AS a giant wave of store closures has started to hit the US and other countries including Singapore, a big question mark now hangs over the head of modern trade investors in Thailand.
One of the biggest news which shocked investors is that the father of value investor Warren Buffett has dumped most of his holding in Walmart Store.
His Berkshire Hathaway sold the majority of its holdings in the world’s largest retailer last year. In the final three months of 2016 alone, Buffett trimmed his Walmart holdings to 1.4 million shares from 13 million at the end of September. With an ownership stake of just 0.05%, Berkshire is no longer a major shareholder in Walmart.
The main reason he is abandoning Walmart is that it’s losing out to Amazon.com.
E-commerce sales are growing faster than sales at traditional brick-and-mortar retailers and should continue to do so.
Walmart is investing in e-commerce in order to ride the wave, including its high-profile purchase of Jet.com, but Amazon remains the market leader.
Retailers in the US are bracing for a fresh wave of store closures at the start of this year when a number of retailers are expected to file for bankruptcy, in addition to mass store closures.
Nearly every major department store, including Macy’s, Kohl’s, Walmart and Sears, have collectively closed hundreds of stores over the last couple years to try and stem losses from unprofitable stores and the rise of e-commerce.
But the closures are far from over. Macy’s has already said that it’s planning to close100 stores, or about 15% of its fleet, in 2017. Sears is closing at least 30 Sears and Kmart stores by April and additional closures are expected to be announced soon.
Mall stores like Aeropostale, which filed for bankruptcy in May, American Eagle, Chicos, Finish Line, Men’s Wearhouse, and The Children’s Place are also in the midst of multi-year plans to close stores.
This trend has spread across the globe and the country near Thailand, Singapore, is feeling the pinch.
Empty storefronts in Singapore’s prime shopping district has now become a more common sight.
Singaporeans are among the most tech-savvy shoppers in Asia, with a greater percentage turning to online shopping than consumers in Hong Kong and Malaysia.
Malls in Singapore now start too remodel to focus more on food-and-beverage outlets, entertainment, services and banking, and less on fashion and consumer products, he said.
Some of the biggest retailers are fleeing. Al-Futtaim Group, the distributor in the city-state of major brands including Marks & Spencer and Zara, announced plans to shutter at least 10 stores in Singapore last year.
And after 174 years, John Little decided to close its last department store in Singapore last December.
Another reason affecting retail business in Hong Kong and Singapore and probably less so in Thailand is China’s slowing economy and fewer flashy purchases by visitors from the mainland.
So what about the retail industry in Thailand especially the modern trade?
Dr Niwes Hemvachiravarakorn, known among stock investors as Thailand’s Buffet, just said in his latest article that he has to think twice if he is to consider investing in listed companies doing modern trade retail business.
He pointed out that in the digital economic era, e-commerce or online shopping and trading has now become a major threat to the modern trade business in Thailand.
“In the long term, modern trade industry in Thailand will be affected for sure,” he added.
Goods worth 500-30,000 baht a piece would be greatly affected by e-commerce. Cheaper goods of less than 50 baht a piece may not be affected because it’s not worth paying delivery cost.
Top: Singapore’s Orchard Road is now attracting fewer shoppers. Photo: Glen Bowman (CC-BY-SA-2.0)
By Kowit Sanandang