The proliferation of smartphones, tablets and social networking has accelerated the growth of online shopping, and retailers are stepping up to cash in on the new purchasing lifestyle.
Lazada, the largest online retail store in Thailand, plans to more than double the number of product lines it offers, from 20,000 to 50,000 stock keeping units (SKUs). Meanwhile, Rakuten Tarad.com will focus more on mobile shopping.
There are more than 34 million active and engaged internet users in Thailand today, representing 50% of the population, and as the 3G mobile network expands there will be even greater opportunities for online shopping.
Lazada, the online retail shop from Germany, last year set up premises in Thailand (www.lazada.co.th), Malaysia, the Philippines, Indonesia and Vietnam. Today the sales value of Lazada Thailand is highest among those five countries. It has also become the largest and most popular e-commerce website here by gaining more than 800,000 Likes on its Facebook page.
Lazada Thailand general manager Chanchai Akaravetwattana pointed out that as a newcomer, the company needs a point of differentiation to truly respond to customers' needs. Free delivery is offered at the initial stage, customers can pay on the day they receive the products, and the items can be returned if they are dissatisfied.
These steps resulted in a quick boost to Lazada's reputation and left the competition in catch-up mode. The approach introduced by Lazada has now become the norm among online shopping outlets.
Lazada has its own products and inventory warehouses. One team selects items in response to market demand, and another team creates content, pictures and campaign materials to make the products appealing for customers.
Of the more than 22,000 SKUs today, Chanchai said the top three categories were IT equipment and gadgets, health and beauty, and home appliances.
There will also be greater variety in the categories when the number of products increases to 50,000 SKUs by the end of this year.
"Tablets and mobile phones are the products that customers need not see as they have already studied them and know them, and we sell more than 1,000 tablet units per month," Chanchai said.
Pointing out that consumer behaviour today has already changed, Chanchai said customers are highly computer and internet literate, are well connected on social networks and adept at online shopping.
Bangkok used to be perceived as the market base with the most potential, however online customers upcountry have overtaken the capital. Chanchai explained that there are lots of IT and camera shops in Bangkok, while customers upcountry have limited sources, meaning they usually have to travel to the city if they want a high-end product.
One example is in the digital camera line. Previously online shops mostly offered only compact cameras, but Lazada was the first to offer SLR cameras on the website.
"Today we sell 150 SLR camera sets per month and most orders are customers in the provincial market. The purchasing power in the provincial market is relatively high."
The Lazada brand has become popular within a short time as the company has invested heavily in advertising _ those who log in to Facebook will no doubt be exposed to them at some point.
Together with a free delivery service nationwide, some observers have been left wondering how Lazada gains any profit.
Chanchai admitted that a profit won't be realised in the business's initial stage, but the break-even point and earnings on e-commerce will be faster than shops in physical malls. With an investment of 100 million baht of registered capital, Lazada can cover the country and deliver to all 77 provinces. Lazada sales today stand at 400 million baht and the company expects to achieve 1.5 billion baht by the end of the year. In the meantime, Lazada plans to diversify soon by having local small to medium enterprises offer their products on Lazada's site.
Tarad.com, owned by Rakuten, has revealed an increase in the percentage of online customers aged 31 and over. It also said tablets were generating the highest volume of online sales. There was also a change in customer demographics, with a 100% increase in the number of buyers aged 40 and above from 2011 to 2012.
Rakuten Tarad.com founder and managing director Pawoot Pongvitayapanu noted that social networking will pay a greater role in e-commerce in the future. At present, e-commerce has not been as active in social media as it could be because customers cannot undertake entire transactions that way.
Products and companies that move with the market will also increasingly enter online and social media shopping. One recent example is Brand's, the chicken essence and health supplement producer, which marketed itself on the Line application and its Brandworld website with a two-month discount campaign. Combining Line marketing with e-commerce, Brand's claimed to have increased sales by 125%.
Online debit card payments will increase with the support of most banks, allowing more than 35 million card holders to pay online compared to Thailand's 14 million credit card holders. Thai people tend not to use credit cards for online shopping because they still do not fully trust in this kind of payment.
Rather than e-commerce, the trend is heading towards social network shopping. Rakuten Tarad.com started using an app to expand its Facebook fans in the first quarter this year, resulting in new Likes increasing 180% and generating a 250% rise in gross merchandise sales.
According to Rakuten, 47.5% of Thai people made their first online purchase within the past two years, with health and beauty products, fashion items and watches being the most popular. Thailand was also found to be the market most likely to share recommended purchases on social media sites, with 64.5% of shoppers surveyed expressing that intention.
Pawoot said that mobile commerce is expected to grow dramatically. Tarad.com's mobile traffic share has been continuously increasing. And this year the company will focus on this segment by offering special deals for mobile shoppers.
The proportion of electronic shopping conducted on mobile phones in Thailand today is less than 30%, but it will take only three years for mobile to catch up to desktop.
There is expected to be a greater vertical alignment of e-commerce, for example in property and cars.
According to MasterCard and the Kasikorn Research Centre, Thailand leads the Asia-Pacific region in online shopping activities, with 80% of Thai internet users purchasing products online. Last year, e-commerce revenue accounted for an estimated 5% of total retail turnover in Thailand. This amounted to about 73 billion baht, and it is forecast to reach 100 billion baht this year. Revenue generated from mobile data in Thailand is expected to reach US$1.5 billion (44 billion baht) in 2015.