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: 2021-02-19

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 they can receive near-immediate assistance 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 250,000 (mostly small) retail outlets in Thailand.  Working through wholesalers 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 in order to cultivate a productive working relationship.

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

  • Use the International Partner Search Service (IPS), Gold Key Service (GKS), or Video Gold Key Service 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 your 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 Video Gold Key Service.  If you do not have access to videoconferencing equipment, you can go to the nearest U.S. Department of Commerce Export Assistance Center in the United States to use our video equipment.  A searchable directory of these centers may be found at the following website:  U.S. Commercial Services Offices.
  • 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.  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.  The majority of 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, although 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 Alien Business Law.  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

The franchise industry remains very popular among Thai investors and is quite successful in the Thai market.  Experts identified 562 franchise concepts in 2019, representing almost 3% year-on-year growth in the last 12 months, according to the Thai Franchise Association report.  Franchise revenue was $7.8 billion in 2019; 95% of that was from local franchise businesses and the other 5% from international franchise businesses. Food and beverage (including coffee shops) have the largest market share of 23.49%, while restaurants, quick service, and casual dining are second with 23.13%.  Education service franchises (including education and child development) come in third with 18.15% of the share.  Though international franchise systems are few in number, they control 60% of the total market value.

As a result of the virus pandemic since early 2020, many Thai franchise operators are under emergency state-lockdown and the self-quarantine policy, which led to a temporary two-month shutdown of many branches at stores located in the malls.  The stand-alone stores in public areas also have to practice social and physical distancing by offering takeaway options and relying heavily on food delivery services.  The franchisors are facing more challenges, including food supply-chain issues, an economic recession, and a lower revenue generation in the coming months. 

The United States is the leader among international franchises and controls 65% of the international 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 $3,125 - $93,750.  Hence, only a few strong financial Thai investors are able to apply for franchise licenses, setup new management teams, and operate brands. Thai investors are also interested in partnering or setting up joint venture companies with well-known foreign companies to promote brands and accelerate the speed in expanding outlets locally. 

Pioneers of American franchise brands include KFC, McDonald’s, Burger King, Carl’s Junior, Starbucks, Swensen’s, Au Bon Pain, Pizza Hut, Krispy Kreme, IHOP, Cinnabon, Baskin Robbins, A&W, Subway, Coffee Beans and Tea Leaf, 7 – Eleven, Outback Steak House, Sizzler, Domino’s Pizza, Dunkin Donuts, Anytime Fitness, Hooters, and Taco Bell.  American franchise brands face strong competition from Taiwan, Japan, and Korean franchises, especially in food and beverage franchise concepts that have gained popularity among local consumers and account for the majority of new market entrants in recent years. 

Potential demand for American food franchise exists among expatriates and tourists.  The Tourism Authority of Thailand (TAT) predicted only 14 million to 16 million foreign visitors this year, down from 33.8 million projected in March, due to the pandemic.  However, 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.

Direct Marketing

Direct marketing is an effective means to share information about products and services with consumers through a variety of media from 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 are able to connect and engage with potential consumers effectively.  Online media has played an important role in direct marketing.  Thai people, on average, spend at least 28 hours per week on a personal computer and over 40 hours per week on mobile phones.  The Thai Direct Selling Association forecasts the direct sales business to expand by 5% annually.  With a sales volume of $2 billion and the number of individual direct sellers totaling 11 million, direct marketing is used widely in the sale of health care products, cosmetics, cleaning, and household items, insurance (life and non-life), and electrical appliances.  Major direct marketing companies from the United States include Amway, Nu Skin, Herbal Life, Unicity Marketing, and Sun Rider International.  Avon decided to exit Thailand’s market at the end of 2016 as part of the company’s global transformation plan.  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 non-traditional means, such as mail order and electronic commerce.  Leading the market in this sector are Citibank and American Express.  Most major department stores in Thailand conduct direct marketing via mail-order campaigns through their own networks of discount cardholders.  Installment plan sales of household consumer goods and electrical appliances are gaining popularity among consumers, especially in rural areas.

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

Joint Ventures/Licensing

Joint ventures (JVs) and licensing agreements are important 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 Alien Business Act include provisions pertaining to joint venture agreements which American firms should be aware of before signing with any Thai business partners.  (Please note that any provision of the contract 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.  In turn, Thai firms generally offer assets, such as valuable local vendor and government contacts, and established business relationships in the region.  A number of U.S. companies have already 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, thirteen major airports serve more than a million passengers arriving each year.  These airports are operated by various organizations such as 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 378,886 flights, accommodate 64 million passengers, and facilitate 1.3 million tons of freight.

In FY 2019, the number of aircraft movements for freight at the 11 major international airports reached 896,097 flights, with 491,994 international flights and 404,103 domestic flights.  The total freight and postal parcel volume amounted to 1,506,040 tons, including 1,432,982 tons of international freight and 73,058 tons of domestic freight.

Cost of Express Postal Service from Bangkok, Effective January 6, 2020

(Rates exclude special fee and fuel surcharge)

* Excluding China (South)

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

4,357

140.55

210

6.77

6,466

208.58

210

6.77

China (South) & Taiwan

3,175

102.42

171

5.52

4,885

157.58

171

5.52

China*

4,357

140.55

210

6.77

6,466

208.58

210

6.77

France

5,268

169.94

219

7.06

7,459

240.61

219

7.06

Hong Kong

3,175

102.42

171

5.52

4,885

157.58

171

5.52

India

5,106

164.71

210

6.77

7,211

232.61

210

6.77

Japan

4,367

140.87

209

6.74

6,466

208.58

209

6.74

Spain, Sweden

8,154

263.03

459

14.81

12,745

411.13

459

14.81

Singapore

3,175

102.42

171

5.52

4,885

157.58

171

5.52

South Africa

8,567

276.35

483

15.58

13,406

432.45

483

15.58

UK

5,268

169.94

219

7.09

7,459

240.61

219

7.09

USA

5,399

174.16

224

7.23

7,642

246.52

224

7.23

(1US$=31 Baht), *Excluding China

Due Diligence

American buyers and investors considering any ventures in Thailand should be cautious and conduct due diligence in their research before entering into legal agreements.  A number of local companies lack transparency in their accounting practices.  The Commercial Section at U.S. Embassy in Bangkok offers the International Company Profile (ICP) due diligence service that provides basic background information on Thai firms such as 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 is available on the website under “Services for U.S. Companies.”

For more in-depth information, 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 bona fides of the company to which they want to sell, extend credit, or form a joint partnership with.  A number of leading American accounting and consulting companies with expertise in due diligence are active in Thailand.

American firms may also need to check with government agencies that have information on firms listed in the Stock Exchange of Thailand (SET) for their listing status.  Organizations worth checking for this type of information are the Stock Exchange of Thailand and the Securities and Exchange Commission (SEC).  Each has its own data bank, which includes mandatory information that all listed firms must report on a quarterly or annual basis.  For information related to other non-listed companies or privately owned firms, the Department of Business Development at the Ministry of Commerce should be contacted.