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28 Apr 2006


Bangkok Residents' Spending Behavior: Adjusting to Steep Oil Prices


In the midst of surging oil prices at home in line with the global oil market, it is undeniable that various businesses have felt the impact as a result of changing consumer spending behavior. KASIKORN RESEARCH CENTER (KResearch) has conducted an in-depth survey on "Bangkok Residents' Spending Behavior" using a sampling group of 505 respondents, April 10-23, 2006. The sampling group was represented by housewives, or those responsible for spending on consumer goods in each household, classified by age and monthly household income, regarded as key variables for spending behavior.

The findings showed some major points, i.e.

- Rising oil prices and higher costs of production are the main culprits for hikes in product prices. These two factors were cited by most Bangkok residents as the cause of steady increases in the prices of goods and services. Around 38.1 percent of Bangkok residents said that steep oil prices had pushed up the prices of products, followed by 21.2 percent of respondents citing that rising costs of production were to blame. In addition, the respondents also viewed that the political stalemate had something to do with their spending behavior. Most of them were adopting a cautious stance in their spending. As many as 79.2 percent of the sampling group had even changed their spending behavior because they had no confidence in the economy, feeling insecure in their lives and property and were tense amid the news barrage regarding political turmoil.

- Changes in spending behavior have adversely affected scores of businesses. In detail:

Businesses benefiting from the changing behavior:
  1. The sales turnover of finished/fresh food has been on the rise as most Bangkok respondents begin to shift to consuming ready-to-eat and instant foods. The business has earned handsome income as consumers become more thrifty, though they still regard cleanliness and flavor as equally important.
  2. House brand products As consumers' spending behavior shifts from brand loyalty in preference to price-consciousness, retailers' house brand products have become lucrative thanks to their cheaper prices. Evidently, a greater number of products in smaller packages have recently been placed on the market to respond to consumers who have adopted 'small is beautiful' or 'buy when necessary' attitudes in their purchases.
  3. Public bus business Bangkok residents who were respondents are beginning to adjust their behavior in using personal cars, which they use only when necessary and have turned to car pools from formerly using cars as a personal conveyance. In addition, respondents are turning to use public vehicle services more often, as well as inviting their family members to use public transportation more.
  4. Gas station business Respondents who have personal cars are turning to install LPG or NGV systems in their cars to save on fuel costs. Therefore, installing gas systems in cars is a business that is booming right now. From now on, LPG and NGV filling stations will have more customers than previously though their most common customers are public vehicles.
  5. Hospital business At present, public hospitals are swamped, and are seeing long queues. Therefore, some high-income earners have turned to private hospitals, even though they have to pay more to avoid long queues. However, when they have to save, the number of people are turning to public hospitals has increased. However, private hospitals that have quality and are economical have an opportunity to gain more customers where service is good and queues are not long.
  6. Herbal medical business Bangkok residents focusing on economy is another supportive factor for increased sales of herbal medicines, from formerly being dependent upon the attraction of being made from natural ingredients, not from synthesis. In addition, their progress in developing production hygiene and modernizing their packaging has also increased the sales of herbal drugs.

L Businesses that have been negatively impacted
  1. Restaurants and food outlets Bangkok residents in the sampling group are adjusting themselves by abstaining from or reducing the number of meals they have outside of their homes, including partying with friends. This means that falling frequency of meals at restaurants and food outlets.
  2. Soft drinks, alcoholic beverages, etc. are being impacted by consumer thriftiness in consumption of these goods. In addition, campaigns on reducing the consumption of alcoholic beverages for safer driving, and hikes in soft drink prices due to rising sugar prices leads to the expectation that producers of these beverages will get impacts rather substantially.
  3. Clothes and jewelry business including high-value goods such as cars, large electrical equipment, etc These are the goods that Bangkok residents in the sampling group are reducing purchases of, or postponing purchases indefinitely. Moreover, the sales of high-value imported goods are falling because respondents are turning more to the use of locally produced goods, or second-hand goods at cheaper prices.
  4. Tourism business and service businesses that are related to tourism The behavioral adjustment of Bangkok residents in the sampling group has affected the revenues of many tourism and related businesses because the number of the travelers has decreased.
  5. Beauty parlors Due to thriftiness among most Bangkok residents, 14.1 percent of respondents will reducing or refrain from using services at beauty parlors. Some of the sampling group have reduced the frequency of their visits to beauty parlors. While others turned to buying equipment to beautify themselves at home. Right now, such equipment can be bought easily because it was distributed widely in ordinary shops and prices are not high.
  6. Cinemas, concert and entertainment venues These businesses are being affected by the belt tightening of customers in reducing their frequency of patronage to such venues.
  7. The supplementary food for good health Supplementary foods are typically thought of as an extravagance. As a result, they are among the first to be deleted from the shopping lists of customers. If there is a problem with household economy, or the economic problems are affecting the household unity, supplementary foods will be impacted greatly.
  8. Lottery Although the majority of Thai people like to gamble, the sales of lottery tickets have dropped when there was a lack of confidence in the economy. The money spent in any kind of gambling business tends to decrease. That will affect the related entrepreneurs.
  9. The Sangkhaphan shop business Due to the fact that the Bangkok sampling group has reduced their merit-making and charitable donations, it has affected on the sales of monks' utensils ('Sangkhaphan') and other businesses related to making merit such as restaurants that prepare food for offerings to monk in the morning. Besides this, the financial donations that were being given to many temples have decreased accordingly.

The problem of expensive oil prices has been hard to avoid because other prices have been adjusting upward in accordance with oil prices in the global market. The Bangkok sampling group hopes that the government will launch measures to decrease the impact of high fuel prices. And the top-five ranked measures hoped for include the control of price gouging by entrepreneurs, fixing the price of all public utilities while oil prices remain high, improving/increasing the services of public buses, reducing income taxes and helping producers to decrease their costs of production. They hope that if the government controls these seriously, it will relieve the detriment of the economic crisis that is occurring at the household level considerably.