From Brick-and-Mortar to Click-and-Purchase: Consumer-driven Innovations in Thailand
The wholesale and retail trade industry sits among the Top 3 contributors to GDP across the ASEAN-6 countries, and is the 2nd largest contributor to Thailand’s GDP.
Source: 2024/2025 ASEAN Enterprise Innovation Market Overview
The retail industry in Southeast Asia, particularly Thailand, is experiencing significant digital transformation driven by increased artificial intelligence (AI) adoption. As companies navigate this evolving landscape, they face both opportunities and challenges in leveraging AI and other technologies to enhance operational efficiency and customer experience. Recent discussions among industry leaders have highlighted several key trends shaping the retail sector's digital journey.
Source: 2024/2025 ASEAN Enterprise Innovation Market Overview
These include cautious AI implementation strategies, a renewed focus on cost reduction and efficiency, efforts to improve employee productivity through AI, the pursuit of personalised customer experiences, ongoing challenges in omnichannel integration, and the struggle to justify technology investments. As retailers balance these priorities, they are taking measured steps towards innovation while seeking tangible benefits and clear return on investment.
AI Adoption and Implementation: Many Thai companies are experimenting with or have implemented AI projects, with focus on starting smaller projects with specific use cases.
Cost Reduction and Efficiency Improvement: This has become a top priority for digital transformation projects in retail, along with usual focuses like omnichannel integration.
Employee Experience and Productivity: Several companies are first using AI internally before expanding to customer-facing applications.
Personalisation and Customer Experience: Retailers are looking to use AI and data analytics to provide more personalised experiences and product recommendations to customers.
Omnichannel Integration Challenges: While progress has been made, companies still face challenges in fully integrating online and offline channels.
ROI Justification for Technology Investments: There's a need for better ways to measure and demonstrate the value of these investments, sometimes through cost-reduction justifications rather than profit or revenue-driving justifications.
Source: 2024/2025 ASEAN Enterprise Innovation Market Overview
AI Adoption and Digital Transformation in Retail: Employee Experience and Productivity, and Customer Experience
Many retailers are actively experimenting with or implementing AI projects, with focus on starting small with specific use cases. Companies are exploring various AI applications, from customer service chatbots to internal knowledge management systems. However, the approach is cautious, with any starting with internal applications before expanding to customer-facing ones.
The retail sector in particular faces high employee turnover rates, and AI is supporting training and onboarding programmes for new employees, especially when there are many standard practices in place. Similar applications can subsequently be rolled out to legal, human resources departments.
This is in line with findings from the Google, Temasek and Bain's e-Conomy SEA report 2024 on the impact of incorporating Gen AI.
Several companies are using AI internally first to improve employee productivity and knowledge management. This approach allows them to test and refine AI applications before deploying them for customer use.
Personalization, Customer Experience and Omnichannel Challenges
Retailers are looking to use AI and data analytics to provide more personalised experiences and product recommendations to customers. While progress has been made in omnichannel integration, this remains a challenge for many, especially when dealing with multiple brands or international operations.
Gross Merchandise Value (GMV) from the digital economy has seen consistent increase in 2023 and 2024. The region's e-commerce sector is projected to reach GMV of US$370 billion by 2030, fuelled by increasing internet penetration and smartphone usage. This poses an opportunity for retailers to tap on these digital channels.
This digital shift is evident in the strategies of major retailers like Thailand's CP ALL and CP Axtra, which saw its online channels accounting for 11% and 13% of total retail sales in 2023 respectively. For CP Axtra, this was a 38% increase compared to the same period in 2022 with plans to grow this to 15% in 2024.
ROI, Cost Reduction and Efficiency Improvement: Justifications for Technology Investments
Cost reduction and efficiency improvement have become top priorities for digital transformation projects in retail. This shift reflects the need to rationalise technology investments made during the COVID-19 pandemic when the digital economy grew exponentially and fundamentally changed the way consumers behave - especially in areas of payment methods, last-mile e-commerce deliveries.
There are multiple layers of the retail technology stack that bodes different concerns.
For the foundational and core systems of cloud, ERP, CRM , POS and data management, the transition from legacy systems to modern solutions often incurs substantial costs, especially for traditional brick-and-mortar retailers who have to maintain different systems for offline POS and online channels, and integrating customer data from multiple sources. This underscores the financial implications of maintaining outdated systems versus investing in new technologies.
In the digital age, the additional layer of online channels, e-commerce platforms, and applications of predictive analytics pose an additional headache. Retailers also struggle to justify investments in new technologies, especially for online channels that may represent a small portion of overall revenue. There is a need for better ways to measure and demonstrate the value of these investments.
In conclusion, while AI and digital transformation offer significant opportunities for the retail sector, companies are taking a measured approach, focusing on practical applications that deliver clear value. The challenge lies in balancing cost reduction with improved customer experiences, all while navigating the complexities of omnichannel integration and ROI justification.
This article was originally written and posted by Valerie Tan.
