JD.com's entry to shake up Thai e-commerce scene

JD.com's entry to shake up Thai e-commerce scene

The entry of Chinese giant JD.com is seen as a harbinger of consolidation in the Thai e-commerce market.

Marketing research firm Nielsen forecasts Thailand's retail e-commerce market, excluding online travel, to reach US$3 billion by 2020, up from $1 billion in 2015.

Pawoot Pongvitayapanu, president of the Thai E-commerce Association and founder of Tarad.com, said the China-based JD came to Southeast Asia before Alibaba acquired Singapore-based Lazada.

In China, Alibaba dominates online retail with nearly 80% of the market. Southeast Asia remains a region of high-growth potential for e-commerce, particularly in Thailand.

JD may position Thailand as a logistics centre in the region.

"We expect JD.com to look for strategic local partners through acquisitions and joint ventures instead of building everything from scratch," Mr Pawoot said.

Only two active players are currently competing in the market with their aggressive pricing strategy: Lazada and South Korea's 11street.

Jarit Sidhu, research manager of research firm IDC, said the arrival of JD in the business-to-consumer (B2C) segment will lead to a price war with Lazada in the short-term.

JD may create a proxy war by teaming up with local players in a co-branding model, joint venture or via acquisition.

Compared with the established e-commerce market in China, the market in Thailand is still in an early stage of single-digit growth.

Chong Siong, country manager of Ezbuy Thailand, an online shopping platform based in Singapore, said JD is smart to enter the market because there is not much competition in e-commerce, which has been dominated by Lazada.

Customers will be better off, as they can expect better prices and quality of services.

In the business sector, Mr Siong said he expects consolidation and mergers.

"JD.com will probably enter a joint venture with a local player to make things easier," he said.

"In China, JD.com's strength is in the logistics business while Alibaba's Taobao is strong in marketing. I think it makes sense for JD.com to replicate the same model in Thailand as both JD.com and Taobao are B2C models."

Service providers such as logistical companies should be prepared for fiercer competition as they already have low margins.

Mr Siong said Ezbuy has been expanding into more business-to-business (B2B) ventures along with the O2O (online to offline) platform by supporting more local businesses and improving its sourcing capabilities.

Tom Srivorakul, chief executive of a-Commerce Thailand, a Southeast Asian e-commerce solutions provider, said JD will benefit consumers and logistics players.

"We expect Amazon also to come to Thailand, as there is huge potential here," Mr Tom said.

"There is opportunity in every sector. If they come later than 2020, it's too late and the cost of acquisition for new customers will be increasing."

The value of e-commerce in Thailand accounts for 2% of the overall retail market.

Previously, Reuters reported that JD.com plans to enter the Thai market later this year in a move to expand its overseas business beyond Indonesia, according to chief executive Richard Liu.

Thailand would be a hub for servicing other Southeast Asian countries such as Vietnam and Malaysia.

In May the company posted its first quarterly profit since its share listing in 2014, as an expanded product line-up attracted more active users, but also cautioned the cost of expanding at home and abroad could crimp profit growth.

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