Retail sector reports cautious spending amidst economic headwinds

 

Thailand’s retail sector is facing a challenging environment, with consumer spending subdued by economic uncertainties and high household debt, according to the Thai Retailers Association.

 

While the industry benefits from the influx of foreign tourists, particularly those from the upper-middle class, overall consumer confidence remains fragile.

 

Nat Wongpanich, the association’s president, acknowledged that the retail outlook is less optimistic than anticipated. Factors such as slower-than-expected economic growth, declining investment and soaring household debt are impacting consumer spending. The recent government relief measures, including the 10,000 baht distribution, have not provided a significant boost to the economy.

 

The recent floods in the North and South as well as global economic uncertainty, which is being exacerbated by geopolitical tensions, are dampening consumer confidence.

 

“The retail sector, valued at over 4.4 trillion baht, has the potential to drive economic growth,” Nat said. “However, this requires strong and consistent government support, including accelerated budget disbursement to stimulate both domestic and foreign investment, and measures to encourage domestic consumption.”

 

 

 

          Focus on high-spending tourists

Nattakit Tangpoonsinthana, chief marketing officer at Central Pattana, noted that spending by middle-class and upper-class customers, including high-spending foreign tourists from Hong Kong, Taiwan, Singapore, and India, is a significant driver for the company's flagship CentralWorld shopping centre. These tourists typically spend 2.5 times more than domestic consumers.

 

“The return of Chinese tourists, particularly high-spending visitors, has been a significant boon,” Nattakit said. “Combined with our focus on attracting high-end customers, we are experiencing positive traffic growth.”

 

          Tourism revenue falls short of target

Voralak Tulaphorn, CEO of the Marketing Group at The Mall Group, highlighted the importance of the year-end festive season in driving consumer spending. The company has implemented various promotional campaigns and introduced unique attractions, such as the “Butter Bear” and “Moo Deng”, to attract customers.

 

“Thailand has the potential to become a world-class tourist destination,” Voralak said. “Our unique culture, cuisine, and festive atmosphere are major draws for international visitors.”

 

However, consumer spending on fashion and luxury goods remains cautious, with most consumers opting for essential items like gifts, electronics, and food.

 

 

          High-quality tourists boosting spending

Wallapa Traisorat, CEO and president of Asset World Corp. (AWC), noted a significant increase in visitor numbers at Asiatique The Riverfront, particularly from Chinese tourists. The company is experiencing strong occupancy rates in its hotel business, reaching 70% in the last quarter compared to 60% in the same period last year.

 

“The influx of high-quality tourists from Australia, the US, India, Japan, Hong Kong, Korea, and China, who account for 10% of our international clientele, is driving significant spending,” Wallapa said.

 

           Cautious consumer spending

Chakrapol Jantawimon, managing director of Nanyang Marketing, observed that while consumer traffic is increasing, spending remains cautious, particularly on luxury goods and fashion items.

 

“Consumers are prioritising essential purchases and saving for travel,” Chakrapol said. “We are witnessing strong demand for gift items, electronics, and food, particularly for the upcoming New Year celebrations.”

 

          Tourism revenue misses target

Thienprasit Chaiyapatranun, president of the Thai Hotels Association (THA), estimated that foreign tourist spending in 2024 would reach approximately 1.5 trillion baht, falling short of the Tourism Authority of Thailand's (TAT) target of 1.92 trillion baht.

 

Tourism and Sports minister Sarawong Thianthong reported that Thailand had accumulated 1,573,080 million baht in tourism revenue from January 1 to December 15, 2024. China, Malaysia, India, South Korea, and Russia were the top five source markets.

 

The ministry further reported that cumulative domestic tourism revenue reached 910,984 million baht, resulting in a total tourism revenue of 2,484,064 million baht. This falls short of the government's ambitious target of 3.5 trillion baht, which included 2.3 trillion baht from international tourism and 1.2 trillion baht from domestic tourism.