Central Group expects online surge through JD pact

The New Year’s celebration at CentralWorld Plaza, Dec 31, 2017. (Photo by Phrakrit Juntawong)

The company with the biggest grip on the brick-and-mortar retail market is expecting a partnership with China’s JD.com Inc to help it do the same in online sales.

Central Group, which controls the country's biggest operator of shopping malls and department stores, expects online sales to account for as much as 15% of its revenue in five years, from 2% now. The partnership with JD will help it compete in Southeast Asia’s booming e-commerce market and also open up businesses opportunities in China, CEO Tos Chirathivat said in an interview.

With an empire that also includes hotels, supermarkets and restaurants, Central Group is counting on online growth to help drive sales. The company first announced its $500-million joint venture with JD in September, teaming up with China’s second-largest e-commerce operator. Mr Tos estimates that online retail in Thailand could rise fivefold to 10% of the market as the country of nearly 70 million develops and access to the web spreads through smartphones.

“We obviously want to be the leading player in the 10% so it doesn’t really matter what kind of percentage of the group it is,” Mr Tos said in the Jan 3 interview at his Bangkok office. “The important thing is to be the leader in the market itself.”

Central Group and JD are competing in an increasingly crowded market, with Alibaba Group Holding Ltd expanding in Southeast Asia through Lazada while Amazon.com Inc. kicked off with a beachhead in Singapore last year.

Southeast Asia is home to more than 600 million people and the region’s internet economy, which includes e-commerce, online travel and ride-hailing, may grow fourfold by 2025 from an estimate of $50 billion in 2017, according to a joint research report by Google and Temasek Holdings Pte.

While Central Group is a privately-held investment arm of the Chirathivat family, the company controls a number of publicly traded businesses. Central Pattana Plc is a mall developer, Central Plaza Hotel Plc operates resorts and restaurants, Robinson Plc has a chain of department stores and COL Plc does office supplies.

All four gained in 2017, with Central Pattana surging 50% in 2017, Central Plaza jumping 47% and COL more than doubling, all outperforming the benchmark SET Index.

Outside the country, Central Group owns Italian luxury department store La Rinascente, Danish retailer Illum and in 2016 acquired the Big C hypermarket chain in Vietnam.

Central Group is targeting annual revenue growth of 13% in 2018 based on the company’s five-year strategy plan, said Mr Tos. That number may be higher with mergers and acquisitions, and the company could consider deals in the billions of dollars if the opportunity is right, he said.

Local sentiment is helping the company, with consumer spending picking up after the October cremation of late King Bhumibol Adulyadej ended the nation’s yearlong mourning period.

“If the trend continues like this then this year should be good,” said Mr Tos.