Thailand Ecommerce Landscape

Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region, valued at $900 million and is expected to increase its ecommerce business 12-fold to a value of $11.1 billion by 2025.

What does the attractive Thai ecommerce market looks like now and what can be expected in the coming years? ecommerceIQ shares ECOMScape: Thailand to provide a quick snapshot.

1. Lazada is the dominating marketplace, while others compete in niches

What differentiates Thailand from other markets in Southeast Asia is that one online marketplace – Lazada – has significantly advanced over its local ecommerce rivals. The traffic of Lazada’s two closest competitors WeLoveShopping.com and Wemall.com combined makes only around a quarter of Lazada’s monthly traffic.

Yet, that and the fact Lazada now has the support of Chinese ecommerce giant Alibaba, is not scaring off competitors. Korean ecommerce marketplace 11street is expected to launch in Thailand in time for campaign season, 11/11, in hopes to replicate its success in Indonesia and Malaysia. The group’s claimed annual gross merchandise value of $7 billion is 7 times bigger than that of Lazada Group, but will it manage to challenge Lazada in Thailand?

Deep pocketed conglomerates are also moving in to steal market share, such as Thai CP Group, which belongs to the richest family in Thailand – brothers Chearavanont, owns Tesco Lotus, Shopat24 and 24Catalog. The second richest man in the country, Charoen Sirivadhanabhakdi, this year bought BigC and Cmart (formerly Cdiscount). While Central Group, the operator of Central department stores and distributor of several tens of foreign brands in Thailand behind which stands the third richest – Chirathivat – family, owns online marketplaces Central.co.th, Robinson and Tops. All of the above mentioned retailers have both – offline and online stores.

Thailand Ecommerce Landscape

Despite Lazada’s dominance, competitors are not easily scared off, especially deep pocketed Thai conglomerates who want their share of etailer online market.

Fashion & Apparel is one of the most competitive online market segments. In Thailand, this category represents a healthy mix of local players like Pomelo and WearYouWant, regional players like Zalora, Reebonz and global brands such as Adidas and Uniqlo.

Thailand Ecommerce Landscape

The competitive Fashion & Apparel online market in Thailand represents a healthy mix of local, regional and global players.

Brand.com webstores are also gaining traction in Thailand, which is best observed in the beauty category. Brands such as Maybelline, L’OccitaneEstée Lauder and Kiehl’s in Southeast Asia embrace the ecommerce market boom and use the opportunity to sell on their brand web stores, marketplaces or through distributors to capture the widest possible audience.

Thailand Ecommerce Landscape

Beauty brands go all-in in Thailand selling their products online on their own webstores, marketplaces or through distributors.

2. Old school vs new kids on the block compete in C2C

Classifieds and consumer-to-consumer (C2C) marketplaces were the first ‘ecommerce’ businesses to operate and remain an important part of the online journey in Thailand. Three of the most popular C2C marketplaces – WeLoveShopping, Tarad, Pramool – were created around the millennium and are run by local companies. However, newer market entrants like Shopee, supported by Southeast Asia’s largest gaming company Garena, are on their heels.

Tarad and Pramool ecommerce sites can be accessed on desktops, while the newest competitors – Shopee, Blisby, as well as WeloveShopping – all have mobile apps, which rank among the top 10 most popular C2C ecommerce apps in Thailand. Since approximately 85% of online shopping outside the major metro areas in Thailand takes place through mobile, it is easy to see that the new kids on the block are disrupting traditional, desktop-first marketplaces.

3. Social commerce is driven by Facebook, Instagram and LINE

An ecommerce business model specific to Thailand is social commerce – merchants set up ‘shops’ on Facebook and Instagram where they post images and details of their products so online browsers can inquire about the product and other details to further facilitate the deal.

Thailand Ecommerce Landscape

Thailand is the leading country where half of online shoppers buy directly from merchants through social networks.

According to a PwC report, Thailand is the biggest social commerce market and around 50% of online shoppers purchase products through social networks. Therefore it was no surprise when this June, Facebook started testing social commerce payments in Thailand and later in August launched Facebook Shop, the first in the world.

Companies like Shopee are looking to lure merchants selling on social networks to its online marketplace with aggressive marketing by offering easy integration of their Instagram shops and reimbursing shipping, cash on delivery fees to sellers. Other players like LINE also have eyed this market segment. LINE Shop was created to utilize the wide audience of LINE messaging app and tap the social commerce market. Yet technical issues such as a requirement to upload merchant product catalogues on the app through mobile phones, as well as limited payment options through LINE Pay, has hindered the success of LINE Shop.

4. Cash is still king

Thailand is still a cash driven society and cash on delivery (COD) is the preferred payment method for 70% of ecommerce shoppers, making payments a bottleneck for faster ecommerce growth as many sellers cannot offer COD. There are various mobile wallets offered by telecom companies, banks as well as independent players but so far, none of them have quite caught on.

Thailand Ecommerce Landscape

Despite various mobile wallet providers, cash is still the most preferred payment method.

The large unbanked population and low trust in the security of personal financial details does not make the task of Thais adopting digital payments any easier. And though there has been a surge in fintech players, none really address the core issue. For example, LINE Pay accounts can only be linked with a credit card in Thailand, where just  3.7% use one to make payments. Mobile wallets and banks offering a top-up through either ATMs or special kiosks, defeats the purpose of an mwallet. Good news is that there is an opportunity for a player to provide a convenient and easy digital payment solution for those without a bank account and/or credit and debit cards.

5. Fierce competition in logistics leads to price war

The ecommerce gold rush across all Southeast Asia has facilitated growth of startups who hope to solve logistics problems like next-day delivery and live tracking, and Thailand is no exception. The success of ride-hailing apps Uber and Grab has encouraged several startups to offer on-demand delivery services.

Thailand Ecommerce Landscape

The success of ride-hailing apps has driven several start-ups to offer on-demand delivery.

There are numerous companies who provide 3PL services and ensure a smooth last mile delivery. This means companies engage in price wars and suffer lower margins, if any at all.  

The packed logistics market is beneficial for marketplaces and merchants as they have plenty of delivery service providers with whom to negotiate a lower price.

Thailand Ecommerce Landscape

Numerous companies offer 3PL services and ensure last mile delivery driving down delivery costs for the benefit of marketplaces.

Click here to download the full, high-resolution version of ECOMScape: Thailand and join the ecommerceIQ network for first look at the next ECOMScape in our series.

Check out also ECOMScape: Indonesia

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Facebook’s new dynamic ad for retail highlights available inventory at nearby stores, and can be targeted to consumers who are most likely to visit, reports Marketing Land.

Facebook has been trying to help boost retailers’ online sales for a few years, but with brick-and-mortar stores still being the present, and in-store sales accounting for 92.5% of total US retail sales in Q2 2016, Facebook has been putting a lot of emphasis towards how it can aid the in-store front, converting people from phones to the checkout counter.

“For us solving for this mobile-to-store challenge is one of the biggest and most important opportunities for us to be spending mind share on,” said Facebook director of monetization product marketing, Maz Sharafi.

To help offline stores push more sales, and gain more ad budget, Facebook is introducing a new ad format that highlights available products at nearby stores, and targeting users who are most likely to go inside those stores.

Abercrombie & Fitch, Target, Macy’s and Williams-Sonoma are among the first brands that tested the new ad format. Facebook is calling the ads “dynamic ads for retail”.

How do Facebook dynamic ads for retail work?

Retailers can use the real-world version of the product to showcase, within a slideshow-like product carousel, what’s available in their nearby stores, as well as the distance to the nearest store and store-specific prices, which can change from one location to another.

To ensure product availability is accurate, Facebook is requiring participating retailers to update their store-specific inventory catalogs at least once every 24 hours.

The new ad-targeting option is the latest addition to Facebook’s push away from brands aiming their ads at specific audience profiles and towards satisfying businesses. Instead of a retailer telling Facebook the types of people it thinks should see its ads, Facebook will do the decision making and the execution.

Facebook’s store visit targeting ads will become available in the next month, but not to all retail brands. Retailers with stores in dense urban areas and multi-level malls will not be able to use the function, as Facebook would have a hard time tracking whether people in those areas are visiting a specific store, or just walking around in the area.

A version of this appeared in Marketing Land on September 20. Read the rest of the version here

Indonesian retail distributor company for medium-high brands, Mitra Adiperkasa (MAP), recorded profit growth of 78% to $3.5 million (46.3 billion IDR) from $1.9 million (26 billion IDR) in the same period last year. One of the reasons for this increase, as reported by Bisnis.com, is the company’s venture to ecommerce.

MAP, who has more than 150 brands under its management, launched its ecommerce site MAP eMall last year.

The company’s investment through ecommerce has created more productivity, efficiency and increased their profit margin – Corporate secretary of MAP, Fetty Kwartati

She also added that the achievement in the first semester of 2016 is also supported by strong consumer spending during the month of Ramadan. She claimed the increase in demand is also because the brand is getting more recognition.

According to Bloomberg, MAP profit until the end of the year is projected to reach $14.6 million (192.4 billion IDR), growing 415.36% from last year at $2.84 million (37.33 billion IDR). Revenue projection for MAP will reach $1.1 billion (14.19 trillion IDR), growing 10.59% year-on-year.

In the financial statements, the company state that their net income until June 2016 has reached $502.2 million (6.66 trillion IDR), up 9.18% from $464.2 (6.1 trillion IDR) YOY.

The company’s revenue mostly came from retail and wholesale sales worth $462 million (6.07 trillion IDR), an increase of 9.56% from the same period the year before $421.5 million (5.54 trillion IDR).

A version of this appeared in Bisnis.com on August 3. Read the full article in Bahasa here.

A new study from Payoneer shows which marketplaces Chinese e-retailers sell on—and what strategies they’re employing on those platforms to expand internationally. Online marketplaces are gateways for Chinese retailers and brands to reach international customers.

According to Payoneer Inc., 62% of e-retailers in China sell goods on marketplaces operated by Amazon.com Inc., the most popular among other international shopping portals, such as eBay Inc. and Etsy Inc.

Of the 62% of respondents selling on Amazon, 91% sell on Amazon.com in the United States. Among the Chinese merchants who don’t currently sell through Amazon, many plan to join. 26% say they want to sell on Amazon.com, the site for US consumers; 23% wish to join Amazon’s European sites and 12% want to sell through Amazon.co.uk, Amazon’s UK site.

Sellers who until a few years ago could barely reach buyers across their own country, can now utilize marketplaces to reach buyers across continents.

Why do Chinese sellers prefer Amazon?

Sellers also cite high traffic volume, local customer support and access to multiple markets for choosing Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide.

Selling on marketplaces comes with its challenges, too, the biggest being stiff competition. Nearly half (45%) of respondents cited increasing numbers of Chinese sellers as the biggest challenge to selling on online marketplaces. Other common challenges marketplace sellers in China face: high fees and low marginal revenue (27%), following strict rules (16%), tax and trading policies of different countries (11%) and unstable payment methods (2%).

A version of this appeared in Internet Retailer on August 1. Read the full story here

China is on the way to becoming the world’s largest e-tailing market – valued at $590 billion in 2015 – as online shopping has become a highly social activity. Marketplaces such as Taobao have recently developed new apps and services in order to reap the benefits of this untapped opportunity.

Wary Chinese consumers don’t swallow advertising at face value and they don’t take vendors for their word—they check the internet for product reviews, swap links to favored products and seek out third-party opinions, especially those in their social groups. According to a recent McKinsey report, two-thirds of China’s consumers cite recommendations from families and friends as the most important factor in purchasing decisions. In the US, only one out of three people say the same.

In China, shopping is also sharing

Social commerce trend is so pronounced in China that Alibaba Group, owner of China’s largest online marketplaces, insists it’s not so much in the ecommerce business these days as it is in the social commerce business. And since more sharing equals more sales, the company is doing everything it can to make it easier for users to interact with one another when shopping online—going beyond offering the standard ecommerce fare of user-generated product recommendations and ratings by establishing online communities, encouraging shoppers to share photos of their latest online purchases and even adding monetary incentives to encourage greater social participation.

The tip of the social-commerce spear is Mobile Taobao, Alibaba’s hugely popular mobile shopping app. With 369 million monthly active users, Mobile Taobao is “not only China’s, but the world’s largest social commerce platform” according to Jiang Fan, who leads Mobile Taobao’s business at Alibaba.

“[On Mobile Taobao,] we want to get people together to allow them to discuss and generate content that can serve more people,”  Taobao product manager.

Mobile Taobao: a new platform to facilitate peer-reviews

One of the most popular social functions on Mobile Taobao is a Q&A feature called Wendajia (‘ask others’) that lets shoppers with questions about a particular product get answers from members of the Taobao community. Wendajia helps free consumers from the drudgery of combing randomly through product reviews or resorting to asking sometimes biased and unhelpful vendors for answers. “The essence here is mutual assistance,” Zhang said. “The new feature builds a direct and effective communication channel between people who have purchased and people who want to purchase.”

Wendajia has proven to be a boon to buyers because they don’t have to wait hours or days for fellow shoppers to stumble on their questions and provide answers. One-fourth of all questions are answered within one minute and 60 percent of questions within 10 minutes, Jiang said. “This greatly optimizes the pre-shopping decision process,” he said. Every day, it receives as many as 1 million questions, and 2 million consumers participated in answering.

Read more: upcoming chatbot revolution in Southeast Asia

China’s widespread adoption of smartphones and the reach of the mobile internet has undoubtedly contributed to the growth of social commerce by making participation easy, ubiquitous and dynamic. Still, Mobile Taobao isn’t relying solely on user enthusiasm and social goodwill to foster greater user involvement.

A version of this appeared in Alizila on July 26. Read the full version here.

Poor market conditions and increasing innovation in the digital space is facilitating the growth of ecommerce, according to e27.

Consumers are being more economical amidst slow economic growth. A report by Deloitte in 2015 cited that in APAC, retail revenue growth slowed dramatically in 2014. 55.3% of the APAC companies surveyed in that period reported a lower net profit margin and 4.3% reported a negative net profit margin.

While sales have contracted, the impact would have been even worse if it wasn’t for ecommerce.

Of the top 140 most profitable retail companies worldwide, 7.6% of sales came from online channels and 33% of the companies don’t have an offline store.

Examples of most profitable online retail companies 

  • Amazon: Raked in more than $70 billion in revenue in 2014
  • JD.com: Sales jumped to 62% at $17.7 billion
  • The top 50 e-tailers in total saw a boost of 19.7% in profits in 2014.

Shift in consumer behavior

There are various factors that are contributing to the growing trend of online shopping, from a sharp increase in smartphone adoption, the rise of cross channel social media to competitive pricing. Over half of survey respondents said they have shopped online at least once since 2016, in a total retail survey published by PWC.

51% of online shoppers shop through social media channels in Thailand, Malaysia at 31% and China at 27%.

Shoppers in Asia Pacific are more social orientated, their spending habits are susceptible to what their peers think.

In Malaysia, 69% of consumers said that feedback and reviews influence their purchasing behavior.

Shopee case study: heading towards retail innovation

It may be too soon to say that the sun is setting on traditional brick and mortar retail, but radical innovation is crucial to retain customers. Figures have showed that the ecommerce sector provides the engine of seismic changes that the industry needs in this slowing economy.

An example of disruptive technology is Singapore based C2C ecommerce platform, Shopee, developed under internet platform service Garena.

Shoppee allows buyers to snap and upload screenshots of their items directly onto the platform and start selling instantly.

For more established SMEs, it has a ‘seller assistant’ function to help to organize inventory and track performance.

The platform also forms third party collaborations to enable logistics, such as a partnership with Singapore based startup, NinjaVan. The platform also recently launched Shopee University, an online program to teach sellers online marketing and photography skills.

Ecommerce does not just enable traditional businesses and SMEs to seek another channel for revenue, it is democratising commerce. By putting ditching the physical modus operandi, anyone with a smartphone or a computer can put an item for sale to potentially millions of customers in a matter of seconds.

A version of this appeared in e27 on July 13. Read the full version here.