Moshi Moshi, Thailand’s cocktail of Smiggle, Daiso and Miniso all rolled into one, sees the current struggles of the Thai economy as a temporary constraint on its sales growth. It doesn’t, however, see it as a constraint on the company’s commitment to the new product development that is one of the key drivers of its success. This time of year is in between ‘occasions’, events or seasons to push out specific products, but no matter, stores are awash with new gadgets, stationery, health and beauty products, personal accessories, and household items, all with quirky, eye-catching designs that are just about impossible to resist, particularly as the prices are as sharp as you can get. Moshi Moshi is very much a data-driven retailer. It is also very much expansion-focussed and wants to have a physical store footprint in 60 of Thailand’s 77 provinces and municipalities by the end of 2024. In the second quarter, it opened 11 new locations, nine in malls and two stand-alone. This brought the total store count to 145 units, so far all in Thailand but it is unlikely to be long before it breaks out across the region.Although geographic expansion helps get the message out, the concept’s growth revolves heavily around product development: it is a concept that must be continuously kept fresh with products that address the needs of its customers. Thus, a steady stream of new items are constantly being sourced, and just as importantly new designs of pre-existing ones. Lately, the fronts of the stores have featured new stationery products such as bags, notebooks and pens — normally mundane, functional items but in this case, turned into works of art by creative designers. Other prominent items to get the attention of passers-by are a slew of products with licensed characters from the Peanuts cartoon, including handbags, totes, purses and T-shirts. Beauty products are also catapulted into prominence with the arrival of a whole suite of scent flavors and 14 new flavors of reed diffusers packaged under the Garlic brand, one of Moshi Moshi’s recently created sub-brands that has its own shop-in-shop at selected locations. Most of the store’s other merchandise is branded Moshi Moshi.The stores are typically crowded with tweens and teens, the brand’s key target group and there are often long lines at the register. The merchandise mix covers 12 categories: home accessories, bags, stationery, cosmetics, fashion accessories, beauty, apparel (primarily T-shirts and hoodies), snacks, toys, plush toys, IT gadgets, and ‘Etc’.A temporary momentum switchFinancial results recently posted for the second quarter and the first half of the year reflected several factors that slowed the company’s momentum. The good news is that they are likely to be temporary. Total operating revenue for the second quarter was 636.5 million Thai baht ($18.7 million), up 7.5 per cent on the second quarter of 2023. This brought revenue for the first half of the year to 1.33 billion baht ($39 millon), a 15.0 per cent increase on last year. The company’s goal is to regularise revenue growth at more than 20 per cent, and the slower second quarter threw a spanner in the works.The reasons for the sluggishness were a combination of more conservative consumer spending, and supply chain disruptions that delayed the arrival of orders. The latter problem has now been sorted according to the company leadership. Moshi Moshi management also noted in the analysis of its results that the bar had been set high because of base-year collaborations with Thai artists that put a rocket under sales during the first half of 2023. Without the addition of 40 stores during the year, things on the revenue front would have appeared somewhat disappointing, since same-store sales were down by 4.0 per cent.However, the gross margin percentage of revenues in the first half was 54.0 per cent, an improvement on 52.9 per cent in the corresponding period a year ago. That was attributable mainly to product mix: an increased proportion of sales were in relatively higher margin categories such as perfumes, diffusers and pet accessories. However, sharp increases in operating and financing costs crimped the bottom line. In operations, the 40-strong expansion in the store fleet meant higher spending on staff, rent and marketing activities. Even so, net profit grew by a shade over 20 per cent for the first half as a whole, to 206.59 million baht ($6.1 million). The percentage of sales attributable to wholesale, which consists of a gift and stationery store called OK Station and a wholesale outlet in Platinum Wholesale Mall, both in Bangkok, remained stable at 17 per cent. Store pipeline: is the cupboard getting bare?Thailand, Moshi Moshi sees the potential for about 170 stores by the end of the year. Many of the stores are in well-located malls operated by Central Pattana and its sibling company Central Retail. The problem is where to plonk down stores when the best mall locations are all taken, and that is a situation fast approaching. The potential for opening freestanding locations seems limited, not because the market isn’t there but because street locations are often impaired by poor pedestrian sidewalks, lack of parking and unfriendly weather. Even so, Moshi Moshi is undeterred: for example, it is experimenting with stores close to university campuses to capture one of its core customer groups. Longer-term, the answer lies in expanding outside of Thailand where there looks to be attractive markets in a number of neighbouring countries.Meanwhile, the macro picture is clouded. The company noted in August a continuing fragility in the Thai economy and retail activity, with slow growth in the first half of the year and a distinct fall-off in May. Rising tourism numbers over last year are an ongoing bright spot, but this has been partly offset by volatile weather conditions and the end of government stimulus programs. On the discretionary side of retail, department stores in particular had the brakes put on them, and along with hypermarkets, these are the principal anchors of many of the malls Moshi Moshi trades in.