How ecommerce is changing Thailand's economy

A high internet penetration rate and growing middle class is behind an increasingly important ecommerce in the Southeast Asian country

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With a total GDP of 395 billion USD, Thailand is the second largest economy of Southeast Asia, surpassed only by Indonesia.

It also has one of the region’s highest number of internet users, making it a breeding ground for ecommerce.

On top of the 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 3.5 billion USD and is expected to generate revenue growth rate of 13.2% annually, reaching 5.8 billion USD by 2022.

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

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

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

Thailand 4.0

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 Siamese 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 villagers to start doing ecommerce businesses for their local products and services.

Thai figures

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%, one of the highest in the region. 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 using the internet is 9 hours and 38 minutes.

90% of them access the internet for personal businesses every day.

Siameses 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.

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 243 USD online, and is forecasted to grow to 382 USD 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 1.2 billion USD 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.

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 emcomerce 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 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 branches of Shopee and 11street, JIB, HomePro, Se-ed, Advice, Central and Munkong Gadget.

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