Coup, consumer confidence, creativity: Major challenges in Thailand

A sluggish economy, political uncertainty and human rights concerns. On the surface it seems like 2016 is going to be pretty tough for brands and the agencies that support them in Thailand.

According to the World Bank, growth in the country is expected to dip by 0.5 percent to 2 percent this year—largely due to falling exports, high household debt and, crucially, stagnating consumer spending.

2015 was hardly an economic success story either, with one of the few positives found in growing direct foreign investment. This, however, increasingly puts it at risk from market volatility in other countries—most notably China, where the World Bank notes a faster than anticipated slowdown will have several knock-on effects.

The most significant of these is likely to be in tourism where Chinese nationals provide 18 percent of all Thailand’s tourist inflows and contribute over 2 percent of GDP in tourism revenue.

A jittery economic outlook is also being compounded by political problems.

The coup of 2014 saw the ruling National Council for Peace and Order (NCPO)—led by prime minister general Prayut Chan-ocha—take power, with the prospect of its pledge to restore democracy still looking far off.

According to Human Rights Watch, “the junta has created a political system that seems designed to prolong its grip on power”.

It has also heavily clamped down on dissent in the media.

Last April the authorities suspended broadcasts by Peace TV and TV 24, accusing the stations of violating the NCPO’s ban on criticism of the military. In November, Fah Hai TV suffered the same fate.

As we will explore in detail in Wednesday’s feature, this economic and political backdrop is having significant consequences for brands and agencies.

As Sunny Hermano, Southeast Asia business development and integration director at Havas WW Bangkok, said: “There is no option of thinking ‘I think it’ll be okay, because in 12 months everything will come together’. There’s uncertainty. Everyone’s just waiting and the thing is, the longer it takes, the more the anxiety increases.

“No one really complains too much, because we all understand the situation, but everyone has this ‘wait and see’ attitude, you can see it reflected in people being more cautious in what they buy and what they do.”

Amid the gloom, one chink of light can be found around mobile, mobile advertising and its ecommerce potential.

The end of 2015 saw the conclusion of a long-delayed, but keenly fought, auction of 4G licences. This is considered a major step in supporting the government's digital economy policy, which is expected to receive 232 billion baht (US$6.42 billion).

As we will examine in detail in tomorrow’s On the Ground feature on consumer trends, Thailand is a mobile hotbed.

“Thailand leapfrogged straight to mobile as the primary device, and as people dwell longer on it, the mobile is increasingly becoming the [key] device,” said Pathamawan Sathaporn, managing director of Mindshare Thailand.

Stats from We Are Social show that 69 percent of Thais own at least one smartphone. Mobile connections, thanks to budget packages in the competitive telco market, as a percentage of the total population are at 122 per cent.

And with the realisation of 4G services, mobile’s dominance will continue, with a surge in rural users predicted.

The challenge, now, is how brands can best profit from the platform.

Mobile ecommerce is still very much in its infancy, but on the flipside that means there is huge growth potential.

The Thai ecommerce market is expected to more than triple in size to THB138.86 billion (US$3.94 billion) between now and 2020, and a fledgling data industry is starting to harness consumer insights to good effect.

This article is part of the On The Ground: Thailand series

Unsurprisingly, then, agencies are increasingly seeing more digital work land on their desks—although more often than not it is on a project-by-project basis.

While it is well known that Thai media consumption habits are unique, with Line and YouTube dominating social platforms, there are a number of technology hurdles the industry has to overcome.

“Adaptation of major technology or methods to the Thai market requires more lead time," said Mitsuyuki Nakamura, Southeast Asia president at Dentsu Media and CEO of Dentsu Media Thailand. "Most media consumed is local media, which still need to adapt. For example, the adoption of ad-serving technology, which requires a sound technical basis, remains at a basic level of usage for many brands.”

One area where many people may assume brands and agencies don’t need to worry is creativity.

Thailand has long been known as a creative powerhouse, but as we will report in detail on Thursday’s On The Ground feature, there are some concerns it might not be the dominant force it once was.

As Paruj Daorai, executive creative director at Leo Burnett Thailand, pointed out, it is hard to pinpoint any truly groundbreaking work in the last year. While much of the work might still be excellent, there is a feeling that it isn’t necessarily breaking new boundaries.

Satit Jantawiwat, chief creative officer at JWT Thailand, summed it up when he said: “In creative advertising, Thailand used to be a leader and in the top rankings of the world. However, when we entered the digital era, consumers changed so fast that agencies and clients have had a hard time catching up.”

Away from agencies, however, there is no shortage of talent across startups, SMEs and independent creatives. The challenge now for agencies is to see if they keep up, or recruit them.

“On the positive side, Thai people are seeing the value of creativity and design like never before,” Daorai added. “And in the long run this will serve the country well.”

Away from ad land, if Thai people are increasingly understanding the value of creativity, it’s fair to say Thai brands and organisations are rapidly acknowledging the benefit of PR.

Our in-depth look on Friday at the state of the PR industry in Thailand reveals a sector buoyed by digital opportunities, brand expansion and public affairs work.

Digital PR in particular was becoming an integrated part of most Thai PR strategies and programmes. He has witnessed a clear shift to digital PR among the agency’s clients, especially FMCG and brand-driven clients.

Over at Vero PR, MD Brian Griffith also points to the opportunities being offered by Thai brands, which are expanding across the region.

"One thing many people don’t realise is that Thai conglomerates are among the best, if not the best, at going regional," he said. "There are some very strong Thai companies that are expanding through the ASEAN (Association of Southeast Asian Nations) countries.”

With Thailand forecast to have the lowest domestic economic growth of all ASEAN countries, this regional expansion will be crucial as brands seek to combat the myriad of challenges on their doorsteps.

As our in-depth reports this week will show, Thailand is a mass of contradictions and change for brands and agencies at the moment. The economic and political outlook is causing concern, but can consumers’ mobile obsessions and new 4G technology provide new hope?

The country is awash with creativity, but are agencies well enough equipped to harness it and are brands brave enough to exploit it?

Mobile ecommerce should become a major success story for brands, but can the data capabilities and infrastructure keep pace with consumers?

These are just a few the issues we’ll be looking at with key industry experts, who are on the ground in Thailand, over the next few days.