After a decade of fierce battle in the e-commerce industry, offering huge promotions, subsidies and discount campaigns, the competition is expected to cool down as operators focus on profit and sustainable growth instead of burning cash to attract users.
Lazada and Shopee still dominate the e-marketplace segment in Thailand, while Facebook, Line and TikTok are riding the wave of social commerce.
Some have left the Thai market, including Japanese e-commerce player Rakuten and South Korea's 11Street. JD Central, another large e-marketplace competitor, faces the prospect of a split between its two founders: Chinese internet firm JD.com and Central Group.
From 2015 to 2021, Lazada and Shopee saw accumulated losses of 13.6 billion baht and 20.1 billion, respectively. JD Central racked up accumulated losses of 5.5 billion baht during the same period.
In August, Lazada received a financial injection of US$913 million from Chinese e-commerce goliath Alibaba and vowed to make cautious investment, while Shopee resorted to reducing staff to ensure it can continue to scale sustainably.
According to Kasikorn Research Center, Thailand's online retail sales reached 565 billion baht in 2021, accounting for 13.5% of the total retail market. The share is projected to reach 16% this year.
Mr Paul says social commerce, especially live-streaming, has been useful in creating real value for brand clients.
PATH TO PROFITABILITY
Pawoot Pongvitayapanu, an e-commerce pundit and founder of Tarad.com, a local e-commerce solutions provider, said the fierce competition in the e-marketplace is likely to fade as people became more familiar with online shopping during the pandemic, making it less necessary for operators to continue spending a large sum of money to draw customers to their platforms.
Thailand's e-marketplaces are transitioning from a heavy flow of ads, subsidies and promotions to a focus on profitability by leveraging their large base of customers and sellers, he said.
The e-marketplace titans want to gain more income, attain profitability and reduce expenses following hefty losses over the past decade, said Mr Pawoot.
"We expect to see e-marketplaces scale up their revenue from both existing and new services," he said.
Mr Pawoot said live and video commerce are gathering pace as they can potentially enhance engagement with buyers.
In the future, live commerce can combine with on-demand delivery services to form "on-demand commerce", where products can be shipped immediately to shoppers who order while watching live commerce, he said.
IMPROVED CUSTOMER EXPERIENCE
Werapong Goo, chief executive of Lazada Thailand, said the company is pursuing sustainable growth with cautious investment.
It is focusing more on enhancing the customer experience through speedy logistics services, a wider assortment of products and promotions, he said.
Lazada has 30 million active users in Thailand, and 45-50 million people have the potential to become online shoppers, said Mr Werapong.
The company recently increased its commission fee from 1% to 2% for sellers in the e-marketplace. It also collects a commission fee of 4-6% from brands in LazMall, a brand-focused feature of Lazada.
"This income will be reinvested to improve the customer experience, which can entice people to buy more frequently and spend more per order, while helping small and medium-sized enterprises expand their market across Asean," he said.
Suchaya Paleewong, senior marketing manager at Shopee Thailand, said the Thai online retail market has continued to grow as people shifted towards the internet during the pandemic.
Citing the "Digital 2022: July Global Statshot Report", she said the percentage of Thai internet users who bought products online each week stood at 66.5% in the first quarter, making it the largest proportion in the world.
Free shipping is the most popular reason for online purchases, followed by coupons and discounts, as well as reviews from other customers, the report indicated.
Ms Suchaya said Shopee is focusing on "shoppertainment", a combination of shopping and entertainment, while continuing to offer attractive promotions and financial services.
BUILD UNIQUE WEBSITES
Kulthirath Pakawachkrilers, newly appointed president of the Thai E-Commerce Association, said job cuts in the e-commerce industry are more common as businesses aim to become leaner the past few years.
Sellers need to have multiple sales channels apart from e-marketplaces and social commerce, she said.
"They should build their own channels or websites," Ms Kulthirath said.
In Thailand, the online retail market comprising business-to-consumer and consumer-to-consumer is expected to hit 4 trillion baht in 2025, with a compound average growth rate of 75% from 2022 to 2025, she said.
Ms Kulthirath said Thai entrepreneurs need six elements to improve their e-commerce business: insightful data, gamification, new products and services, innovation, technology, and entertainment enablers.
"E-commerce will continue to grow and evolve over the next decade," she said.
"With the rise of the metaverse, it will play a key role in commerce in what is called meta-commerce, with virtual and immersive reality experiences."
The meta-commerce market globally is expected to reach $679 billion in 2030, while the global metaverse economy is projected to hit $13 trillion that same year, said Ms Kulthirath.
left Line Shopping is riding the wave of social commerce.
SUBSIDY CUT
Paul Srivorakul, co-founder and chief executive of aCommerce, a Southeast Asian e-commerce enabler, said e-commerce operators have been forced to take "unpleasant but necessary" steps in the face of economic headwinds.
There will be less subsidies for brands as e-marketplaces crank up the profitability engine, he said.
All signs indicate the future of e-commerce is in social commerce and direct-to-consumer (D2C), said Mr Paul.
"But for brands, it doesn't have to be an either-or decision," he said.
"We support our brand clients to meet their consumers wherever they are, and all the numbers show the return on investment in omni-channel strategies including D2C and social."
The growing popularity of social commerce has been a long time coming and its arrival was primarily driven by mobile penetration in the region, a highly engaged mobile-first generation, and most importantly, a sense of community among social media users, said Mr Paul.
"In a recent survey, 58% of social media users indicated it's extremely important to feel you are part of a place or a group," he said.
"At aCommerce, we spotted the trend early and experienced the increase in demand first-hand. We went from pitching social commerce left and right to new and existing clients, to being asked about social commerce constantly and ending up shifting a lot of our attention to it as part of the hike in demand for the technology and services."
That same increase in demand supported the meteoric rise of TikTok, said Mr Paul.
"TikTok Commerce helped TikTok to develop as a platform and its demographic is now much wider than it used to be," he said.
Live commerce is gathering pace as it can potentially drive customer engagement.
"Through live-streams, TikTok has learned how to leverage its growing user base and help brands seamlessly integrate shopping and entertainment, taking front stage in the shoppertainment scene."
According to Mr Paul, the worsening economic environment will change the spending habits of consumers, prioritising necessities such as consumer goods while reducing categories like electronics, appliances or high-ticket items that average consumers would prefer to delay.
"Retailers and brands have more to do with consumer behaviour than they realise. At aCommerce, we talk with our brand partners to develop strategies like bundling, bulking and remarketing products that matches the current market reality," he said.
"Merchants need to remember that it's not always a price war and personalisation of the purchasing experience is a remarkably important factor."
Shoppers will cut back on their spending in the upcoming months, especially on discretionary goods and services, as a recent survey found only 2 out of 5 shoppers plan to spend the same amount now as they did in 2021, said Mr Paul.
"Another phenomenal contributor to the future of e-commerce in an inflationary environment is new payment solutions such as buy now, pay later," he said. "Not having to say goodbye to large sums of cash is a huge confidence booster for the industry."
According to Mr Paul, social commerce, especially live-streaming, has been useful in creating real value for brand clients.
"The engaging content promotes brand loyalty and increases lifetime value, while D2C channels enable healthier margins and control over customer data," he said.
Lazada is putting more emphasis on enhancing customer experience.
RISE OF SOCIAL COMMERCE
Line Thailand is scaling up efforts to attract sellers to its e-commerce platform Line Shopping in order to strengthen its leading position in social commerce.
"We aim to attract more social sellers to the platform, with a target of at least 30% of around 436,000 merchants to strengthen our position in social commerce," said Lertad Supadhiloke, director of e-commerce at Line Thailand.
Sales through social commerce accounted for 61% of Thailand's 270-billion-baht e-commerce market, according to Southeast Asia Social Commerce Report 2021, jointly conducted by data analytics firm iKala and Line.
Line Shopping does not charge a sales commission fee and lets sellers keep their customers' data, as well as engage with buyers using chat. The platform earns revenue from advertising fees collected from merchants via their Line Official Accounts. It also provides a live feature on the platform.
TikTok is also a rising star in social commerce.
"TikTok is growing rapidly and becoming an alternative platform where entertainment meets commerce for brands and sellers to engage in sales conversion, with content we call shoppertainment," said Sirinit Virayasiri, head of business marketing at TikTok.
Shoppertainment is content-driven commerce that seeks to entertain and educate, while integrating content and community to create highly immersive shopping experiences.
According to Ms Sirinit, the shoppertainment market in Thailand is forecast to jump to $12.4 billion by 2025, up from $3.4 billion this year.