• Retailers and restaurant businesses continue to face challenges as the COVID-19 pandemic sees a rise in infection rates, prompting the government to implement various measures, including temporary closure requests for establishments. Recently, the Emergency Decree has been enacted to control the outbreak and protect public health and safety. These measures inevitably impact businesses, as the majority of their revenue comes from in-store services.
  • Nevertheless, retail and restaurant businesses are rapidly adapting to generate income and sustain operations through online sales channels and delivery services. The Kasikorn Research Center estimates that online sales (E-Commerce) and food delivery services from March 22 to April 30, 2020, will increase by approximately 8 billion baht compared to normal periods. However, this increase in online and delivery revenue will not fully compensate for the lost primary income, resulting in a net decline in the market value of the retail and restaurant sectors during this period.

Since the beginning of 2020, the COVID-19 outbreak in Thailand has acted like a massive wave impacting retail and restaurant operators, leading to a contraction in sales. Recent government reports indicate an increase in new infections and fatalities, with no clear timeline for resolution. Consequently, the government has had to implement stricter measures to prevent widespread outbreaks affecting public health and safety, including the Emergency Decree effective from March 26 to April 30, 2020, and temporary closure requests (Lockdown) from March 22 to April 30, 2020, in several provinces, particularly in Bangkok and its vicinity.

These measures have significantly impacted various businesses, including retail and restaurant sectors, as their primary revenue streams come from in-store sales, alongside widespread effects on the labor force. However, retail and restaurant businesses still have alternative marketing channels to generate income during this challenging time, as the measures allow for continued operations with adjusted service formats. Some operators have already begun adapting, such as increasing online sales channels to help offset lost income and sustain their businesses, as well as maintaining employment levels.

The Kasikorn Research Center views the situation for retail and restaurant businesses following the Emergency Decree and temporary closure requests as follows:

  • Retail Sector: Supermarkets and convenience stores may face less impact than other groups, and all groups are rapidly adapting to increase online channels.

In the retail sector, the Kasikorn Research Center believes that the impact from these measures will affect retail sales in certain segments more than previously estimated, particularly for businesses unable to operate, such as stores in shopping malls (except for supermarkets that can continue to operate normally) and specialty stores like hardware, furniture, and beauty shops, which are primarily non-food retailers. In contrast, supermarkets, convenience stores, and online retailers are still permitted to operate and are likely to experience less impact than other retail segments.

The Kasikorn Research Center suggests that retail operators can adapt by increasing marketing channels through online systems and delivery services to maintain liquidity and generate cash flow. Many retail operators, from large chains to small retailers, have adjusted their business models to focus more on online markets through E-Marketplaces and social networks like Facebook or Line, allowing customers to order conveniently and receive delivery. Retail operators still reliant on in-store income should explore online channels to integrate into their businesses as an additional revenue stream, as worsening conditions could impact business liquidity.

Furthermore, the Kasikorn Research Center anticipates that the market value of E-Commerce from March 22 to April 30, 2020, during the closure period, is expected to increase by approximately 20-30% compared to normal periods, rising from 26.2 billion baht to 33 billion baht, reflecting an increase in spending through E-Commerce of around 6.8 billion baht. This increase is primarily driven by consumer behavior changes due to temporary store closures, leading to a shift to online spending on health and beauty products (vitamins, supplements, cosmetics), children’s products, clothing, footwear, and pet supplies.

Additionally, there has been an increase in online purchases of essential consumer goods or FMCG, although not significantly, as many consumers had stocked up beforehand, and most stores remained open. In a climate where consumers are cautious about spending and some may face income loss, operators may need to offer more promotions than usual, including in-store promotional activities at retail locations still open, such as supermarkets and convenience stores, as well as marketing activities through all online platforms. Simultaneously, controlling or reducing various cost burdens remains essential for sustaining businesses, including managing stock levels to align with current buyer demand, negotiating with creditors, and fully utilizing government measures as they are rolled out.

Operators must also prepare contingency plans for potential future changes, especially if COVID-19 infection rates do not peak soon, as the government may need to escalate control measures further. Ultimately, this could impact business operations, such as preparing flexible transportation plans for high-demand products, diversifying supply sources, and managing communication to ensure clear and prompt understanding among consumers regarding potential delays beyond agreed timelines.

  • Restaurant Sector: Targeting the market through online channels and enhancing food delivery services to mitigate liquidity impacts and reduce the likelihood of layoffs.

The Kasikorn Research Center believes that government measures, including the Emergency Decree and temporary closure requests, will affect restaurants differently based on their service models. Some establishments that primarily focus on dine-in services will undoubtedly face more significant impacts but can still adapt by offering takeaway and food delivery services. The Kasikorn Research Center categorizes restaurants into three groups:

1. Full-Service Restaurants: Such as those in shopping malls, tourist attractions, or dining venues that primarily rely on customers dining in. This group will be significantly impacted due to operational constraints in adjusting sales channels, leading to substantial revenue declines.
2. Limited-Service Restaurants: This group is likely to experience limited impact from the measures, as they offer various service formats, including dine-in, takeaway, and some with food delivery services through their apps or partnerships with delivery apps. Under the current circumstances, these restaurants should be able to adapt quickly and mitigate impacts compared to the first group.
3. Street Food Vendors: These are mostly small operators who offer dine-in, takeaway, and have recently begun providing delivery services through food delivery apps. While they can adapt, some small operators may have limited cash flow and face challenges in accessing technology or delivery apps, making temporary closures likely to impact their liquidity.

The Kasikorn Research Center believes that the restaurant business remains flexible and has opportunities to generate income through in-store sales and delivery services to homes or workplaces. Following the announcement of temporary closure requests, residents in Bangkok and surrounding areas have increasingly used food delivery services to their workplaces or homes through apps, similar to how restaurant operators are ramping up campaigns through food ordering apps.

During the closure period from March 22 to April 30, 2020, the Kasikorn Research Center estimates that food delivery services to residences and workplaces will likely grow by approximately 35-40% compared to normal periods, increasing from 3.3 billion baht to 4.5 billion baht, reflecting an increase in spending through food delivery of around 1.2 billion baht.

Therefore, operators who do not yet offer these services should adapt to create additional revenue channels to reach new customer segments, whether through their platforms or by partnering with food delivery app developers. Restaurant operators located in business districts may consider special promotions for customers and adjust staff roles to include food delivery in nearby areas.

Moreover, managing and controlling costs during this time is crucial for restaurant operators, especially for perishable items that cannot be stored long-term. Operators may consider menu adjustments or reducing variety while rotating menu items to provide customer options, allowing them to control raw material costs and set prices that align with economic conditions. Simultaneously, restaurant operators must instill confidence in customers ordering food by maintaining cleanliness and secure packaging, while in-store sales should ensure waiting areas are arranged to promote social distancing.

Amidst the ongoing uncertainty, operators should seek contingency plans to mitigate various impacts, such as planning food preparation materials and delivery services for customers in case delivery service providers encounter issues.

In summary, the prolonged COVID-19 outbreak has significantly impacted the lifestyle, health, and lives of people in Thailand, as well as the broader business sector, including retail and restaurant industries, which have inevitably faced declining sales from both Thai consumers and foreign tourists. Coupled with the temporary closure measures and the Emergency Decree to control COVID-19, the Kasikorn Research Center estimates that from March 22 to April 30, 2020, while revenue from E-Commerce and food delivery may increase by around 8 billion baht compared to normal periods, it will not replace the lost primary income from in-store sales. Thus, the overall market value of retail and restaurant sectors is expected to decline by 72 billion baht during this period. For the remainder of 2020, the direction of retail and restaurant businesses will depend on various factors, and operators must closely monitor potential additional measures related to COVID-19 control and economic relief for businesses and the public, which may affect operations.

Thank you for the information from K Research