Thai retail sees fragile spending as shoppers think twice before buying

Thailand’s retail sector is sending a clear signal that consumer spending power is under extreme strain, with shoppers increasingly thinking before they spend and prioritising value over brand loyalty, marking the end of broad-based growth across the board.

At a time when household debt has climbed to record levels, while both domestic and external risks continue to mount, especially from volatile energy prices and logistics costs driven by geopolitical tensions, the ongoing Iran war is emerging as a major flashpoint affecting economies worldwide, including Thailand’s. If these pressures persist, they are likely to weigh even more heavily on purchasing power and household consumption, with direct consequences for the Thai retail industry.

Nat Wongpanich, president of the Thai Retailers Association, said that in the short term, over the next 12 months, consumer spending power would remain fragile and contract further under the pressure of high household debt.

Data from the Bank of Thailand show that household debt remains above 90% of GDP. The situation in the Middle East has also pushed up energy prices and living costs. Even so, government stimulus measures and aggressive private-sector marketing campaigns are still helping to support consumption.

“In the short term, the government should urgently roll out measures to stimulate purchasing power, such as a co-payment scheme,” he said.

Over the medium term, in the next one to three years, Thailand’s GDP growth in 2026 is expected to come in at below 2%, with the recovery likely to be gradual. That recovery will depend on support from tourism, which remains the country’s main economic engine, infrastructure investment to accommodate future growth, and a rebound in the services sector.

In the longer term, over three to five years and beyond, the outlook for purchasing power will depend on the country’s ability to raise incomes, particularly through the development of a new economy driven by technology and AI, higher labour productivity, stronger workforce skills, improved quality of goods and services, and greater emphasis on Made in Thailand products. These factors will determine the long-term growth potential of the retail sector.

Thai retail is facing pressure on all sides. Beyond surging household debt, volatile energy costs and geopolitical uncertainty, the influx of substandard imported goods and the nominee business problem are also hitting Thai operators directly, especially SMEs, of which there are around 3.2 to 3.3 million nationwide.

“Retail should still grow in 2026, but at a slower pace, at around 2%, compared with Thai GDP growth projected at 1.6% to 2.0%. This is due to cost pressures, especially energy prices affected by the conflict in the Middle East, combined with purchasing power that has yet to fully recover,” he said.

Despite the many challenges, there are still some positive structural signals. The recovery in tourism is helping to boost spending in major cities and attractive travel destinations, with cumulative tourist arrivals since January reaching 8.5 million. Other supportive factors include growth in house-brand and value-segment products, expansion in omni-channel and digital commerce, and joint public-private campaigns to ease living costs.

Nat said consumer behaviour in Thailand was now clearly entering an era of “value-conscious consumption”, with shoppers placing more importance on value for money than on brand alone. Price and promotions have become the main factors behind purchasing decisions. Clear behavioural shifts include greater demand for house brands and second-tier brands, more advance planning of spending, a tendency to buy only when there are promotions, and wider use of omni-channel platforms to compare prices and value.

Even among upper-middle consumers, who still retain spending power, there is a growing trend towards more selective spending, with greater emphasis on experience and emotional value rather than buying in volume.

Over the next one to three years, Thai retail is expected to move towards “selective growth”, meaning growth concentrated in specific groups and segments rather than across the whole system, as in the past. The value and mass segments are likely to perform well as consumers place more importance on affordability amid higher living costs and household debt. As a result, house brands, affordable products and value-driven promotions are becoming the market’s main drivers.

Meanwhile, the premium segment is likely to be supported by spending from tourists and niche customers, especially in major tourism cities benefiting from the recovery in foreign arrivals. High-end customers still have spending power, but they are becoming more selective and increasingly focused on experiences.

Operators that adapt quickly, particularly in digital, data and efficiency, will gain a clear advantage. Using customer data analytics for personalisation, improving stock and supply chain management, and developing seamless omni-channel experiences that connect online and offline channels will help drive both sales and profitability over the long term.

Looking more broadly, Thailand’s economy is now at a turning point, shifting from a traditional model towards one driven by technology and data, sustainability and regional integration.

Retail businesses therefore need to accelerate adjustment in three key areas: data and personalisation to create tailored customer experiences, cost efficiency and supply chain resilience to improve performance and reduce risk, and sustainable retail to meet the needs of modern consumers who increasingly value sustainability.

“The key turning point for Thailand’s retail sector is not GDP alone, but the real income of households, which forms the foundation of purchasing power. If grassroots spending power does not recover, growth will remain only a short-term boost driven by festivals or promotions. Meanwhile, both large and small retailers continue to face pressure on all sides, especially SMEs, which are constrained by costs and access to technology. Upgrading Thai retail will therefore require cooperation between the government and the private sector to create fair competition and support stable long-term growth,” he said.

A new S-Curve: “Lifestyle & Value Integrator”

Nat also believes that, over the next three to five years, Thailand’s retail industry will move beyond the traditional model of simply selling products and evolve into a “Lifestyle & Value Integrator”, built around five core pillars that will form the sector’s new S-Curve.

The first pillar is Seamless Omni-channel & AI-Driven Commerce. This means not merely having both online and physical stores, but using AI to analyse data in order to deliver a personalised experience, allowing customers to shop anywhere, anytime, in a seamless and highly tailored way.

The second pillar is Retail-tainment & Experience Ecosystem. This will transform department stores and shopping centres from a “place to buy” into a “place to live”, with a stronger focus on creating engaging experiences and positioning retail spaces as lifestyle destinations that respond to every dimension of modern living.

The third pillar is Tourism & Cross-Border Retail. This aims to elevate Thai retail into a global “shopping paradise”, connecting tourist spending power with benefits and services that meet global standards in order to attract more foreign money into the economy.

The fourth pillar is Value-Based & Sustainable Innovation. This focuses on quality products with innovation and storytelling, combined with environmentally friendly production processes, in response to the growing trend of responsible and self-aware consumption among modern consumers.

The fifth pillar is Health, Well-being & Silver Economy Integration. As ageing society expands, health and wellness-related products and services are expected to continue growing, becoming one of the key drivers of the retail business in its next phase.

At the same time, the Thai Retailers Association has proposed that the government urgently introduce proactive measures to stimulate spending and strengthen the country’s competitiveness. These include an instant 7% VAT refund at the point of sale for tourists making purchases of at least 3,000 baht, a review of cuts to luxury import tax — currently 20-30% — to improve competitiveness against rivals such as Singapore, Hong Kong and Japan, and the pilot introduction of free trade zones in tourism cities such as Phuket.

These measures, it said, would help drive Thailand towards becoming the region’s “shopping paradise” and sustainably increase tourist spending over the long term.