Thailand's e-commerce landscape is entering the next stage where major e-marketplace players are introducing innovative features to woo customers instead of focusing on price wars, while social commerce is strengthening in a bid to capture buyers.
The growth of e-commerce will happen across diverse channels, ranging from social media to websites owned by product developers, said analysts.
Live-streaming as a method to sell products is gaining popularity because it encourages consumers to quickly make a purchasing decision, according to analysts.
Another trend is the application of artificial intelligence (AI) to bolster e-commerce business.
Though JD Central, the sector's third-largest player, withdrew from the market earlier this month, Lazada and Shopee remain as a dominant duo.
The pair have had little time to enjoy the prospect of less competition as social commerce players TikTok Shop, Line Shopping and Facebook all swooped in to gain market share.
Thanida Suiwatana, chief of business for Lazada Thailand, said earlier the company plans to continue sustainable growth this year in three areas: building a differentiated service for users; ensuring a smooth shopping experience and enhancing security; and using innovation to drive its platform.
"Different user experiences are key to attracting customers," she said.
Lazada's latest features include LazLive, a curated interactive live content series to stimulate the impulse to purchase, and Virtual Try-On, which lets consumers try products on virtually.
Thailand's online retail sector is expected to grow 13% to reach 600 billion baht this year, accounting for 16% of the retail market.
The number of local e-commerce users is expected to reach 43.5 million by 2025, Ms Thanida said.
Lazada Thailand was the first e-marketplace in Thailand to post a profit, doing so in 2022 after operating for more than a decade.
Pawoot Pongvitayapanu, Tarad.com and Paysolutions CEO, said with the price war era among e-marketplaces about to end, both Lazada and Shopee would switch to a focus on generating profits.
He said e-marketplace operators would continue to increase service fees for sellers.
Lazada is expected to increase its service fee from a flat rate of 2.14%, including value-added tax (VAT), for all product categories, to between 3.21-4.26% (including VAT), said Mr Pawoot.
Mr Pawoot says digital financial services are a catalyst for Thailand's e-commerce market to grow. Somchai Poomlard
The variation will depend on the product category. The new rate will take effect on April 1, he said.
As a result, Mr Pawoot said entrepreneurs will adapt by selling a greater proportion of their products on social media, their own websites or other channels.
The boom in Thai e-marketplaces led many Chinese manufacturers and importers to establish warehouses in Bangkok to sell their products through online channels, he said.
The warehouses also enable Chinese distributors to shorten their product delivery time to market and lower their prices.
Some of these products were illegally imported into the country, bypassing standard inspection procedures, said Mr Pawoot.
The authorities should look into this matter to ensure a level playing field for imports and locally made products, he said.
DIGITAL FINANCIAL SERVICES
Mr Pawoot said digital financial services are a catalyst for the growth of Thai e-commerce.
Digital financial services refer to online financial services provided by non-banks. The services include online payment services, digital loans, online insurance services, online money transfers and digital financing.
"Many business operators such as Grab, Shopee, Foodpanda and Lazada are increasingly providing these financial services to their own merchants," he said.
Sawapop Tuamsang, chief executive of Zort, a Bangkok-based order and inventory management platform, said the e-commerce market this year is expected to continue its strong performance, with a predicted value growth of 15-20%, up from 660 billion baht the previous year.
Since last year, all the social platforms have developed features to support e-commerce, enabling merchants to sell their products and buyers to choose and pay for the products.
Short video commerce is another trend affecting consumer purchasing decisions, attracting people interested in watching streamed content.
Paul Srivorakul, co-founder and group chief executive of aCommerce, an e-commerce enabler in Southeast Asia, said the landscape in Thailand is rapidly evolving, with both horizontal and vertical marketplaces competing for market share.
With the exit of JD Central, incumbent marketplaces are continuing to thrive, comprising 51% of the total e-commerce market currently worth 770 billion baht, he said.
Similar to global trends, Thailand's e-commerce is moving towards vertical category-specific marketplaces that cater to specific consumer needs.
Examples of such marketplaces include NocNoc for home goods, Pomelo for fashion, HDmall for healthcare and Konvy for beauty products.
A greater number of vertical business-to-consumer marketplaces should emerge in the near future, such as those focused on handicrafts, luxury, pets and automobiles, said Mr Paul.
Mr Paul says the e-commerce landscape in Thailand is rapidly evolving, with both horizontal and vertical marketplaces competing for market shares.
Traditional retailers are also jumping aboard the e-marketplace bandwagon with their own platforms and business models to compete with bigger players.
Social commerce also adopted the marketplace model. He said analysts predict TikTok Shop in Southeast Asia will grow by almost 200% from $4.4 billion in 2022 to an estimated $12 billion this year.
This significant growth is likely to take market share away from Shopee and Line Shopping, said Mr Paul.
Quick commerce represents another vertical marketplace, concentrating on providing grocery and meal deliveries in less than an hour.
The quick commerce market was estimated to be worth 85 billion baht, or 11% of the entire e-commerce market, last year.
Social media continues to grow, with more than 73% of the country's population using platforms like Line, Tiktok Shop, Facebook and Instagram.
The channel is a significant driver of e-commerce sales and accounted for around 200 billion baht in sales last year.
Brands will continue to invest and leverage these influential platforms to connect with customers and sell products directly to increase branding, engagement and loyalty, especially amongst the younger demographics, he said.
One of the most exciting developments in social commerce is the emergence of live-stream shopping, which is worth 52 billion baht per year, said Mr Paul.
Live-selling combines influencers, live video, social media and interactive features to engage customers and increase sales.
Live-stream shopping should become increasingly popular among Thai consumers, with the trend expected to continue over the coming years, he said.
With global interest rates rising, creating a more challenging business environment, the large e-marketplaces have been pressured to prioritise profitability.
To achieve this, they increased their commission fees while reducing their marketing and subsidies to market participants, Mr Paul said.
In response, entrepreneurs are increasingly interested in securing customer relationships and avoiding intermediary marketplace fees.
This led to a shift to direct-to-consumer (D2C) platforms that allow brands to reduce their reliance on marketplaces and diversify their sales channels to reduce their exposure to risk, he said.
In addition, D2C models enable brands to test and iterate on price and product offerings more quickly by gathering feedback from customers.
This shift towards D2C models represents an important trend in retail and e-commerce, offering brands greater control, data, flexibility and agility in responding to changing market conditions, said Mr Paul.
Business-to-business (B2B) e-commerce is projected to continue growing this year as the pandemic caused companies to interact and buy products online, avoiding face-to-face meetings with sales representatives.
Companies will start investing in B2B e-commerce to increase sales and distribution, create better digital customer experiences, improve and automate their internal processes, and get a holistic view of the customer, he said.
Rapid advancements in AI development have encouraged companies to invest in and deploy the technology across all aspects of their retail and e-commerce operations, Mr Paul said.
According to market and consumer data provider Statista, 84% of e-commerce businesses are either actively working on adopting AI solutions or have it as a top priority.
The integration of AI into e-commerce operations offers several benefits, including targeted marketing through deep personalisation based on customer interactions.
Through the analysis of big data, AI algorithms can deliver what customers really want, ultimately boosting customer retention rates and sales, he said.
Repetitive tasks such as customer support, discount options, invoicing and email marketing can be easily automated via AI, leading to a more efficient and seamless sales process.
Leveraging customer data insights can also make the sales process more effective.
The use of AI tools not only lowers operating costs, but also increases productivity by reducing employee burden, said Mr Paul.
SUSTAINABILITY A PRIORITY
Like other business sectors, e-commerce also embraced the trend of sustainability.
Companies are expected to start taking measures to promote sustainable practices and offer sustainable products, he said. For example, aCommerce provides biodegradable packaging to its partners.
"We believe more brands and retailers will start prioritising sustainability to decrease their impact on the environment, differentiate themselves from competitors, and establish a loyal customer base that values eco-friendliness," said Mr Paul.
He said another trend projected to continue in Thailand this year is online grocery shopping among older generations, specifically Generation X and Baby Boomers, even as the pandemic restrictions ease.
This trend is gaining momentum and expanding in various product categories, with larger average basket sizes, said Mr Paul.
These affluent groups are becoming aware of the benefits of online shopping, such as ease of use, affordability and availability in comparison with physical stores, he said.