Monday, February 26, 2024
HomethailandgeneralTrying to withstand the deluge

Trying to withstand the deluge

With cheap Chinese products flooding the Thai market through online sales, local e-commerce and retail operators are worried it could affect small enterprises.

Thailand’s retail e-commerce sector is the second-largest in Southeast Asia. E-commerce is the largest contributor to Thailand’s digital economy, with estimated gross merchandise value (GMV) of US$22 billion in 2023, $30 billion in 2025 and $60 billion in 2030.

According to the General Administration of Customs of China, the country’s cross-border e-commerce has become a new engine for foreign trade development, with volume doubling from 1 trillion yuan in 2018 to 2.11 trillion ($306 billion) in 2022.

How are Chinese products flooding the Thai market?

Paul Srivorakul, chief executive of aCommerce, a regional e-commerce enabler, said the majority of cheaper Chinese imports are from marketplaces such as Lazada, Shopee and TikTok Shop, supporting cross-border commerce or vendors from China selling goods in Thailand.

As the platforms charge these merchants higher commission and logistics fees, these sellers set up businesses locally to sell at even cheaper prices and make better margins, he said.

The ratio of international sellers on these marketplace is not publicly disclosed. However, according to iPrice Group, an e-commerce research firm, the proportion of international sellers on Lazada in Southeast Asia ranged from 20-30% in 2021.

“I estimate the percentage to be much higher today, around 30-40%, especially after the pandemic,” said Mr Paul.

Other cross-border sites such as AliExpress, Temu and Shein are gaining popularity, enabling Chinese retailers to sell directly to consumers in Thailand.

Pawoot Pongvitayapanu, founder of Tarad.com, said the number of Chinese products in Thailand has skyrocketed compared with 5-6 years ago because of a free trade zone pact that exempts Chinese products from customs tax for items priced below 1,500 baht.

In addition, more Chinese operators recently established warehouses near suburban Bangkok to stockpile resale goods, charging 20 baht for all items.

Chinese e-commerce enablers offering software systems sell to Chinese merchants based in Thailand. Chinese logistics providers also deliver products from China to Thailand within five days.

Mr Pawoot said all these factors have combined to affect local small and medium-sized enterprises (SMEs) as Chinese players grow their networks, from manufacturing to payment and delivery.

Why does this market flooding matter?

He said increased flooding of Chinese products could result in a digital trade deficit.

Mr Pawoot estimated Chinese products have a 40-50% share of the online retail market in Thailand. Live commerce also allows Chinese manufacturers to hire Thais to sell their goods directly to consumers.

He said Chinese manufacturers also upgraded their products from non-branded to branded items.

A user browses face masks on Lazada shopping platform. VARUTH HIRUNYATHEB

Does TikTok have a local entity in Thailand?

As TikTok gains ground in Thailand, retail operators want to know whether the short video platform established a business entity in the country.

According to TikTok, it strives to ensure its business complies with relevant regulatory requirements in Thailand. Since 2021, TikTok Technologies has obtained the Board of Investment’s certificate as an international business centre and a foreign business certificate covering its core businesses.

For e-commerce business, TikTok is in the process of applying for a licence to register TikTok Shop in Thailand. Both TikTok Technologies and Singapore-based TikTok Shop have already provided business information to the Electronic Transactions Development Agency, in line with the digital platform service law.

According to data analytics site Creden Data, TikTik Technologies reported revenue of 786 million baht last year with a profit of 46.9 million.

TikTok has nearly 50 million users in Thailand, according to Digital Advertising Association of Thailand.

A Momentum Works report noted TikTok registered a GMV of $4.4 billion out of $99.5 billion total GMV in the region last year. In Thailand, TikTok gained 4% of the $4.4 billion in GMV last year, while Shopee claimed 56% and Lazada 40%.

What remedies should policymakers consider?

Mr Paul suggests Thailand follow a multifaceted strategy to deal with cheap Chinese imports and their effect on SMEs and industries.

First, the Commerce Ministry should establish a system to research and monitor the impact of imported goods on local markets and use data-driven approaches to adjust policies, he said.

The government should re-evaluate its trade agreements with China to possibly adjust tariffs to protect specific industries from being inundated by cheaper imports, said Mr Paul.

Implementing tariffs on specific categories of imported goods such as fashion, home furnishings and consumer products can make them less price-competitive with local products, but this needs to be carefully balanced to avoid triggering trade disputes or violating trade agreements with China, Thailand’s biggest export partner, he said.

The Thai government can pass regulations that require e-commerce platforms to ensure a certain proportion of local SMEs’ products in specific categories and industries are promoted, said Mr Paul.

“This can increase the visibility of local products among consumers. Policymakers also need to create consumer awareness campaigns to educate Thais about the benefits of buying local, including support for the local economy and potentially higher quality standards,” he said.

To remain competitive in the long term, Thailand cannot play defence, said Mr Paul. The country needs to invest in programmes that encourage local SMEs to innovate and improve the quality of their products, making them more competitive in both local and international markets, he said.

Thailand has not prioritised unfair competition and anti-dumping practices, in particular when giant platforms use marketing subsidisation for discount coupons on the platforms, said Mr Paul.

Are there any success stories where local SMEs outperformed Chinese products?

Mr Pawoot shared the story of an online entrepreneur nicknamed Mo, age 24 in Buri Ram province. She sold close to 100 million baht within 11 months via TikTok Shop, then expanded to multiple channels.

Mo shifted from being a food vendor at age 19 to online and live selling on her TikTok channel.

With two years of experience as an online reseller, she decided to start her own product line and create the eye cream brand Luna, which had ample room to grow because there were few rivals, said Mr Pawoot.

Mo related her own experience that eye allergies limited her cream choices. She selected a factory that fit her quality standards and could produce cream according to her specifications.

Then she gave free samples to 1,000 of her customers to review, offering them commission fees under the affiliate marketing model.

Mo averages 1,300 orders per day, with the peak order 27,000 in one day.

The cream has an average price of 239 baht.

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