Rising incomes are shaping new consumer trends in Thailand

26 February 2018 Consultancy.asia

As incomes in Thailand steadily rise so too does the demand for consumer goods, with an evolved ecommerce ecosystem and increased spending on indulgences two of several notable trends. 

Although Thailand’s growth is on a slower trajectory than that of its rapidly escalating regional neighbours, the country’s economy continues to chug along in an upwardly fashion, fuelled by a fast-growing affluent and middle-income demographic which is expected to eclipse Malaysia’s current figure in a little over a decade. And with the country’ rising incomes comes an increasing consumer demand, with the nation’s population of 68 million ranking among the most optimistic shoppers in the world.

Against this backdrop, the strategy and management firm The Boston Consulting Group conducted a survey with 4,000 Thai consumers over the age of 20 across all income brackets and evenly split between genders, identifying as a result five primary trends shaping the local consumer market; strong pockets of growth in consumer categories offering indulgences and experiences; a high level of brand loyalty; a social media driven ecommerce market, the influential growth of convenience stores, and; an empowered female population with significant buying power. Thai Consumers Are Spending More on Luxuries and ExperiencesThe study examined spending patterns across 51 product types, from appliances and clothing to alcohol and snack foods, classifying the respondents into five basic income groups – with those earning THB 15,000 or less a month categorised as aspirant or poor, and the emerging (THB 15,000 to 30,000) and established and affluent (THB 30,000 to 50,000 or above) categories constituting the middle- and affluent-class (MAC).

The results found that compared to their counterparts in other Southeast Asian countries, Thai consumers are more likely to spend and less inclined to save, with small indulgences like chocolate and ice-cream through to luxury products such as watches and jewelry attracting greater levels of spending in step with the growing discretionary means of the citizenry. These splurges big and small were noted across the MAC and non-Mac groups alike and, according to the respondents, were felt to be deserved due to the hectic and hard-working nature of their lives.

Also compared to most Southeast Asian consumers, the Thai demonstrate high levels of brand consciousness and loyalty – indeed, the highest in the region – and are far less likely to switch for better discounts or through promotions, with this allegiance to brands extending across category types including soap, beer and cosmetics. Of the consumers surveyed, 79% stated that they ‘look for my favourite brand and purchase that, as compared to just 40% in Vietnam.Social Media Sites Account for Many Online SalesThai consumers, however, will seek out bargains for their favourite brands online, where they can bring a haggling culture to the table and are especially savvy in respect to online shopping; knowing how to evaluate sales channels and understanding payment and delivery options. As a result, ecommerce is growing at double-digit rates in the country – almost equally among urban (27.2%), suburban (21.6%), and rural (20.8%) consumers – and roughly 40% of online purchases in categories such as phones, clothing and cosmetics are conducted through social media sites – with the Thai spending an extra hour online per day compared to the regional average.

Other findings include the growing influence of convenience stores as the fastest growing sales channel (registering a CAGR of 10% from 2011 to 2016 with a 14% to 19% of increase in share of total sales) and a female demographic with a considerable degree of purchasing power – the country achieving one of the highest rates of female employment for anywhere in the world (64%), such that Thai women now have disposable incomes relative to their collective male compatriots higher than other developed Asian economies.

The report states; “By regional standards, Thai women are well educated, well paid, and digitally savvy… For these reasons, female shoppers in Thailand, especially those women who work, are more likely to be the primary decision makers for household purchases, compared with women in other Southeast Asian nations, even for products such as alcohol and durables, which have not traditionally been viewed as women’s categories.”

Regionally

Thailand's growing demand for consumer goods and increasing taste for luxury is in step with greater trends across the Asian region, with two recent Bain & Company and KPMG reports both outlining a strong rebound in the luxury sector of China driven by the country's millennials, the latter projecting the young generation to become the biggest consumer spenders within five years.  

Excessive technology can be counter-productive in new retail, says S.POINT

05 April 2019 Consultancy.asia

Technological advancements have in recent years opened the door to ‘new retail’ – but an overreliance on technology can be counter-productive for retailers, argues Steven Jiang, Managing Partner of Shanghai-based innovation consultancy S.POINT.

Moving beyond just a buzz-word, the ‘new retail’ business model has outright boomed in recent years, most notably driven by Chinese e-commerce giant Alibaba. Striving for the seamless integration of offline and online shopping channels, together with a mesh of big data, logistics, marketing and distribution, the emergence of new retail has been undoubtedly enabled by rapidly evolving intelligent technologies.

But, as Steven Jiang, Managing Partner and Vice President of Shanghai-based product innovation consultancy S.POINT notes, not all enterprises have the strong technological genes of Alibaba. Jiang contends as such that enterprises in the new retail space can have a tendency to over-rely on technology, with its excessive application and misapprehension of the space producing effects counter to intentions.

“Developers with a misunderstanding of new retail are over-dependent on technology and believe that technology changes and solves everything, which is an extreme obsession with technology,” states Jiang. Rather, new retailers should as a starting point consider scenarios across the shopping and buying life-cycle and the combination of human and technological elements to create a seamless customer experience.Excessive technology can be counter-productive in new retail, says S.Point“New retail should pay particular attention to the sense of balance to connect technology with customers to create a better experience – as the application of excessive technology leaves no room for the development of the relationship with customers,” says Jiang. “The key lies in the insight into customer scenarios, and only by understanding and extending scenarios for their consumers can organisations have the chance of winning new retail opportunities.”

An MBA graduate from the MIT Sloan School of Management and former consumer and industrial goods consultant with Booz & Company, Jiang was a founding member of the China Industrial Design Institute and now serves as Managing Director for S.Point, a 1997-founded Chinese consultancy and Cordence Worldwide member with offerings in consumer research, product definition & design, product delivery, go-to-market strategy, and innovation capacity building among other provisions.

With respect to his contentions on new retail, Jiang points to the modern self-serving vending machines that have emerged in the past few years, which are very advanced in terms of technology but haven’t been entirely successful – separated as they are from consumer scenarios. “Consumers will not approach technology proactively,” he says. “Only when technology is made close to customers’ needs can it find its market.”

Noting that the center of shopping has shifted from the merchandise in traditional retail to customers in new retail, Jiang concludes: “Enterprises hoping to grasp new retail should understand traditional retail from the heart – i.e. consumers see the product first, then recognise the brand, and compare prices in the end. If consumers cannot see the product or understand the product it will be very difficult to push sales . . . the key to new retail lies in creating new and more scenarios to increase the value of the merchandise.”