Thailand 4.0 represents a great opportunity for players in the Thai e-commerce market. So what do businesses need to know about this booming online economy?
By Kiattichai Pitpreecha, Managing Director for DHL eCommerce Southeast Asia.
Read this article in Thai (ภาษาไทย)
We’ve all heard of Web 2.0, but what about Thailand 4.0? That’s what the Thai government calls its new economic model which aims to unlock several of the country’s economic challenges. Thailand 1.0 focused on agriculture, Thailand 2.0 on light industry, while Thailand 3.0 looked at advanced industry. Thailand 4.0 will promote economic prosperity by creating a value-based economy driven by innovation, technology and creativity. Here are six things to note about Thailand’s e-commerce landscape.
Over 50 million internet users
Most of Thailand’s population of 69.11 million is already online and happily using digital technologies, mobile phones and e-commerce. Some 57 million Thais are regular internet users and 55.5 million are unique mobile users. 12.1 million Thais currently shop online, with 1.8 million more expected by 2021, by which time some 24.5 percent of the total population will be using e-commerce. The average user spends USD243 per year on e-commerce, which will grow to USD382 by 2021 according to Statista.
A trend towards social buying
A recent report from BCG identified five major trends that are shaping Thailand’s consumer landscape: consumers are increasingly keen to purchase indulgences and experiences; brands matter as Thai consumers are extremely brand loyal; women have substantial buying power; convenience stores are having a huge effect on shopper’s behavior; and social commerce is starting to drive e-commerce in Thailand. Consumers conduct 50-60 percent of online research for purchases on apps such as Facebook, Instagram and Line, and they’re comfortable buying most things online. The user base is young: 76 percent of 15 to 19-year-olds, 52 percent of 20 to 29-year-olds, and 34 percent of 30 to 39-year-olds use the internet to make purchases. Not surprisingly, these young shoppers are keen social media consumers who account for some 40 percent of online sales for products like phones, cosmetics and clothing.
Credit card payments for example are popular with e-tailers, but penetration is relatively low among shoppers.
Making payments convenient
One of the key aspects of Thailand 4.0 is to encourage a cashless society. One year after its launch, Thailand’s PromptPay e-payment scheme has already received 14 million registrations by the start of 2018. There is still a way to go though. Credit card payments for example are popular with e-tailers, but penetration is relatively low among shoppers. This means e-tailers need to offer more convenient alternatives. 81 percent of companies offer a bank transfer option like ATM transfers, while 46 percent offer offline points of sale such as over-the-counter service at convenience stores. Cash on delivery is another popular option for customers, accounting for 80 percent of all e-commerce transactions. Things will start to change with the advent of e-wallets. The Qwik peer-to-peer payment system, which provides payment services via Facebook Messenger, is already taking off. Alipay from China has also moved into the Thai market with its recent merger with TrueMoney, which allows customers to charge their accounts at 7-Eleven stores. When it comes to payments, convenience is key in Thailand.
No unicorns in sight, yet
Marketplaces like Lazada, Alibaba, Shopee and 11street have so far dominated the e-commerce scene in Thailand and local SMEs are slowly making their mark. As part of its Thailand 4.0 initiative, the Thai government is intensifying its focus on SME development by launching a network of support mechanisms aimed at boosting SME exports, supporting digital business development and e-commerce activities, and increasing access to finance.
As yet there is still no Thai start-up that’s achieved the celebrated unicorn status.
As yet there is still no Thai start-up that’s achieved the celebrated unicorn status – marked by a valuation of at least USD1 billion. However, there are a lot of up-and-coming players in both the C2C and B2C sectors. An example is Shopee, a mobile application which launched in 2016 and took off like a rocket with 5 million downloads and 1 million orders per month. In the B2C sector, LOOKSI is the big name in fashion offering some 1,000 brands with products such as apparel and bags, shoes and sporting goods. Online food orders are also taking off – according to Bloomberg, the sector is expected to reach US$1 billion in 2018. The Foodpanda delivery service is a good example. Launched in mid-2016, it targets connoisseurs with premium Thai and international restaurants. Its Thailand chief executive expects deliveries in the country to roughly double this year to 16,000 per day.
E-Commerce is not only for fashion and tech
We are increasingly seeing a wider range of products being purchased and sold online. We’ve shipped many interesting products, from household appliances, pet food and even daily essentials like rice and eggs. Beyond the usual product categories like fashion and technology, the rising adoption of e-commerce means consumers are more open to buying a variety of goods online and even traditional industries like farming are jumping on the bandwagon. In fact, this trend is also picking up in China and Indonesia, and will only continue to grow as businesses continue to optimize and grow their sales channels.
Local differences were a big part of our decision-making process when we launched our Parcel Metro service in Thailand in July.
The last mile challenge
With 50 percent of the population residing in urban areas, traffic is a serious problem in Thailand, especially in Bangkok. Measured by start-stops, Bangkok is number eight in the world in terms of congestion. The average driver spends 36 percent of their time in a car idling, while the average rush hour speed is 18 km per hour. The private sector is already coming up with its own solutions to deal with inner city congestion. One success story is Grab, the ride-hailing app that started in 2012. The company’s success across the SEA region has a lot to do with its ability to understand and leverage local market differences. With 95 percent of individuals in SEA using cash, Grab developed a payment system that didn’t rely on credit cards. It also expanded its focus beyond taxis to motorcycle taxis and launched GrabBike in Indonesia, Thailand and Vietnam last year.
Local differences were a big part of our decision-making process when we launched our Parcel Metro service in Thailand in July. Perfectly suited to Greater Bangkok’s busy and congested roads, the new service is set to revolutionize last mile deliveries while leveraging on our 100% nationwide coverage and over 1,000 ServicePoints within Thailand. With our late cut-off time of 12pm and ability to manage up to 20kg shipments, retailers will find it easy to cope with the increasing consumer demands for same day delivery, and will be able to sell more, while we ship more for them.
If you’re looking to sell to the Thai market and want to ensure fast and flexible delivery services, make sure you choose a logistics partner that understands the local landscape like DHL – we deliver the smile in the last mile.