Before the pandemic hit, Thai retailers generally did a good job adjusting to the digital age. Many retailers created online channels for their customers to complete transactions while using data analytics to better understand customer needs. Starting from the beginning of 2020, the enforcement of social distancing, lockdowns, and other measures led consumers to change their behavior to online shopping, social media use, internet telephony for teleconferencing, and streaming of videos and films due to the COVID-19 pandemic. These trends resulted in spikes in online shopping businesses, especially in business-to-consumer (B2C) sales and business-to-business (B2B) e-commerce.
The driving factors behind this growth are increased internet and mobile phone use, as well as improved logistics and e-payment systems, which heightened convenience and consumer confidence to shop online. According to the Digital Economy Promotion Agency, the revenue in the e-commerce market is estimated to amount to $4,492 million in 2019 with an annual growth rate of 9.2 percent resulting in a value of $6,384 million by 2023. The mobile commerce market is expecting a compound annual growth rate of 12 percent to $25 billion by 2023, driven by rising smartphone penetration (around 40%) and an established preference for mobile over desktop shopping.
The Thai government’s focus on its Thailand 4.0 policy includes allocating a budget for the specific purpose of constructing a broadband network for all villages across the country. This nationwide broadband network will help bridge the digital divide and promote modern economic development through eCommerce. The government also has a vision of creating the next generation of digital application platforms to accommodate and promote online activities, including e-marketplace, e-payments, and e-government. Eventually, the goal is for villagers to start doing eCommerce businesses for their local products and services. Support from the Thai government, coupled with growing smartphone penetration, should also boost digital wallet adoption. According to JP Morgan, using debit or credit cards is still popular method of e-commerce payments in Thailand. Debit is preferred over credit. Cash on delivery remains a feature of the Thai e-commerce market, but its use is in decline.[1]
Current Market Trends and Domestic eCommerce (B2C)
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, B2C transactions are the largest and account for 50 percent, followed by B2B transactions at 27 percent and B2G transactions at 23 percent.
Cross-Border eCommerce
According to JP Morgan, an increase in domestic e-commerce sellers will also promote sales volume. Cross-border e-commerce consumes almost 30 percent of the overall e-commerce market in Thailand. Almost 50 percent of online shoppers have already made a purchase from abroad.
The top three overseas sales destinations for Thai products are China, Japan, and the United States. This balance may shift as domestic Thai merchants begin to seize on the opportunities presented by having a digital sales presence. At present, the top five e-commerce sites are Shopee, Lazada, Kaidee, AliExpress, and Amazon, all seller platforms with advanced logistics and delivery infrastructure.
B2B eCommerce
B2B eCommerce in Thailand is also growing rapidly due to Internet development and mobile transformation. According to the Electronic Transaction Development Agency, the sectors using eCommerce platforms to increase their productivity include the food and service sector with 31 percent, followed by manufacturing at 16 percent, and retail and wholesale at 15 percent. Interestingly, demand for eCommerce services is coming not only from Bangkok but also from the other provinces, such as Nonthaburi and Chonburi.
eCommerce Services
Thailand’s online retail commerce is driven by several factors, including increased smartphone penetration and intense competition among eCommerce operators. The government’s PromptPay service, which falls under the national e-payment scheme, is the key driver to stimulate eCommerce activities.
Over the last couple of years, many courier service companies started launching their eCommerce platforms in Thailand, bringing domestic end-to-end delivery to the market. Consequently, delivery costs for eCommerce products have sharply declined due to the fierce competition among logistic service providers.
eCommerce Intellectual Property Rights
Apart from other specific laws and regulations that require compliance by eCommerce businesses, intellectual property (IP) protection is another important component business owners should consider. Trademark registration in Thailand is determined on a first-to-file, first-in-right basis. New entrants should consider obtaining trademark protection before introducing products or services into the Thai market.
For a company seeking a patent registration for its business method in the eCommerce market, please note the Thai Patent Act currently does not grant patents to any computer program or any type of business method. However, under certain conditions, computer programs, including technologies used to protect the programs’ or company’s information from unauthorized access or reproduction, may be protected automatically under the Thai copyright protection system. In addition, a company’s trade secrets, such as processes, strategies, instruments, or databases, may be protected by the Trade Secret Act (2002). Companies may wish to seek advice from local attorneys or IP consultants who are experts in Thai intellectual property laws.
In addition to protecting IP rights, companies must run their relevant business in compliance with the Computer Crime Act (Amended 2016). The law prohibits input of forged or false computer data or content that is likely to cause damage to others or to the public, including sending data or email that disturbs the recipient without a means to opt-out. Service providers such as social media platforms and access providers may also be required to delete or otherwise prevent access to such content following a government notification, or they may be subject to liability for that content. At the request of a relevant authority, a court may order service providers to block or take down a website that contains illegal content or content which is against public order. In addition, the law requires service providers to store traffic data for a period of no less than 90 days from the date on which the data is input into a computer system and up to two years in special cases.
Furthermore, the Personal Data Protection Act (PDPA) came into force in June 2022. The law prescribes several obligations for both overseas and local eCommerce businesses to gather and use personal data. Companies should make necessary efforts to comply with the PDPA to avoid penalties.
Popular eCommerce Sites
Thailand’s mix of international and local eCommerce stores is indicative of Thai consumers’ preference for variety when it comes to online shopping. Lazada and Shopee, both key players in e-commerce, are competing to become a leader in the market, spending a huge amount of money on advertising and marketing campaigns. JD Central is scaling up efforts to boost customer retention and support cross-border e-commerce.
Online Payment
Growth of eCommerce can boost the use of e-Payment because it can make purchases of goods faster and more convenient. Thailand’s online and mobile banking market could reach maturity within six years, largely driven by the national e-payment system and the significant growth in mobile broadband penetration. The number of eCommerce users is expected to grow by 19 percent to 43 million users by 2025.
With heavy promotion of the national e-Payment scheme, both government and private sectors have been encouraging stores and consumers to move away from cash and move towards e-Payment. The government has also launched PromptPay, which allows registered users to transfer funds between consumers and businesses using their mobile phone number or citizen ID number.
Mobile eCommerce
According to a JP Morgan report the Thai mobile commerce market is already the dominant e-commerce sales channel in the country, with a value of $15.8 billion, a figure that is set to grow at a compound annual growth rate of 12.2 percent by 2023.
Thai smartphone users are keen e-shoppers, with 71 percent shopping online at least twice a month. Some 90 percent of smartphone users plan to shop online in the future. Apps are the most-used method to shop online, comprising 65 percent of all transactions – offering in-app purchasing will therefore be crucial for merchants to reach the majority of Thailand’s online consumers.
Digital Marketing and Social Media
Thailand has around 48.6 million internet users, an increase of 5.9 million between 2021 and 2022. Thailand also has 95.6 million mobile connections, and 56.85 million social media users. The most used social media platforms in Thailand are Facebook, YouTube, Line, Instagram, Twitter and Tiktok. Thailand has around 50 million Facebook users, 45 million Line users, 42.8 million YouTube users, 35.8 million TikTok users, 35.70 million Facebook Messenger users, 18.5 million Instagram users, 11.45 million Twitter users, and 3.3 million LinkedIn users.
The Coronavirus pandemic increased the Thai drive to move toward a ‘cashless society’, including more retailers turning to online payment services. Online payments are often used in shopping malls and restaurants but now can be seen everywhere; even street carts offer an online payment service or scanning a QR code for payment. Additionally, Thailand’s 4.0 program which supports the digitalization of business and payment systems, will have a huge impact. The use of online banking is encouraged through the Thai Government’s payment of state aid to people through an e-payment system called “Paotang App”.
Thai people use social media and mobile apps to research new products before making purchases. Thai shoppers are already high on the list of consumers who purchase directly through the internet, 36.60 million purchasing consumer goods via the internet. Electronics, fashion, personal & household care, and food & beverages are remaining the strongest online shopping categories. The online shopping sector had a total value of approximately $18.97 billion in 2021.
Thai people mainly shop online at the end of the year and during holidays events. However, Thai sellers are also encouraging new promotion strategies, including the 12-month promotion plans such as “2.2” (February 2 promotion) or “7.7” (July 7 promotion).
[1] JP Morgan: https://www.jpmorgan.com/europe/merchant-services/insights/reports/thailand-2020#footnote-21, accessed June 17, 2022