Thailand - Country Commercial Guide
Distribution and Sales Channels

Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.

Last published date: 2022-07-26

Distribution and sales of industrial goods in Thailand are normally conducted through two channels:

  • U.S. exporter, to Thai importer, to Thai end-user
  • U.S. exporter directly to Thai end-user

The selection of distribution and sales channels depends largely on the type of product and the end-user.  Exporters of products that require after-sales service should have a Thai importer representing them locally.  A local agent or distributor can respond more quickly to provide service and parts replacement.  Accordingly, the end-user’s confidence will increase if there is a place where near-immediate assistance is available any time a machine breaks down.  Also, the end-user generally feels more comfortable dealing with a local agent or distributor since there are no language or distance barriers.  The agent or distributor also facilitates customs procedures for end-users.  It should be noted that, in general, only local agents, distributors, or manufacturers’ branch offices in Thailand are eligible to enter day-to-day bidding for routine government tenders.  Please also see the sections in this chapter on “Selling Factors” and “Selling to the Government” for more detailed information about bidding on projects by international bidders.

For consumer goods, there are generally three distribution and sales channels:

  • U.S. exporter, to Thai importer, to Thai retailer, to Thai end-user
  • U.S. exporter, to Thai importer, to Thai wholesaler, retailer, and end-user
  • U.S. exporter, to Thai retailer, to end-user

Perishable consumer goods tend to go through the first channel, which is the fastest. In this instance, importers tend to act as wholesalers at the same time.  Non-perishable consumer goods normally go through the second or third channel.  The second channel seems to be the most favored, especially with lower-priced items, since there are over 18,490 retail outlets, including 80 department stores, 571 discount stores, 498 supermarkets, and 1,7341 convenience stores in Thailand, according to Krungsri Research. Working through wholesalers and retailers will promote better market coverage.

Using an Agent or Distributor

Although Thai law does not require the use of local agents or distributors, it is one of the most efficient and effective ways to enter the market in Thailand.  A key aspect of business culture in Thailand is interpersonal relationships, which drive business development and transactions.  Thailand-based agents and distributors are accustomed to local business practices and requirements and as such are well-positioned to develop and execute business in the market.  In addition, local agents and distributors typically manage regulatory affairs, acquire required import permits, manage customs clearance, and handle other logistics for U.S. exporters.

U.S. exporters must invest sufficient time and attention in selecting a qualified local partner and provide training for marketing and technical support.  Frequent contact with local representatives is essential to cultivate a productive working relationship.

Some of the best ways to locate an agent or distributor in Thailand are to:

  • Use the Partner Search Service (IPS), IPS plus Virtual Introduction Service, or Gold Key Service (GKS) available from the Commercial Section, U.S. Embassy Bangkok.
  • Order an IPS report that provides a listing of Thai companies that have been interviewed and hand-selected by the Commercial Specialist responsible for your industry sector.  These companies have examined your product literature and company profile and expressed significant interest in exploring a potential business relationship with your firm.  You will receive a company profile and contact information for each Thai company that expresses interest in your product or services.
  • Should you plan to visit Thailand following receipt of the IPS report, we recommend utilizing our GKS.  Under the GKS, a Commercial Specialist will arrange one-on-one meetings with each potential Thai representative, arrange hotel and transportation, and accompany you to meetings.  If you are not in a position to travel to Thailand but wish to have face-to-face discussions with the Thai candidates, we can arrange “virtual” meetings by videoconference under our Virtual Introduction Service.  If you travel to the region to utilize one of our fee-based services, we strongly encourage you to consider undertaking a similar service in another market.  U.S. Commercial Service Staff at your local Export Assistance Center can help facilitate a multi-market visit to the region.
  • Participation in trade exhibitions in Thailand can also be an effective means to test the market and locate appropriate agents or distributors in Thailand.  Contact the Commercial Section at the U.S. Embassy in Thailand to learn more about regional trade events.

Establishing an Office

The primary organizational structures for commercial enterprises are sole proprietorships, partnerships, limited liability companies, joint ventures, or foreign branch operations.  The organizational structure is similar in nature to those found in the United States; however, limited liability companies are more often privately held rather than public corporations.  Most foreign corporations operating in Thailand do so through private limited liability companies.

There are three major forms of partnership in Thailand:

  • Unregistered ordinary partnership
  • Registered ordinary partnership
  • Limited partnership

As in the United States, each form of partnership has different levels of liability for partners and different tax consequences for the partners and partnerships.  If a company chooses to be a formal organization, it may decide to form a private limited company or a public limited company.  Generally, a private limited company is similar to a U.S. privately held corporation, while the latter may offer shares to the public.

Thailand also offers the possibility of establishing a representative or a regional office for companies engaged in non-revenue generating activities.  Typically, these offices engage in market research and assessment, provide quality control and purchasing services to a foreign head office, or provide warranty support services for products sold by the company’s head office to the Thai market.

In any process of establishing an office, individuals and companies are strongly advised to consult with legal or other professional advisors during the beginning stages of business planning to ensure compliance with all applicable laws and regulations and selection of the optimal business structure for their activities in Thailand.  American firms should also ensure there are no restrictions on foreign entity participation in a particular sector, whether there are import licenses or other special licenses required, and identify special incentives that may be available from Thai organizations such as the Board of Investment (BOI) and the Industrial Estate Authority (IEAT).

The U.S.-Thai Treaty of Amity and Economic Relations of 1833, commonly referred to as the Treaty of Amity, allows U.S. majority-owned businesses or branch offices incorporated in Thailand to operate in business sectors generally prohibited for foreign firms according to the Foreign Business Act, B.E. 2542 (1999). However, there are still government restrictions in the following areas: communications, transport, banking, exploitation of land and natural resources, and the trade of domestic agricultural products.  To register under the Treaty of Amity, a U.S. company should obtain documents from the Commercial Section at the U.S. Embassy in Bangkok and file an application with the Department of Commercial Registration at the Thai Ministry of Commerce.

Franchising

According to the Franchise and Licensing Association report, Thailand’s franchise business shrank 10 – 20 percent or $8.18 – 8.48 billion, primarily because of the third wave of the COVID outbreak in April 2021 and lockdown restrictions.  Experts forecast that the franchise industry will rebound after the government reopens the country to international tourists.  The dine-in restaurant business expects to recover and generate revenue up to $10.60 billion in 2022 after reporting a sharp contraction in 2021 due to business needs, such as importing specific ingredients or raw materials.  Franchisors face additional challenges, including food supply-chain issues, financial issues, and lower revenue generation. 

The United States is the leader among international franchises in Thailand and controls over half of the international franchise market.  The quality, standards, brands, and innovations offered by U.S. franchises are well known to potential Thai investors.  Franchising fees required by U.S. companies are perceived as very high, and start-ups require a huge capital investment, compared to the local franchise fees, which range from $1,562 - $93,750. With those high fees, only a few strong financial Thai investors have the financial means to apply for franchise licenses, set up new management teams, and operate U.S. brands.  Thai investors are also interested in partnering or setting up joint venture companies with well-known foreign companies to promote brands and accelerate expanding outlets locally.

Potential demand for American food franchises exists among expatriates and tourists.  The growing tourism industry also enhances the growth of the restaurant industry in Thailand.  In addition to offering products and services that are well-liked by Thai consumers, identifying a strong local partner, with strong financial capabilities and experience in franchising, is a key factor for future development opportunities.

Direct Marketing

Direct marketing is an effective means to share information about products and services with consumers through various media in both traditional and online channels, including online advertisements, email, websites, cell phones, television, catalogs, radio, and newspaper.  As a result of mobile application development and online marketing, marketers can effectively connect and engage with potential consumers.  Online media has played an important role in direct marketing.  According to the Thai Direct Selling Association (TDSA), Thailand’s direct sales contracted by one to two percent in 2021 due to the highest domestic household debt in eighteen years and economic uncertainty, which caused consumers to focus on essential goods only.  The TDSA forecasted that the overall situation would improve after re-opening the country through eased lockdown restrictions and a series of economic stimulus packages from the government.

With a sales volume of $2 billion and the number of individual direct sellers totaling eleven million, direct marketing is widely used to sell health care products, cosmetics, cleaning, household items, insurance (life and non-life), and electrical appliances.  Direct sellers must adjust their strategies as they face challenges with the increasing number of online shoppers on various e-commerce and social media platforms.  Major direct marketing companies from the United States include Amway, Nu Skin, Herbal Life, Unicity Marketing, and Sunrider International.  Despite the success of direct marketing in the Thai market, poor consumer protection laws and enforcement hinder growth potential in the market.  Many problems still need to be solved, such as poor product quality, loss during delivery, refund policies, and protection of intellectual property rights.

Direct marketing and mail-order sales have benefited from the use of individual credit cards in Thailand.  Credit cards stretch the buying power of Thai consumers and facilitate retail sales through mail orders, social media platforms, and electronic commerce.  Leading the market in this sector are Siam Commercial Bank, Kasikorn Bank, Krungthai Bank, and Bangkok Bank. Most major department stores in Thailand conduct direct marketing via their social media platforms and mail-order campaigns through their networks of discount cardholders.  Installment plan sales of household goods and electrical appliances are constantly gaining popularity among consumers, especially in rural areas.

TV home shopping continues to be popular in Thailand.  More international home shopping operators, mainly from South Korea, have entered the Thai market in joint ventures with local retail operators.  Product quality is a significant concern for most buyers.  Thai consumers tend to order products online for convenience and low product prices.

Joint Ventures/Licensing

Joint ventures (JVs) and licensing agreements are essential market entry strategies for American exporters to Thailand.  In many cases, the only way to overcome costly freight charges, high tariffs, and competition from cheaper local goods is via local production.  Thailand’s Civil and Commercial Code has a section on General Contracts, which broadly governs all contractual business relationships and transactions.  Depending on the nature of the contract, the Public Companies Act and Foreign Business Act include provisions about joint venture agreements of which American firms should be aware before signing with any Thai business partners.  Note that any contract provision that is deemed to be contrary to public order or morality will be void.  Joint venture partnerships with funding support, technology transfer, and training components are effective mechanisms to achieve success.

Many Thai firms are actively seeking U.S. joint venture partners that, in addition to much-needed capital, can also bring technical, marketing, and management skills to the business relationship.  Thai firms generally offer assets, such as valuable local vendors, government contacts, and established business relationships.  Several U.S. companies have entered strategic joint-venture relationships with Thai partners in Indochina and China.

The Commercial Section at the U.S. Embassy in Bangkok can aid American firms seeking potential joint venture partners in Thailand through various business development services.

Express Delivery

In Thailand, airports are operated by various organizations such as the Airport of Thailand Public Company Limited (AOT), Department of Airports, Bangkok Airways, and Royal Thai Navy. The major airport facilities serve both domestic and international flights.  Suvarnabhumi International Airport, which is designated as the country’s main airport, has the annual capacity to serve 113,663 flights, accommodate 5.9 million passengers, and facilitate 1.05 million tons of freight.

In FY 2021 (Oct 2020 – Sep 2021), the number of aircraft movements for freight at major international airports reached 245,458 flights with total passenger volume of 20 million passengers.  The total freight and postal parcel volume amounted to 1,090,920 tons.  These numbers are expected to increase as economic conditions continue to recover post-pandemic.

Table: Cost of Express Postal Service from Bangkok, Effective January 2021

(Rates exclude special fee and fuel surcharge)

Destination

10kg Box

(41.5 x 34 x 27 cm)

Additional rate per kg above 10kg and up to 20kg

25kg Box

(56 x 44 x 35 cm)

Additional rate per kg above 25kg and up to 44kg

Baht

US$

Baht

US$

Baht

US$

Baht

US$

Australia

4,937

145.20

239

7.02

7,327

215.5

239

7.02

China & Taiwan

4,937

145.20

239

7.02

7,327

215.5

239

7.02

China (South)

3,596

105.76

194

5.70

5,536

162.82

194

5.70

France

5,970

175.58

248

7.29

8,453

248.61

248

7.29

Hong Kong

3,596

105.76

194

5.70

5,536

162.82

194

5.70

India

5,787

170.20

238

7.00

8,172

240.35

238

7.00

Japan

4,947

145.50

238

7.00

7,327

215.5

238

7.00

Spain, Sweden

9,241

271.79

520

15.29

14,445

424.85

520

15.29

Singapore

3,596

105.76

194

5.70

5,536

162.82

194

5.70

South Africa

5,787

170.20

238

7.00

8,172

240.35

238

7.00

UK

5,970

175.58

248

7.29

8,453

248.61

248

7.29

USA

5,940

174.70

246

7.23

8,408

247.29

246

7.23

(Exchange Rate: 1US$=34 Baht)

Due Diligence

American buyers and investors considering any ventures in Thailand should be cautious and conduct due diligence and their own research before entering into legal agreements.  Several local companies lack transparency in their accounting practices.  The Commercial Section at U.S. Embassy in Bangkok offers the International Company Profile (ICP), a due diligence service that provides basic background information on Thai firms.  The report provides an in-depth or basic background check, including an overview of business operations, a list of key management personnel, customer references, business operating conditions, and financial statements.  U.S. companies can also obtain financial background on Thai firms registered with the Thai Ministry of Commerce.  More information on these services provided by the U.S. Commercial Service in Thailand is available on the U.S. Department of Commerce website under “Our Services”.

U.S. exporters and investors are advised to hire professional service providers, such as accountancy companies, lawyers, asset appraisers, and other experts to check the company’s bona fides.  Several leading American accounting and consulting companies with expertise in due diligence are active in Thailand.

American firms should also check with government agencies that have information on firms listed on the Stock Exchange of Thailand (SET) for their listing status.  Both the SET and the Securities and Exchange Commission (SEC) maintain their own data banks, including mandatory information that all listed firms must report on a quarterly or annual basis.  The Department of Business Development at the Ministry of Commerce is a good source of information for other non-listed companies or privately owned firms.