How ecommerce is changing Thailand's economy

A high internet penetration rate and a growing middle class are behind an increasingly important ecommerce scene in the ASEAN country

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2018 concluded with good news for the ecommerce sector in Thailand.

According to the country’s Electronic Transactions Development Agency (ETDA), the value of Thai ecommerce grew 14% in 2018, reaching some 3.2 trillion baht (over USD 101 billion), and its growth is expected to hit 20% this year.

With a GDP worth of USD 602 billion, Thailand is the second largest economy in Southeast Asia, surpassed only by Indonesia. However, Thailand falls midway in wealth spread, getting a lower fourth rank based on GDP per capita (after Singapore, Brunei, and Malaysia).

But what makes the country a breeding ground for ecommerce is its great number of internet users - one of the highest in the region.

On top of a rich internet penetration rate, a second decisive factor which is affecting the growth of ecommerce in Thailand is a growing middle class with a higher acquisitive power.

At present, the Thai ecommerce market is valued at USD 3.5 billion and is expected to generate revenue growth rate of 13.2% annually, reaching USD 5.8 billion by 2022.

This promise of fast ecommerce growth has captivated China’s two ecommerce giants — Alibaba and JD.com — to explore opportunities in the region.

2018 concluded with good news for the ecommerce sector in Thailand.

According to the country’s Electronic Transactions Development Agency (ETDA), the value of Thai ecommerce grew 14% in 2018, reaching some 3.2 trillion baht (over USD 101 billion), and its growth is expected to hit 20% this year.

With a GDP worth of USD 602 billion, Thailand is the second largest economy in Southeast Asia, surpassed only by Indonesia. However, Thailand falls midway in wealth spread, getting a lower fourth rank based on GDP per capita (after Singapore, Brunei, and Malaysia).

But what makes the country a breeding ground for ecommerce is its great number of internet users - one of the highest in the region.

On top of a rich internet penetration rate, a second decisive factor which is affecting the growth of ecommerce in Thailand is a growing middle class with a higher acquisitive power.

At present, the Thai ecommerce market is valued at USD 3.5 billion and is expected to generate revenue growth rate of 13.2% annually, reaching USD 5.8 billion by 2022.

This promise of fast ecommerce growth has captivated China’s two ecommerce giants — Alibaba and JD.com — to explore opportunities in the region.

In 2017, Alibaba paid USD 1 billion for a controlling stake in Singapore-based Lazada, which owns a portfolio of popular ecommerce sites across Southeast Asia.

What’s the internet penetration rate in Thailand?

According to Internet World Statistics, 57 million people, out of a total population of 69 million, are internet users in Thailand.

This situates the internet penetration rate at 82.4%, one of the highest in Southeast Asia. The penetration rate for unique mobile users is 80%.

Since January 2017, the annual digital growth in the country has increased by 24% (i.e. 11 million) and the average daily time spent by each Thai, according to ETDA’s Thailand Internet User Profile 2018, has increased to an average of 10 hours and 5 minutes daily as a result of the increasing shifts towards more digital lifestyles. That represents an increase of 3 hours and 41 minutes daily from the previous year.

The same study found that Thais use social media for as long as 3 hours and 30 minutes per day. They also stream videos through channels such as YouTube or Line TV for an average of 2 hours and 35 minutes daily.

Most of the time spent on the internet (90%) is for personal rather than business use.

Thais have overall a positive perception towards the digital world: 68% believe that new technologies offer more opportunities than risks and 52% prefer to complete tasks digitally whenever possible.

What’s Thailand 4.0?

Thailand 4.0 is an economic model that aims to unlock the country from several economic challenges resulting from past economic development models. It expects to position Thailand at the forefront of the global digital economy, something that will undoubtedly influence a quick expansion of the ecommerce market.

The Digital Thailand 4.0 programme, which was launched in 2016, has brought about a wave of opportunities for ecommerce businesses in the country.

The initiative has increased internet adoption, and encouraged businesses - especially SMEs in remote areas - to use epayments and emarketplaces to sell local products and services.

Through Thailand 4.0, the national government wants to allocate a budget for the specific purpose of constructing a broadband network for all villages across the country.

Having a nationwide broadband network will help bridge the digital divide and promote modern economic development through the ecommerce channel.

Not only that, the government has a vision of creating the next generation of digital application platforms to accommodate and promote online activities including emarketplace, egoverment and epayments.

The ultimate goal is for rural inhabitants to start doing ecommerce businesses for their local products and services.

The state of ecommerce in Thailand

Statista calculates the number of ecommerce users in Thailand at 12.1 million, with an additional 1.8 million users to be shopping online by 2021. These 13.9 million ecommerce users will represent 24.5% of the total population in three years.

To maximise customer reach in the busy online market, many ecommerce merchants set up Facebook and Instagram pages where they post images and details of their products.

This enables online browsers to enquire and review product details directly with the company or the merchant for a better and easier deal.

The average Thai user spends USD 243 online, and is forecast to grow to USD 382 by 2021.

Although the preferred payment method is cash on delivery - as is the case is most emerging ecommerce markets in Southeast Asia - alternative methods such as mobile banking and credit and debit cards are slowly gaining prominence under the Thai government’s National e-Payment master plan.

Under this initiative, the Thai Ministry of Finance and commercial banks have jointly enabled the installation of a total 550 thousand electronic data capture (EDC) terminals nationwide to support credit and debit card payments.

In 2017, the government launched PromptPay service that allows registered customers to transfer funds using only mobile phone numbers or citizen ID.

The ecommerce boost has also dramatically affected supply chains and logistics operations.

The ASEAN Briefing reports that several companies have launched cost-effective and high-quality logistics services which work across the country to deliver products quickly and efficiently.

Major companies such as DHL Express Thailand, Aden and Shopee are also taking advantage of the business opportunities that ecommerce carry entail.

Ecommerce platforms in Thailand are divided into three categories: business-to-business (B2B) transactions, business-to-consumer (B2C) transactions, and business-to-government (B2G) transactions.  

Among the three groups of transactions, B2B transactions are the largest and account for 55%, followed by B2C transactions at 29% and B2G transactions at 16% respectively.

Currently, electronics and media are the leading ecommerce products in terms of total sales.

The segment combined is worth USD 1.2 billion and includes the online sales of physical media, such as DVDs, books, and games; consumer electronics, such as television and stereo systems; and communication devices including computers, smartphones, and tablets.

Ecommerce and emerging technologies

Artificial intelligence (AI) has been used to improve the quality of products and services across the retail and services industries, including ecommerce. The top use for AI is in the service sector, where chatbots are able to provide information to customers and in theory more efficiently as well.

On 8 February, Thailand launched a 5G test bed with Huawei, the world’s top producer of telecoms equipment and second-biggest maker of smartphones. It is Huawei’s first 5G test best in Southeast Asia.

According to Reuters, Huawei is in talks with telecoms operators, such as Advanced Info Service Pcl and TRUE, to secure local partnerships ahead of a national roll out scheduled for December 2020.

Considering the high use of mobile users in the country, the roll out of 5G in Thailand will undoubtedly contribute to an increase of ecommerce growth.

Wednesday Fever

iPrice Insights State of Ecommerce in Southeast Asia 2017 report found Wednesday to be the day of the week when consumers spent most of their shopping time - not only in Thailand but across the Southeast Asian region.

Considering Monday as a base value, ecommerce merchants suffer a dip of up to 30% of their conversion rate over the weekend consistently across ASEAN countries.

The main factor contributing to the dip in conversion rate on the weekend is the large increase in the percentage of mobile usage.

Another consistent trend is the peak conversion rate on Wednesday, up on average between 4% and 15% from the average weekly conversion rate.

Mobile traffic over the weekends increase on average of 10%, with a reliance of close to 90% on Saturdays and Sundays.

Who’s leading the way in ecommerce in Thailand?

Thailand’s mix of international and local ecommerce websites show a wide variety of tastes within the Thai consuming population when it comes to online shopping.

Global retailers such as Amazon, Agoda and eBay continue to remain popular while WeLoveShopping and Pantipmarket, local C2C marketplaces and online communities, prove strong contenders that cater to local preferences.

The 10th most visited website (and first in the ecommerce category) in Thailand is Lazada.co.th, part of the Alibaba Group, and it amounts to 73,800,000 monthly traffic, making it the unrivalled champion of internet shopping in the country.

Following Lazada’s steps are the Thai branch of Shopee, Chilindo, Notebook Spec, Advice, JD Central and JIB.

This story, "How ecommerce is changing Thailand's economy" was originally published by CIO.

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