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The International Association of Department Stores (IADS) had the opportunity to visit Thailand in 2023, providing a chance to review the myriad of innovations that are consistently emerging in this specific retail market. Thailand, particularly Bangkok with its state-of-the-art stores like The Mall Group's Emquartier, is renowned for an exceptional focus on customer service and offers valuable insights and lessons for European retailers.

In an era where customer loyalty is increasingly crucial for department stores, the approach of Central Group in Thailand stood out. They have established a business unit with its own profit and loss accountability, solely dedicated to cultivating customer loyalty. This initiative extends well beyond the confines of their own operations, presenting intriguing elements that could be of interest to external observers.

Therefore, we explore in this article Central Group's business strategies, focusing on their main flagship stores - Central @ CentralWorld and Central Chidlom. These establishments are integral parts of a larger ecosystem where loyalty is not just a concept but a tangible, profitable asset. This strategy enhances Central Group’s engagement with its customers and strengthens its relationships with brand business partners.

Introduction to Central Group

Just like many other retail giants, such as IADS’ Thai member The Mall Group,  Central Group's origins are surprisingly humble. The journey began in 1925 when Tiang Chirathivat, hailing from Hainan Island, established a modest shop on the outskirts of Bangkok, specializing in basket sales. Recognizing the potential in Thailand, he soon partnered with his son, Samrit, to open a more centrally-located store near the present-day Mandarin Oriental hotel in Bangkok. There, they expanded their offerings to include books, magazines, and a variety of general merchandise.

In 1956, they made a significant leap by opening Thailand's first and largest department store at that time in Wang Burapa in central Bangkok (this location has since closed). Central Chidlom, the first full-scale department store in Thailand, opened in 1974, encompassing 11,000 square meters. Originally a four-floor establishment, it was rebuilt after a 1995 fire and reopened in 1998 with seven floors.

Central Group has mirrored global corporate strategies by understanding the importance of real estate control. This led to the establishment of the ‘Central Pattana’ subsidiary in 1980, focused on development. Their inaugural mixed-use project, featuring retail, private apartments, offices, and hotels, opened in 1982 on 31,000 square meters in Ladprao. At the time, it was Thailand's largest shopping mall, including a department store that remains the most successful in the Central Retail network to this day.

Expansion and scaling up were achieved through acquisitions (like Robinsons in 1995), diversification (such as Tops supermarkets and Powerbuy in 1996, and the Park Hyatt hotel in 2017), and international growth (with La Rinascente in 2011, Illum in 2013, KaDeWe group in 2015, Globus in 2020, and Selfridges group in 2022). This growth occurred alongside typical retail group developments: the launch of ‘The 1’ loyalty programme in 2006, the introduction of an e-commerce channel in 2013, and the opening of flagship locations like the Central department store in Central World (opened in 1990 as Zen department store, with the real estate acquired in 2002) and the Central Embassy mall in 2014, which includes a direct connection to the Central Chidlom department store and the Park Hyatt hotel.

Today, Central is a conglomerate composed of three direct business units: Central Retail, Central Pattana, and Central Plaza Hotel. It owns The 1, Central Insurances, Grab Thailand, KaDeWe, Illum, and Globus. Operating in over 3,700 locations and with branches across more than 7 million square meters of retail and commercial spaces, including 84 department stores, the group is supported by 80,000 employees and serves 30 million loyal members.

Visiting Central @ CentralWorld

CentralWorld, Thailand's ninth-largest shopping complex, encompasses not only 550,000 sqm of retail space but also houses a hotel and an office. Previously known as the World Trade Center, it was acquired by Central in 2002, strategically positioned to complement the nearby luxury Siam Paragon mall. CentralWorld, which targets the middle-class demographic, underwent significant changes, including the transformation of its Central department store. This store, formerly named ZEN, was completely revamped following a fire in 2019.

Notably, CentralWorld was home to the Japanese department store Isetan until 2020. This influence is evident in the food court, which exudes a distinct Japanese ambiance.

The Central department store spans seven floors, covering 50,000 square meters, and serves as a model for new store concepts across the nation. A unique aspect is the integration of sustainability messaging with fragrances throughout the store, enhancing the shopping experience with pleasant scents.

The ground floor is dedicated to beauty and fashion, featuring accessible luxury brands such as Sandro, Maje, Vivienne Westwood, Veja, Etude House, and Sunay. The layout includes red carpet walkways and well-presented brand signage, creating an upscale atmosphere. This floor is also a hub for temporary installations, like the prominent Seiko watches stand observed during the visit.

The first floor showcases women's shoes, jewelry, and designer clothing, with brands like Paul Frank, Steve Madden, and Nine West, also available in the Siam Paragon mall. Unique features of this floor include a second-hand stand, Komehyo, in partnership with a Japanese company, and a dedicated space for Thai fashion designers.

On the second floor, shoppers can find women's accessories and ready-to-wear items from Marks & Spencer, which includes a small food section. However, the lack of windows on this floor limits natural light, making some areas, like the lingerie section, feel crowded and enclosed.

The third floor is dominated by sportswear, divided into brand-specific areas, suggesting a concession-like operation. It also features denim, luggage, gifts, and a Muji store.

Men's casual and formal wear, along with watches, are located on the fourth floor. This level is spaciously designed to showcase both local and international brands such as Wrangler and Polo. Additionally, it houses a barber shop and cafes near piano displays, offering a unique blend of services.

Children's products are the focus of the fifth floor, where the loyalty programme is prominently advertised. This area includes child-friendly facilities like arcade games (that were not operational during the visit). Facilities are very interesting: baby changing rooms and kid’s toilets are extremely well designed and user-friendly, in addition to smartly-presented reminders of all the F&B offering available in the store. In comparison, it was very strange to see that the cash desks were rather difficult to find, and not particularly tourist friendly.

The sixth floor is dedicated to home decor, offering full-priced merchandise in a spacious and inviting environment. This floor features a food court designed to mimic Bangkok's street dining ambiance, strategically located near the cash registers. The ventilation system effectively prevents food scents from permeating the floor. This level also emphasizes the group's sustainable practices, through material explanation and encouragement to eco-friendly gestures.

The last floor houses an outlet for home and decor items. The layout is clean and well-organized but lacks decoration. Given the view from the windows, it is also very surprising that this space is not used for other purposes that could make the most of its potential.

Each floor of the Central @ Central World department store is seamlessly connected to the mall, with entrances opening onto promotional stands offering discounts on products relevant to each floor's category.

Visiting Central Chidlom

Central Chidlom, a venerable establishment in the company’s network, predates its high-performing counterpart, Ladprao, by eight years, having opened its doors in 1974. This iconic store encompasses seven floors, which, at the time of our visit, were undergoing extensive renovations planned to last two years.

The ground floor is dedicated to cosmetics (including Buly) and accessible luxury items, including brands such as DKNY, Calvin Klein and Longchamp. The accessories section exudes a luxurious ambiance, contrasting with the rest of the floor which presents standard brands commonly found in other retail locations.

The first floor is dedicated to women's ready-to-wear clothing, accessories and jewelry, including a local Thai fashion section called Thai Thai, a Marks & Spencer store, and mid-range brands such as Tara Jarmon, Maje and Sandro (which are displayed in the “luxury” section in Central @ Central World). Additional amenities on this floor include a click-and-collect area, a dedicated cash desk for The 1 loyalty programme members, and direct access to the Central Embassy mall.

The second floor is a dynamic space focused on denim, sports apparel, and watches, where cleverly designed columns demarcate the various sections.

The third floor is dedicated to men's fashion, including luxury, as well as a Supersports section (a company owned by the group). The men's fashion area is well-executed with a classic style, though the brands are predominantly mainstream.

The fourth floor focuses on tech, home decor and furnishings, but not only. Amidst ongoing restructuring, this floor also accommodates hair care and high-end jewelry salons, as well as a mattress display. Despite a somewhat disjointed layout, the atmosphere retains a luxurious feel, and the expansive electro-domestic space invites browsing.

The fifth floor, dedicated to children, offers an immersive experience surpassing that of CentralWorld. It includes a changing room, a breastfeeding area, and personalized cash desks for each section. During our visit, lingerie and swimwear sections were being added due to the ongoing restructuring.

Finally, the sixth floor caters predominantly to tourists, featuring a Muji store and customer services. It also houses a food court, reminiscent of CentralWorld but with a more organized and compact layout. Muji occupies half of the space, with the food court taking up a third, and the remaining area dedicated to tourist items, luggage, and customer services. A lounge is available, although its signage is inconspicuous, making it challenging to locate without prior knowledge.

Interestingly, and surprisingly for any European customer, neither Chidlom or CentralWorld department stores featured visible anti-theft systems on the products sold at the time of visit, which suggests either total lack of it, or massive use of RFID tagging to prevent fraud.

Central’s vision: be the “central of life”

When examining the mission of Central as presented on their website, their objective is manifestly defined: they strive to be the 'central of life.' This goal is to be at the forefront of people’s everyday experiences through a comprehensive ecosystem encompassing physical stores (as exemplified by two case studies), an online shopping platform, and superior customer service. A critical component in materializing this vision is their loyalty programme The 1, which offers a fascinating subject for analysis.

Predominantly, The 1 is unique to Thailand and has not yet expanded internationally. While each European department store operates its own loyalty scheme, sub-programs do exist to acknowledge Central Thailand's customers in affiliated stores like Selfridges.

Since its inception in 2006, The 1 has diversified beyond conventional retail, encompassing food specialty stores, hotels, banks, and offices. A significant milestone was the launch of a dedicated app in 2020, followed by the introduction of a top-tier membership category in 2021 and an extension into the restaurant sector in 2022. Importantly, The 1 is designed to be a profit center, which is why the whole programme needs to be profitable.

Presently, the programme has garnered over 20 million members (with 8 million active annually) and circulates more than 10 billion points across various partners, including notable brands like Toyota, Adidas, and even hospitals or gas stations. The points system is designed with location-specific variability; for instance, Marc Jacobs purchases accrue different points based on whether they occur in a Central Department Store or an offsite franchise.

The primary strategy for profitability focuses on partnerships rather than solely on Central’s in-house businesses, such as Central or Robinson Department Stores. Regarding total sales volume generated through the program's ecosystem, approximately half derives from external partners, with the majority of the remaining points being utilized internally.

The 1's privileged class signifies a premium tier for members who spend over THB250,000 annually (approximately €6,500). This group, consisting of about eighty thousand members, contributes significantly to the loyalty scheme's revenue, generating about one-fifth of the overall sales. This segment predominantly utilizes partnership credit cards and dedicated apps, which facilitate customer engagement through inspiring content, serving as platforms for offer discovery without necessarily concluding transactions.

Demographic analysis reveals that the program's user base mainly comprises Generation Y (45%) and X (35%), with a notable presence of Generation Z (11%). Predominantly female (62%) and residing primarily in the Greater Bangkok area, the programme evidently caters to an affluent clientele. Advanced CRM techniques enable customer segmentation and identification through various models, such as life stages or lookalike propensities.

Consent management is centralized under The 1 programme, which also plays a pivotal role in enabling cross-channel acquisitions between business units. The programme also tracks the types of credit cards used in transactions, including those from private banking, thereby providing valuable customer insights through comprehensive dashboards available to brands. Current initiatives include developing retail media programs for advertisers, aiming to automate processes both online and offline, albeit with limited traffic numbers. When comparing their vision of retail media to, for instance, the US models, they do not sell to advertisers a quantity, but rather the quality of the audience.

The top 20% of customers enjoy a 95% retention rate, with an annual spending growth of 8%. On average, members engage with around 4.8 product categories within the scheme. The offers encompass access to data, insights, rewards, and engagement solutions, maintaining a flexible approach that can be adapted internally to meet specific needs. Future plans include fully internalizing and white-labeling strategies, though there is no provision for training on how to best utilize these services, leading to varying success rates across different businesses like Central Department Store (burn rate: 200%) compared to Starbucks (<100%).

Looking ahead, key questions revolve around the potential applications of blockchain technology and Web3 for managing point currency supply-demand and real-time yield, coupled with the objective of simplifying the user experience to enhance clarity and ease of use for consumers.

Conclusion: Centralizing Life in the Digital Era

Central Group has realized exponential growth since its origins nearly a century ago as a humble Bangkok shop. Strategic expansions into real estate, hospitality, and online channels have enabled the diversified conglomerate to embed itself at the epicenter of daily living for Thailand's rising middle class.

Led by generations of the Chirathivat family, each evolution has built upon learnings from the last. As founding patriarch Tiang Chirathivat once wisely pronounced, "Progress lies not in enhancing what is, but in advancing toward what will be."

Indeed, Central Group has consistently looked ahead, cementing its positioning through acquisitions of prestigious brands and loyalty ecosystem cultivation via The 1 program. With over 20 million engaged members and partnerships spanning hospitals to gas stations, Central cannot be dethroned as Thailand's predominant retail centrality nexus.

What is interesting with The 1 is that they offer an alternative to all loyalty systems as they are currently designed either in the West or in the East, by mixing the need for profitability with a strong concern about customer privacy and rights. As a consequence, The 1 is an ecosystem that goes beyond Central Group’s own boundaries and becomes an asset as strategic as the other business units which are historical components of the group.

As the next generation pioneers ever-more immersive customer experiences through experiential stores, decentralized Web3 platforms and virtual reality, the company may realize the ultimate manifestation of its vision – “pioneering innovations that centralize life”.

Credits: IADS (Selvane Mohandas du Menil)