The second half of the year isn’t looking that robust for home improvement or home furniture retailing in Thailand, but HomePro, the country’s biggest home improvement retailer, is undeterred. The company is going ahead with its store opening program, launching two in the third quarter to bring its total store count in Thailand to 117. The latest to open is in the town of Pluak Daeng, Rayong Province. It’s a Mega Home, which as the name suggests is the company’s largest format, and thi
this particular monster sits on a massive 32,000sqm site. Pluak Daeng is no tourist town and much of its infrastructure, including its roads, is poor. However, there are a number of new housing developments already in place and huge swathes of land in the vicinity of the town have been cleared and are being prepped for construction. It’s all a bit messy and transitional at the moment, but the logic of the Mega Home’s location is compelling. The store itself is sparkling, and there are some new features that are uncommon in home improvement warehouses around the world. One is a small food court that allows visitors and staff to relax and refuel. There is also a Chao Doi kiosk – Chao Doi is a national coffee and bubble tea franchise – doing a brisk business inside the front of the store. Before even getting inside though, visitors have to run a gauntlet of half a dozen enthusiastic greeters, and once inside another, similar-sized, group is waiting to pounce, just in case the shopper is unfazed by the first assault. In no department of the store is the customer left to browse without first having to fend off a zealous staff member. This is by no means unusual in Thailand and overstaffing is a feature of Thai retail stores that foreigners often remark upon. Labour is very cheap in Thailand and absenteeism chronic; put the two together and it isn’t surprising that retailers often hire a lot more personnel than can possibly be productive on the shop floor at any one time. The result, however, is that many employees have little product knowledge and spend much of their time standing around chatting or looking at their phones. Despite the staff issue, the visit remains unspoiled: The outstanding quality of the product presentation and the dazzling assortment make this an excellent shopping experience. Although the store is new and still under-trafficked, the atmosphere is positive, made more so by the lively Thai pop music blaring from speakers in different parts of the store. To jazz it up even more, in the paint department a staff member in a smart yellow dress with a microphone gives a breezy technical spiel on the durability of a certain house paint. There are also frequent reminders throughout the store that home improvement is a category that needs to mind its p’s and q’s when it comes to environmental impacts. This store is clearly on the front foot, beginning with the prominently displayed solar panels near the front entrance. HomePro reportedly wants half of its products to be ‘eco-products’ by 2025. As usual, however, it is unclear how that is defined. All in all, this new Mega Home is an impressive effort by a retailer that continues to make incremental improvements with each new project. The backdrop is disconcerting The bigger picture though is that home improvement as a category in Thailand is struggling in the second half of the year, suffering not from the quality or quantity of retail on the supply side but by a weakening economy. When consumer sentiment is fragile, the first retail categories to feel it are those in the durable goods sector: purchases of big-ticket discretionary items for the home and home improvement projects generally are postponed. The slowdown affecting HomePro and its main competitors is, therefore, understandable, yet management still feels compelled to serve up strange and unnecessary excuses for performing below expectations. In this spirit, HomePro’s management made a few comments around its performance in the third quarter that were a little questionable. The first was that consumers were concerned about inflation, despite the fact that inflation is hovering around zero on a year-over-year basis. (It actually dropped 0.31 per cent in October.) It is difficult to accept that people get rattled by inflation when there isn’t any. On top of that, and even more bizarrely: “The third quarter is [the] rainy season and heavy rain occurred in many areas.” What makes that comment particularly weird is that last year’s rainy season was one of the worst in recent years, so the bar for this year was set relatively low. One thing HomePro’s management highlighted that is a concern though is rising interest rates: The Bank of Thailand raised its benchmark rate to 2.5 per cent in September, the eighth consecutive hike. Sales revenues are up but rental revenues are down For its part, HomePro’s total store sales in the third quarter increased by only 3.1 per cent, year-on-year, which isn’t too bad but disappointing considering the addition of nine new stores in Thailand during the last 12 months. After-tax profit was about flat with the third quarter of 2022. The results take some of the gloss off the performance for the first six months but even so, sales for the whole January-September period are up 7.1 per cent and after-tax profit up 4.4 per cent. HomePro also owns Market Village, a large and hugely popular enclosed mall in the resort town of Hua Hin, southwest of Bangkok on the Gulf of Thailand. In the third quarter, rental revenue from this and other sources was slightly down on last year, but rose by a tidy 9.4 per cent for the whole nine months of the year. Overall, the second half of the year is not shaping up to be the best and the company may have some more tough months ahead.