Foreign domination predicted

Foreign domination predicted

The coronavirus pandemic is expected to drive Thailand's e-commerce growth by 30% in 2020, compared with the usual 15-20%, says e-commerce pioneer Pawoot Pongvitayapanu.

Traditional retail businesses are likely to be disrupted by Chinese e-commerce players faster than expected, he said.

Many local small and medium-sized enterprises (SMEs) will disappear within five years after e-commerce gains steam.

Within a decade, online business is likely to be dominated by foreign players, said Mr Pawoot, founder of e-commerce platform Tarad.com and the former head of the Thai E-Commerce Association.

"In the past two months, the pandemic has changed Thai user behaviour rapidly, with a broader customer base adopting e-commerce, particularly baby boomers," he said.

"Online sales are becoming the main channel."

The trend is happening three years faster than projected because of the outbreak, said Mr Pawoot.

The country has three e-commerce groups: brands' own websites, e-marketplaces and social commerce.

E-marketplaces are dominated by foreign players. Lazada is the e-commerce arm of China's Alibaba and Shopee is a Singapore-based e-commerce site under Sea Group. JD Central is the joint venture between Chinese internet giant JD.com and Thailand's largest retail firm Central Group.

Mr Pawoot said these e-marketplaces are likely to drive out local SMEs across the country within five years.

Before the pandemic, most people bought products at local shops, but the pandemic has forced them to purchase items online, he said.

E-marketplaces are investing heavily in attracting customers and face an accumulated loss of 10 billion baht over the past few years.

"How can local businesses compete with these strong, financially backed players?" asked Mr Pawoot.

Social commerce is dominated by Facebook, Instagram and Line. The live-streaming features on Facebook and Instagram have become a big driver for real-time sales.

"In the past few years, foreign players have posted threats to local e-commerce players," he said. "Foreign players will erode offline businesses and kill retail operators in the midterm."

"The government needs to pay attention to this issue. We should have our own local systems in some sectors and the government should have a unified policy framework."

According to him, manufacturers will shift towards direct-to-customer business models to gather customer insight, which will be detrimental for second- or third-tier dealers.

The rise of e-marketplaces means a huge influx of Chinese products and local firms need to be prepared for the surge of imports, rising from 30 million items to 100 million within a year.

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