Thailand's Opulent Evolution As The New Darling of the Luxury Market | Eye On Asia

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Thailand's Opulent Evolution As The New Darling of the Luxury MarketImage sourced from Freepik

Europe, the US, and East Asian powerhouses like China, Japan, South Korea, and Singapore for Southeast Asia have traditionally dominated the world of luxury shopping and are home to renowned global luxury brands. However, recent years witnessed a shift in focus from the big luxury brands towards new markets to strengthen resilience and diversify, especially in Southeast Asia, driven by recent global economic upheavals, including inflation, the pandemic's effects, and falling prices for luxury stocks. 

Enter the new darling Thailand, a newcomer to the luxury market landscape. The country quickly became a front-runner for luxury companies vying to establish themselves further in Asia with its interesting consumer demographics. 

While Southeast Asia is often overlooked in discussions of luxury markets, the region recently experienced a rise in the sector, particularly in Thailand, as brands seek new avenues for growth amid slowdowns in growth from primary markets due to various factors, but mainly because of the post-pandemic effects, which led to the sector's decline in one of its powerhouse markets, China. 

It became evident by 2022, when Chinese consumer spending accounted for an estimated 17% of the global luxury market, representing a decrease from 21% in 2021. China's personal luxury goods market experienced a double-digit decline, approximately 10%, in its annual growth rate, marking the end of its five-year growth streak.

This shift, however, has been well-met by Thailand. For years, the country has been poised to cater to affluent consumers with its world-class luxury malls, a trend that the pandemic lockdown only fueled, leading to a growing demand for luxury items. Post-pandemic, the retail business experienced a resurgence as multiple mega luxury malls opened in 2023, further enticing luxury brands to explore Thailand's opulent landscape. In 2022, one of its known luxury malls, Siam Paragon, saw a 50% year-on-year increase and surpassed the pre-pandemic levels of 2019 by more than 200%. By 2023, it had even surpassed Singapore in the luxury market size. This remarkable growth positions Thailand to aim for the coveted status of being the top luxury shopping destination in the region. Local consumers' demand and preferences played a big part in this rise, which can be felt both in retail and online. 

In actuality, the emergence of Thailand may have contributed to the increase in spending power in the market. About 30% of the Thai population has a strong propensity to consume luxury products and services. Pre-pandemic Thai consumers are accustomed to traveling and often sought luxury goods overseas given that Thailand's higher prices due to import duties, but this stood out as a positive sign of openness to investors to focus on Thailand's luxury sector. As brands diversified their brick-and-mortar establishments, more Thai consumers have stayed domestic when shopping. This openness can be attributed to how Thai consumers view luxury purchases, which are "self-rewarding experiences," and believe spending time in a shop provides a creative and inspiring atmosphere, making it a significant part of the luxury shopping journey. 

What's more interesting is that the profiles of Thai consumers are mainly driven by young luxury consumers, dominantly by Gen Z and Millennials, but even by the eldest of the Gen Alphas (15 or 16 years old) sponsored by their parents. As digital natives, they discover products and gather information online and are even more enthusiastic about online shopping or e-commerce and buy their goods from various online channels. Boosted by social media's effectiveness in marketing, Thai celebrity brand ambassadorships have profoundly influenced consumers, becoming significant regional stars. This is comparable to the rise of Korean celebrity ambassadorship, driving interest in luxury brands among Thailand's younger consumers who want to emulate their style and adopt the things they like due to meaningful and relevant ambassadorships, and as these consumers age, this behavior doesn't show any signs of subsiding. 

Diving into Thailand's luxury goods market, we can see how its unique demographics shape customer behavior. Furthermore, in terms of per capita income, each person in Thailand is expected to contribute 68.58 USD to the luxury goods market in 2024.  

Significantly, many senior executives and management in Thailand are women. Many businesses in every industry have female leaders. This means we see many ladies buying things such as watches and jewelry for themselves. These factors from cultural shift to a new consumer profile have proved their impact in a short periodFrom 2020 to 2023, Thailand's luxury sector had an aggregate growth of 400%, placing the country on many luxury brand's radar. It's projected that the luxury goods market in Thailand will bring in a revenue of 4.93 billion USD in 2024

While its local consumers have a strong footing for the luxury brands, another big contributor to its continuous rise will be coming from the tourists' expenditure once it has fully come back, bringing in a slightly different profile from before. Pre-pandemic, Thailand had over 40 million tourists annually and by 2023 have only reached about 25 to 28 million. It is anticipated that the rebound will happen once the Chinese tourists are back to the pre-pandemic level, combined with the traction of neighboring countries such as Cambodia, Laos, Vietnam, and Myanmar, that have discretionary spend. 

As the new darling of luxury, its emergence stems from a combination of factors, from shifting consumer behavior, demographic dynamics, and strategic investments in retail infrastructure. As Thailand continues to embrace its unique demographics it is surely well-positioned to continuously thrive in the luxury market and possibly be part of one of the mature powerhouse markets. 

Explore more of the emerging consumer behavior in Asia with Eye on Asia! Read From Roses to Self-Love: A Closer Look in the Shifting Perspective of Asian Consumers on Love Holidays and Singlehood or Singapore's Solo Act: Taylor Swift and Tourism Boost of Concert Economics. See you in our next one!

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