malls serve a clear purpose in their trade areas, its supermarkets and convenience stores don’t seem to achieve the same status, suffering from a lack of identity, differentiation and overall quality. Not only that, but many of them desperately need upgrades, and they are often the fourth choice behind Lotus’s Go Fresh, 7-Eleven and Tops Daily in the hotly competitive Thai convenience market. Convenience stores can no longer get away with just being cosy little boxes with a ragtag assortment of everyday items and ordinary service: they now need to look and function as compact supermarkets. Unfortunately, many of Big C ‘Mini’s 1,600+ stores still look and function like old-fashioned convenience stores. Meanwhile, Lotus’s has a clear competitive advantage in fresh food at its small formats with their strong assortment of fresh meat, fruit and vegetables. Their stores tend to look fresher, too. The other big player in the small supermarket space, 7-Eleven, is staking out its own territory in prepared meals, health and beauty. Big C Mini needs its own drawcard. More than 2000 stores and counting Still, Big C is trying, and its large formats are still throwing their weight around. Big C in all its formats accounted for 69 per cent of Berli Jucker’s total revenues in the first quarter. It ended the quarter with more than 2,136 stores in Thailand, Laos, Cambodia and Hong Kong, comprising 155 hypermarkets, 52 supermarkets, 1,629 Big C Mini convenience stores, 145 drug stores, 70 book stores and a motley collection of other formats. It also has a network of 11,911 ‘Donjai’ stores, which are independent mom-and-pops that sign up to buy some minimum amount of inventory from Big C in exchange for technology (especially POS systems) and other goodies. Same-store sales are edging up In the first quarter, Big C’s total revenues increased by 1.0 per cent on the same quarter a year ago, to 28.5 billion Thai baht ($880 million), of which retail sales from its various formats accounted for $25.5 billion baht ($785 million). Same-store sales overall improved 2.1 per cent on the first quarter of last year. The company again flagged its fresh food sales (up in the double digits like-for-like, thanks primarily to its hypermarkets) and “improving dry food sales” as key drivers of sales, although it noted that the dry food aisles still weren’t performing to the level expected. (For its part, fresh food has been powering sales growth at Big C’s competitors as well.) Gross margin was 18.1 per cent (down slightly on a year ago) and net profit was down 6.2 per cent to 977 million baht ($30 million). Rental business A little under 10 per cent of Big C’s retail business consists of rental and service income from the 1.03 million square metres of space it rents out primarily within its hypermarket-anchored malls, which is not a lot less than the 1.27 million square metres of its own stores’ floorspace. The malls have now been rebranded as ‘town centers’, presumably to emphasise their role in many secondary communities in Thailand where they are the dominant retail force in the absence of a full-blown regional mall. (They don’t exactly fit into the typical town centre concept as retail professionals know it: the malls are all enclosed, for one thing, and there is little or nothing in the way of design frills — nothing like the greenery or street furniture that are prevalent in Western town centers or even in Asian community malls. Revenues from the rental and service business actually fell by 3.6 per cent year-over-year to 3.1 billion baht ($94 million) in the first quarter, which the company attributed to changing tenant mix and temporary vacancy while renovations were occurring. The occupancy rate at its malls now sits at 89 per cent, which is better than it was but nowhere near the level the company would like it to be. A lot of irons in the fire Big C just completed the renovation of three of its 155 and is in the process of renovating 14 more. The company has a lot of irons in the fire to improve its competitive position. It continues to add stores and close unprofitable ones — it opened 30 and closed 16 in the first quarter alone — and the renovations of existing ones are an absolutely essential step, albeit not on the scale that is really needed. It has also been tinkering with its assortments in markets that are more exposed to tourists, and further on the international-facing front, is increasing its dry food imports from Europe and improving its Japanese and Korean merchandising. And let’s not forget the expansion of its already enormous Donjai network of mom-and-pops. Private-label penetration is also sneaking up (now over 14 per cent of sales compared with just under 13 per cent a year ago). The outlook is a little fraught The economic environment in the region where Big C operates continues to be fraught. The Thai economy grew faster than expected in the first quarter, but that was on the back of exports and the primary sector; consumption was weak, and that suggests weak consumer confidence and overhanging household debt. In response, the government has taken out some stimulus measures, and the Bank of Thailand has been cutting interest rates. Thailand is also heavily vulnerable to any slowdown in tourist arrivals. Estimates vary, but tourism accounts for at least 10 per cent of gross domestic product, so if that part of the economic equation wobbles, then Big C might have slow growth for a while yet.