Thailand is the second largest e-commerce business in the consumer market after Indonesia. The large numbers of internet users have created a favorable climate for e-commerce businesses. The present revenue rate of Thailand is US$3.5 billion and it is expected to be US$5.8 billion by 2022.
In this blog, we explore why Thailand is one of the best countries for running an e-commerce business.
Thailand – the biggest social commerce market
Various market reports suggest that online shoppers in Thailand purchase a majority of their products from social network sites. Therefore, to reach a wide targeted audience using social sites, many of the e-commerce merchants make use of social site pages like Facebook and Instagram to promote their products. There are about 10,000 online stores in Thailand that one can find on Instagram and Facebook alone. The companies that are trying to break into the e-commerce market have to face serious competition with these online platforms.
Preferences for payment
One of the main accepted modes of payment in Thailand is cash. About 75% of the online purchasers love to shop online using the Cash on Delivery mode of payment. COD prevails over the other payment options. However, there are various other alternative options for payment such as internet banking, e-wallets, debit and credit cards, mobile banking, etc. These payment methods are gaining ground under the national e-master plan of the Thailand government. Over 550 thousand EDC terminals have been set up to facilitate credit and debit card payments in Thailand. The Prompt Pay service has been started since 2017 which allows the registered users to transfer money by using their citizenship ID or cell phone numbers. The mobile applications have been renewed by large banks and private enterprises. The non-banks are promoting their services to attract more e-wallet users.
There has been a huge demand for logistics services because of the high increase in the development of the online business. A lot of changes have been brought in the logistics operation and in the supply chain of Thailand. Various companies providing delivery services are bringing cheap and high-quality logistics services for satisfactory delivery throughout. To cope up with the pressure, central warehouses have been set up along with small pickup and drop off destinations in various parts of the country. This is highly beneficial for small and medium enterprises because they can now pick up the deliverables from their nearest location to ensure the fastest delivery to the consumers at a very affordable price. Some of the major e-commerce companies that are leveraging this model are Lazada, Kerry Express, DHL Express Thailand, etc.
‘The Digital Thailand 4.0 program’ was created to promote opportunities for e-commerce business in Thailand. This program has encouraged small and medium enterprises in rural locations with a high emphasis on the adoption of the internet. It has helped rural-based small and medium firms to make use of e-markets and e-payments for selling their products.
Also, the varieties of products that are sold on online platforms are expected to grow rapidly. For example, the food industry will rise from US$187.2 to US$225.4, the fashion and beauty industry will rise from US$531.3 to US$703.5, etc. In terms of the total sales, media and electronics are leading e-commerce verticals.
Read more about Thailand digital scenario
Factors that drive the growth of the e-commerce market in Thailand
One of the major drivers of the e-commerce market in Thailand is the Government. As mentioned above, the Thailand 4.0 program is supposed to boost the eCommerce business because it is facilitating the use of digital payment modes and e-marketing both inside and outside the country. The program has an agenda which includes the following:
- strengthening the internet connection
- enhancing the infrastructure and the logistics services
- Promoting trade relations with neighboring countries like Vietnam, Cambodia, etc.
The rising influence of the young generation, modernization by private and public parties and active participation of the international and the local players have boosted the growth of the e-commerce market in Thailand. In this section, we will explore the factors that have facilitated the online business in Thailand.
- Adoption of e-payments– Earlier, Thai online shoppers preferred the COD mode of payment for shopping. It has been reported by the Thailand Business News that the use of the internet and mobile banking transactions has increased. PromptPay services have also played a huge role in boosting e-commerce services. E-commerce has become popular because of digital payment methods which have made the shopping experience user friendly for shoppers. The PromptPay services have reached beyond the nation to Singapore as well. Therefore, it has become convenient for the cross border merchants to have online sales because of easy methods for collecting payment.
- High social media usage– People in the age group of 17 – 36 years spend most of their time on social media especially on Facebook, Twitter, and Instagram, etc. E-commerce activity is highly dominated by smartphone usage. Though smartphone dominates the e-commerce market, desktop still plays an essential role in delivering high conversion rates. Desktop usage is high on weekends. Therefore, if you are planning to start a business in Thailand for your online users, make sure that you target both the mobile and desktop users.
- Social and conversational commerce – The use of messaging platforms and social websites have triggered social commerce in Thailand thus leading to enormous growth in online product selling. The companies are fully utilizing digital means to enhance their businesses. Chatbots and online messaging services are available where the clients can sort out their queries and information. This has been done to keep pace with the queries of the customers. Thus it is essential for an online business to leverage social media, be active, and use online messaging services to promote their business and sort out the queries and concerns of their customers. This is way better than creating your a website or buying ads for promotions. There are about 10,000 online stores in Thailand that you can find on Instagram and Facebook alone.
- Growth beyond the capital state – It has been observed that the demand for online shopping has been coming from not only within important cities of Thailand but also from other provinces. The program initiative taken by the government has enhanced internet usage not only within the nation but to the other provinces as well. So you can increase your potentiality because of the higher usage of internet and e-payment methods if you start a business in Thailand. Also, you can capitalize on the fact that the numbers of shopping malls are less. Therefore the provincial buyers get the opportunity to have access to a variety of products that they are not being able to find in the offline stores.
- Cross border partnerships – the e-commerce market is rising increasingly because of cross border partnerships. For example, Thailand’s partnership with Singapore’s scheme of PayNow. Foreign investments are wholeheartedly welcomed by the country. The PromptPay services have also reached beyond the nation to Singapore as well. Therefore, it has become convenient for the cross border merchants to have online sales because of easy methods for collecting payment. The government is also taking more initiatives to increase cross border activities in the nation.
Every set of business has own set of challenges and constraints. The e-commerce market in Thailand is of no exception. Some of the challenges faced by the market include:-
- The preference of Thai shoppers for foreign brands can pose a threat to your business. Usually, the buyers prefer international brands across the following categories- digital camera, personal care products, etc.
- The people of Thailand are extremely cautious about the price and therefore, the cheaper products available online are in huge demand.
- The fraudulent e-commerce services offered online are huge reasons for not shopping online. Nearly every month, there have been complaints from the customers regarding fraudulent scams.
These are some of the problems that you might face if you start a business in Thailand. However, with so much improvement, one can surely climb the ladder of success. Ask Andy Aditya, an experienced Startup Specialist for any assistance, should you need any, for doing business in Thailand. Contact Startup in Thailand for a free business consultation.
Here are some more Interesting Reads
- Why Internet Marketing is essential for small business
- How to obtain financing for business in Thailand
- Top 10 reasons to start a business in Thailand
- Thailand reforming itself for doing business easier in Thailand
- Growth of Startups in Thailand and Future Outlook
- What you should consider before doing business in SE Asia
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