At long last, Thailand’s economy finally seems to be firmly on the recovery trail. In 2023, the Thai economy is expected to expand at its fastest rate in five years, back when social distancing and mask protocols weren’t yet a part of the conversation. Thailand welcomes this recovery along with the return of tourism as quarantine measures were eased in May 2022.
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Pre-pandemic, tourism accounted for close to 20 percent of Thailand’s economy, with the government hoping this figure will rise to 30 percent by 2030. Thus, it is no surprise that Thailand had one of Southeast Asia’s worst-performing economies over the last two years as Covid-enforced travel bans devastated the sector.
Rising tide
According to McKinsey, spending power in Thailand is on the rise. They estimate consumption value in the country could hit USD 410 billion per year by the end of the decade, almost quadrupling the current figure of USD 120 billion.
Tourism will surely lead the charge, but that doesn’t mean it’s the only factor that will help retailers fill their pockets. More confident consumers spend more, and GDP growth breeds confidence, while revenge shopping after a couple of years of frugality will likely also play a role.
Though the explosion in eCommerce demand of the last two years may have slowed to some degree, the changes to consumer demands and even expectations are here to stay.
For a start, consumers increasingly consult eCommerce as a first resource when interacting with a retail brand, as evidenced by the number of eCommerce users in Thailand soaring from 11 million in 2017 to 20.7 million this year. According to Statista, this growth is expected to keep rising to almost 27 million by 2025.
The changes go beyond mere adoption though, they extend to how consumers expect to interact with brands.
The study from the Qualtrics Experience Management (XM) Institute, “2021 Thailand Consumer Trends”, found that 40 percent of Thai consumers expect to be able to resolve support issues through self-service, a step up in terms of digital experience compared to what most brands are used to offering.
In addition, this study found that price was far from the most important factor for Thai consumers, as 36 percent would prefer to buy from an establishment that treats them well.
Crucially, the same study found that only 15 percent want to resolve customer service issues in person, indicating just how high their expectations are for online experience. Issues such as returns and repairs, which many retailers are accustomed to handling in-store, now have to be handled with care and efficiency online, requiring a step up in digital skills for many brands.
Transform or die
Thai retailers clearly have a challenge on their hands, and while what they have to do is straightforward on paper, it’s harder to put into practice: digital transformation.
The Thai government is a big proponent of the entire economy going digital, hence digital transformation is indeed a key pillar of the “Thailand 4.0” plan.
Thai executives are increasingly aware of the need for digital transformation. A Deloitte survey of top executives in the country found that 95 percent believe digital transformation has been essential for their company to remain competitive.
Perhaps even more tellingly, 100 percent of the executives Deloitte surveyed in the consumer industry said digital transformation was critical for competitiveness, and 30 percent said digital transformation had made a “major impact” on their sector.
Retailers that embrace digital transformation at a rapid yet sustainable pace for them will reap the benefits of the rising tide in Thailand. Some firms have already made significant investments in this key area.
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Blueprints
Nothing worth having comes easily, and while strong GDP growth in Thailand is undoubtedly good news for retailers, they will have to work hard and smart to take full advantage of this economic prosperity.
Digital transformation is no longer a ‘nice to have’, it is now essential to a thriving, modern retail business. Fortunately for brands, there are blueprints for success.
Some of Thailand’s top retailers have long led the way in digital transformation, and they’ve only accelerated those efforts since the pandemic. Other retailers would be wise to follow their example, lest they sink amid the rising tide.
Author: Thai Son Nguyen, CEO and Co-Founder of SmartOSC