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12 Jan 2023

Econ Digest

Retail business in 2023 expected to grow 2.8-3.6% amid challenges of cost and purchasing power


        KResearch views that retail sales in 2023 will see continual growth in line with economic conditions and consumer purchasing power, but still face multiple challenges. In 2023, the retail market is expected to expand by 2.8-3.6%YoY, thanks to the return of foreign tourists, rising product prices in line with production costs, the government's “Shop with Payback” scheme, and the stimulating effect of the country’s upcoming general election. All of these factors will likely boost overall retail sales, especially in the first half of next year. For the second half of 2023, attention must be paid to the economic stimulus measures and policies implemented by the new government amid the rising cost of living, and the fact that consumer spending power has yet fully recovered. Despite a bright outlook for continued retail growth in 2023, retailers remain cautious and face numerous challenges that will have varied effects on the retail business recovery in each segment.

  • Segments projected to expand well compared to other retail segments are department stores and convenience stores after a big contraction in 2021-2022 due to the COVID-19 outbreak. Supermarkets, especially those located in department stores, are expected to grow at the rate close to that of 2022.
  • Segments expected to see continual growth but at a slower pace due to the high base in 2022 is local brand retail businesses jointly invested in by large business operators and E-commerce, which have accelerated at a double-digit rate during the COVID-19 pandemic.
  • Segments expected to face tough competition are hypermarkets or discount stores, as retailers continue to operate cautiously by focusing on consumers with moderate purchasing power despite benefiting from the sales of consumer goods; and grocery stores, which continue facing difficulties in achieving sales due to competition with large business operators, especially in terms of prices.

        KResearch views that the retail business in 2023 will continue facing high costs and tough competition, especially in the domestic retail market where overall consumption has not increased significantly. In the short-term, retail businesses may recover or change depending mainly on economic conditions and domestic purchasing power. Looking ahead, the retail business model or landscape will likely shift as Thailand’s demographics become a complete aged society, the birth rate declines, and technologies that will change consumer behavior and business operations in the future.

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