Despite a global economic slowdown and a possible looming recession, consumer confidence remains high in Thailand, according to research by Nielsen.
The report found that 57% of Thai consumers felt better off than five years ago and there was 4-5% growth in sales of fast-moving consumer goods (FMCG) in 2018, a rebound from a significant decline in 2017. Export growth saw 7.2% growth, tourism 9% and government investment 5%.
But Thailand saw the slowest growth in disposable income over the past five years (14%) in Southeast Asia, behind the Philippines (22%) and Singapore (23%).
Some 23% of Thais say they have extra money to spend on non-essential goods.
"Even with an economic slowdown, GDP is going to continue to grow, but we may see a two-stream economy, where the rich get richer and the poor get poorer," said Vaughan Ryan, managing director of Nielsen Southeast Asia. "We're probably not going to see double-digit growth like in the past, but we can expect healthy growth in lifestyles with people spending more on consumer goods."
Fuelled by urbanisation, many smaller provinces in Thailand contributed heavily to growth in consumer spending.
The FMCG market grew 5.6% in rural areas in the fourth quarter of 2018, a year when the areas outside Bangkok saw much greater growth rates for FCMG than those inside the capital.
Nielsen pointed to 20 "large middleweight" regions (areas with populations of 1-5 million like Chon Buri and Chiang Rai) that are expected to see rapid urbanisation and growth. These regions are expected to grow 62% in population by 2025, adding an average of 1.1 million people each.
Household goods saw 5.8% market growth and the personal care market grew 8.2% from October 2017 to September 2018, compared with 0.8% and 6.6% shrinkage respectively from October 2016 to September 2017.
Consumer lifestyles in Thailand have been changing with increased demand for convenience. The number of convenience stores grew from 12,600 in 2015 to over 15,000 in 2018. This dependency on convenience stores has been driven by bad traffic, smaller households, rapid urbanisation and evolving gender roles.
"We are going to start facing more traffic congestion in other cities like Chiang Mai, Phuket and others, but it also brings opportunities to the consumer sector," said Somwalee Limrachtamorn, managing director of Nielsen Thailand. "We will see more women as decision-makers for choosing products, while women's average income starts to get higher than their male peers'."
Thailand's e-commerce market still makes up less than 1% of the FMCG market, but online shopping is only becoming more popular.
Some factors inhibiting the growth of e-commerce are the maturity of some of the online retailers, consumer trust, logistics and postal reliability.
"Thai e-commerce will have to be different than a country like Singapore, where traffic is not as bad and logistics are better," Ms Somwalee said. "1 out of 10 Singaporeans buy groceries online, but Thais probably wouldn't want to risk having their meats sitting in traffic in a motorbike for a long period of time."
In general, consumers in Southeast Asia lack trust in online retailers and have high return rates for online products.
Thailand's ageing population will have a considerable effect on consumer habits, affecting advertisers, retailers and manufacturers.
By 2025, nearly 40% of the population will be over age 50, a total of 27 million people, up 3.7 million from the current figure. Services like home delivery and design features like easy-to-open packaging will expand to cater to this market.