Udon Thani. International flights are likely to return slowly after the Civil Aviation Authority of Thailand announced the lifting of the ban on international flights, under a set of restriction, effective on June 29.

Analysts agree inbound flights will not quickly return to pre-Covid levels, as air travel to and from the main markets remains suspended.

The CAAT’s announcement coincided with the release of the International Air Transport Association’s figures for passenger demand in May, which dropped 91.3% compared to the same time last year. This was a mild improvement from the 94% annual decline recorded in April.

The IATA’s director-general and CEO, says there’s tremendous uncertainty about what impact a resurgence of Covid-19 cases in key markets could have.

“May was not quite as terrible as April. That’s about the best thing that can be said.”

International passenger demand fell 98.3% year on year in May, virtually unchanged from the 98.4% recorded in April. Capacity plummeted 95.3%, and load factor sank 51.9 percentage points to 28.6%, meaning just over a quarter of seats, on average, were filled.

Financially struggling Thai Airways said yesterday, that its passenger numbers fell by 4.5 million to 3.5 million in the first 5 months of the year. The airline’s cabin factor, the percentage of available seating capacity actually filled by passengers, tumbled to 69%, down from 78% in the same period last year.

The figures were calculated before the national flag carrier suspended all flights in early May due to the pandemic, although the airline had already been in the red long before that. With a debt burden of 244.9 billion baht, the airline is awaiting the Central Bankruptcy Court’s decision on whether to admit its petition for debt rehabilitation on Aug 18. If the court accepts the case for a hearing, a rehab plan will be drawn up – subject to approval from creditors.

SOURCE: Bangkok Post

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