Thailand’s Central Group is making headway in the large-scale retail business in Europe after buying up such prestigious brands as La Rinascente, KaDeWe in Germany and Illum in Denmark. Central Retail, the group’s primary operations concern, is headed up by Nicolò Galante, a manager who is focusing enormously on e-commerce, yet without ruling out the possibility that the group may also bolster its traditional retail network in the future, starting with Italy.
What are your strategies for Europe and Southeast Asia?
Our strategy is based on focusing our efforts and on maximizing the development potential of those markets in which we are already operating, in other words in Thailand where the group first saw the light of day seventy years ago, in Vietnam where we have invested extensively, and in Europe where we have recently expanded through our purchase of La Rinascente in Italy, KaDeWe in Germany and Illum in Denmark.
Experience tells me that the challenges facing a large-scale retail business such as ours in Southeast Asia and in Europe are very similar. The first challenge concerns the technological innovation that is currently revolutionizing the market, with customers making increasingly well-informed and aware choices. The second challenge is the exponential increase in the amount of competition, with large e-commerce groups with easy access to capital making considerable headway in the marketplace.
But there are also differences, chiefly concerning the speed of the changes taking place. Thailand and Vietnam experienced the digital revolution a little later than Europe but they soon made up for that. And then the synergies between Europe and South Asia primarily involve soft skills. In our case we are talking about the skills needed to design the new multichannel service models. In that connection it is essential to synchronize the various company brands in order to develop a common organizational apporach. We are building e-commerce for La Rinascente with skills developed in Thailand, while we are learning a great deal from Italy in terms of tourist services that are now growing also in Southeast Asia.
How is your group going to change with the multichannel approach?
Customers today make no distinction between digital and physical, they only distinguish a good experience from a bad one. This is a crucial aspect, because for the time being neither the traditional groups nor the e-commerce giants are capable of offering a decent multichannel experience. In fact it is no mere coincidence that, while the traditional groups are putting their money on e-commerce, businesses such as Amazon and Alibaba are buying up physical retailers.
We believe that Central Group has the ability to become one of the first groups in the world to offer a geniune multichannel experience. We have some very important brands, a very strong customer base and extensive knowledge of the way customers behave in our stores thanks to our analysis of big data. Yet traditional large-scale retail groups have serious cultural issues in addressing these changes, both in terms of their stockholders who have always considered real estate to be the most important kind of investment, and in terms of in-store staff who have to be involved in the changes and trained to handle the multichannel approach.
Is the multichannel approach going to kill off small shops or are they going to be reborn with it?
It is a world that is still taking shape, but I believe that there are opportunities for the small retailer and, above all, for local manufacturers. I am convinced that the emptying of historic downtown areas due to the construction of major shopping malls in the suburbs has peaked out. E-commerce offers the small retailer a chance to become the last mile in digital distribution. E-commerce businesses are already scouting for “physical” retailers where customers can go to pick up their orders, a method that can sometimes be a more practical and economical option than home delivery. Another opportunity involves the ability of small retailers or manufacturers to differentiate and to break out of the confines of physical retailing, using digital platforms to offer products or packages also outside their traditional customer catchment areas.
What difficulties has Central Group encountered in investing in Italy?
Central Group has not encountered any special difficulties in investing in Italy. In fact the experience has been so positive that we are searching for new opportunities to grow on the Italian market, including through new buy-ups.
One aspect that can make investing difficult is the perception of risk. I am not talking about the country’s rating but about the uncertainty perceived in its legislative environment and about the difficulties caused by all the red tape. It took us ten years to open our most recent store in Rome, while in Thailand it takes 18 months at most. In other words, greater clarity and stability in the legislative environment would make it easier for foreigners to invest. This, among other reasons, because, in our sector at least, there still exists a widespread positive prejudice toward Italy that is unquestionably an important lever of which Italy needs to be made full use.
Nicolò Galante is the Chief Operating Officer of Central Retail, Thailand’s largest nonfood distribution group and a holding company that owns several large department stores in Southeast Asia and in Europe. Holding a degree in nuclear engineering from Turin University, Galante gained his MBA at INSEAD in 1996. He arrived in Bangkok after a career with McKinsey & Co. in Milan and Paris.
