Nielsen
Jul 30, 2018

Shopping stimulus boosts Thai consumers' spending

But Thai consumers remain concerned about issues such as global and local economic uncertainties as well as job security.

Photo: AFP
Photo: AFP

Despite the political and economic turmoil over the last few years, Thailand continues to show enormous growth opportunities across many areas. Thailand’s economy expanded by 4% in Q4 2017, continuing the strong momentum shown throughout the year.

Such expansion came from government investment, a growth of private consumption (+3.5%) in tourism-related sectors, durable goods and passenger cars; as well as robust export growth (+11.6%). Inflation remained low despite a slight increase to 0.9% this quarter mainly driven by the higher prices of food and beverages as well as energy.

Thai consumers remain increasingly optimistic throughout 2017 compared to 2016, with the government’s recent tax-break campaign 'Shop for the Nation' occurring in November 2017 in an attempt to boost domestic consumption nationwide.  While consumers remain optimistic, the uncertainty surrounding the global and local economy continues to be the biggest concern of Thai consumers followed by job security and debt.

Thailand’s FMCG industry is yet to see a turnaround as a result of the 'Shop for the Nation' initiative with value declining by 2% this quarter mainly due to a continuous decline of alcoholic beverages and cigarettes with the increasing excise tax as well as a new sugar tax on specific non-alcoholic beverages.

Impulse and personal care categories however showed favourable growth year-on-year driven by new product launches.  Across retail channels, traditional trade continued to lose  momentum, while the convenience store channel has been the only format to show positive growth at 6% this year. 

Continuing urbanisation, on-the-go lifestyles as well as increasing growing ageing population are the driving forces behind the growth in proximity shopping and convenience format demand. The convenience channel still faces its challenges within lower sales per store due to aggressive store expansion continuing at 7% growth compared to last year.  Given the current challenge with shoppers’ lower spending, retailers and suppliers executed fewer campaigns and in-store promotions compared to last year in an attempt to drive efficiency and better margins.

Looking ahead, the government’s recent approval to raise the daily minimum wage across the country effective April 1, 2018 will not only help ease the hardships of workers burdened by a high cost of living, but also bolster household spending.

However, it is important to keep in mind that the hike will also increase labour costs to business, likely forcing them to pass on costs increasing the price of their goods and services. As a result, it is expected the government will need to control domestic prices throughout 2018.

Given the current income disparity between higher income consumers and the evolving middle class, it is likely that categories and innovations that focus on indulgence and experiential offering will see stronger growth appealing to the rising affluence of Thai consumers.  The continued government investment in public infrastructure will be welcomed by companies looking to expand their footprint across Thailand’s regions as improved distribution and logistics will improve supply chain efficiencies and open access to broader consumer groups.

Related Articles

Just Published

10 hours ago

Behind Spotify's new Southeast Asia campaign

EXCLUSIVE: Campaign talks to Jan-Paul Jeffrey, Spotify’s head of marketing, on the streamer's latest regional campaign for Indonesia, Thailand and Philippines.

11 hours ago

Tech MVP 2022: Sunil Naryani, Dentsu

MOST VALUABLE PROFESSIONAL: Chief product officer Sunil Naryani has been instrumental in elevating the product offerings from Dentsu and driving radical collaborations across market product leaders.

12 hours ago

Why purposeful creativity is more important than ...

Why do we still rush to come up with a once-in-a-lifetime brilliant stroke of genius that had zero impact on anyone’s life or business, and then proudly stand on a stage receiving accolades for our achievements? MediaMonks' APAC ECD ponders this question and more.

15 hours ago

Here's Google's plan to to help advertisers manage ...

David Temkin, senior director of product management, ads privacy and user trust at Google, who is leading the charge on preserving ad targeting and measurement while tracking restrictions loom, discusses these shifts.