This research examines the relationship between digital transformation, business performance, and the smart economy. The study uses a purposive sampling method with a quota approach, targeting business owners or managers from traditional retail businesses in smart cities across Thailand. 389 usable responses were collected and analyzed in Structural Equation Modeling (SEM). Digital transformation positively correlates with business performance. Moreover, both digital transformation and business performance positively impact the smart economy. The findings support that digital transformation enhances business performance and contributes to the smart economy in retail operations, improving customer experiences and fostering smart economies. This study advances the academic understanding of digital transformation in Thailand’s retail sector, confirming the relevance of the TOE framework. The findings provide practical insights for retail businesses seeking to enhance performance and integrate with the smart economy through digital transformation.