How Consumers Are Shaping Thailand’s Future
Steve Jobs, the former chief executive of Apple, made innovation the new norm because he believed in getting so close to consumers that they could tell him what they needed, well before they realised it themselves. In this age of ubiquitous information and disruptive technologies, insights into constantly changing consumer behaviour can help shape the strategies of the future – the right branding, packaging, pricing, marketing and distribution decisions – and determine an organisation’s local, regional and global competitiveness.
But who makes up this critical mass of consumers? More than half of Thailand’s population comprises what marketers call “middle-class and affluent consumers” (MAC). This rising MAC population is adding a new dimension to the economy – with increased consumer demand, increased competition, and improved quality of goods and services.
MAC presents an opportunity in specific categories such as consumer products, trade-up options, luxury goods and experiences. Companies that can capitalise on their brand strength will be well-positioned to increase their market share among these affluent consumers.
At Boston Consulting Group, we believe that despite the economic turmoil and political instability of the last five years, Thailand’s slow growth will soon accelerate, especially in certain consumer categories and in e-commerce. Our research with Thai consumers has identified five key trends that can guide companies seeking to expand their reach and share of wallet. They are as follows:
Strong growth in indulgence and experience categories. Our analysis shows pockets of strong growth in several product categories, reflecting rising affluence. For instance, small indulgences such as ice-cream, cakes, chocolates, fresh milk, juices, bottled water and crispy snacks increased their penetration of MAC and non-MAC households by 10-15% from 2013 through 2016.
As incomes increase, however, Thai consumers – particularly upper-income shoppers – are spending even more on experiences such as dining out and leisure travel, as well as on luxury products. When compared with their peers in other Southeast Asian countries, Thai people are more likely to spend and indulge – as also reflected in their higher debt levels.
Thailand’s consumer patterns are similar to what we’ve seen in other countries. Once consumers can meet their basic needs, demand for small indulgences increases first. Then, when earnings reach middle-income levels, luxury products and services become more popular and experiences gain momentum.
Brands matter, and consumers are loyal. Although most consumers in Southeast Asia are very price-conscious and will switch brands for discounts or promotions, Thai consumers are willing to pay more for many of their favourite brands. In fact, people in Thailand are the most brand-conscious and brand-loyal consumers in the region. Also, they’re loyal to brands in a variety of categories, from soaps and cosmetics to foods, beer and snacks.
Companies that recognise this characteristic can build and leverage brand equity to create strong consumer pull and loyalty. But at the same time, a brand must rank number one or two in a category in order to achieve strong loyalty.
Women have substantial buying power. By regional standards, Thai women are well educated, well paid and digitally savvy. Thai women aged 15 or older have one of the highest employment rates (64%) of women in any economy worldwide. Their disposable income relative to Thai men’s is also higher than in other developed Asian economies. Thai women are also more likely than men to do research online (27% versus 21%) and buy products online (29% versus 18%).
Today’s Thai women are confident, liberated and independent – and they feel secure earning as well as spending their own salaries. For these reasons, female shoppers in Thailand are more likely to be the primary decision makers for household purchases, even for products such as alcohol and durables, not traditionally viewed as women’s categories.
New social media model drives e-commerce.About 40% of purchases by Thai consumers are digitally influenced, and consumers reported conducting 50-60% of their online research for a wide variety of products on websites and apps. They also know how to evaluate online and offline deals, understand payment and delivery methods, and recognise the differences among online platforms.
Online buying isn’t just an urban phenomenon: Urban (27.2%), suburban (21.6%) and rural (20.8%) consumers alike shop online because it makes a wide variety of products available to consumers with limited access to stores. In rural areas, small and medium-sized businesses also buy online because of the convenience. Still, retailers need an omni-channel strategy because many shoppers research and buy offline as well as online.
Convenience stores are shaping shopper behaviour. Driven by demand and an increasing number of outlets, convenience stores are the fastest-growing channel in Thailand. Consumers who shop in these stores tend to buy fewer items more frequently – and often more spontaneously – rather than doing a major weekly shopping trip. Moreover, the line between grocery shopping and convenience shopping is blurring.
Thai consumers plan to increase their spending at convenience stores at the expense of hypermarts and supermarkets. As a result, we will see convenience store brands allocate more capital to renovate and expand their facilities.
The future. These insights can help companies develop an effective strategy for making further inroads into highly promising markets. In view of these trends, companies will also be able to determine innovative product lines; offer differentiated experiences for the MAC market; strengthen brand equity and image; target women and their unique needs; and devise multiple channel strategies with emphasis on the growing relevance of e-commerce.
The modern consumer knows more, expects more and contributes more in making products and services more sustainable from economic, social and environmental perspectives. It is therefore critical to take the pulse of the consumers and the first step is always to know who they are.
Source: Bangkok Post