The flood of cheap Chinese products into Thailand is expected to grow even larger following the entry of the Chinese online retailer Temu to the local e-commerce market on Monday.
The move is expected to stoke a price war in the local e-commerce market and affect Lazada, Shopee and TikTok, as well as fuelling concerns over the potential shuttering of more local factories.
The Thai government needs to take more measures to curb the flood of Chinese products, in particular non-standard and illegal cross-border products, while local small and medium-sized enterprises (SMEs) should stop importing Chinese products for sale to avoid losses, according to e-commerce business leaders.
The Temu Thailand application offers free returns on products for a period of 90 days and a promotional discount of up to 90% on products, along with a set of discount coupons worth 70 baht.
Alessandro Piscini, the co-founder of the e-commerce enablement specialist CREA Asia and a former chief executive of Lazada Thailand, said Temu’s entry will intensify competition in terms of cross-border sales.
“You should expect a significant increase in the market share of cross-border items, particularly in fashion and lifestyle home products [shipped directly from China],” he said. “While brands will probably come later in the game as they will focus first on TikTok, it will be interesting to see how this will play out in live commerce.”
A source who requested anonymity said Southeast Asia is a prime destination for Chinese e-commerce players as they need to find more export markets while facing strict rules in the US and Europe.
Temu’s parent company is PDD Holdings, a Chinese e-commerce titan. Its other platform, Pinduoduo, specialises in group purchases that have cost advantages.
Temu’s rapid global expansion at one point last year helped US-listed PDD become China’s most valuable e-commerce company, outstripping longtime leaders Alibaba and JD.com.
Pawoot Pongvitayapanu, honorary president of the Thai E-commerce Association, said Temu focuses on non-branded products at lower prices.
The lower-priced items in this challenging economy will attract buyers and affect local SMEs. For example, it offers paper napkins for 20 baht, versus 60 baht for the Thai version of the same product.
“We can expect more factory closures and a major wave of millions of Chinese products,” Mr Pawoot said.
Subsidised pricing
Temu also uses subsidised pricing on discount promotions and local support and fast delivery from China to Bangkok within five days, as well as enjoying a favourable baht. This will push the next wave of Chinese products flooding into Thailand, he added.
Mr Pawoot added that the Thai government must take more action on curbing illegal cross border products and more stringent on import standard requirements to promote the quality products and ensure fair competition of local SMEs.
More importantly, policymakers must strictly examine Chinese nominees who have established businesses in Thailand.
Thanawat Malabuppha, chief executive of Priceza Group, said PDD has expanded into overseas markets through Temu by bringing a variety of products from Chinese factories to the global market, starting in the US in 2022 and then Europe. Last year it entered Southeast Asia in the Philippines and Malaysia.
Temu has enjoyed more success in the international market than Alibaba’s Ali Express as Temu supports more local languages and has a larger network ecosystem.
“We can expect the dumping of Chinese unbranded products in Thailand with massive promotion and discounts, and later on Temu will open TemuMall for branded products, similar to Shopee,” Mr Thanawat added.
He said the government should impose stricter import measures, particularly customs taxes for products priced below 1,500 baht.
The government this month introduced 7% VAT on all imported goods priced below 1,500 baht, mainly to help local businesses struggling to compete with cheap products from abroad.
Local SMEs that import Chinese products need to be careful and stop selling those products to avoid losses, warned Mr Thanawat.
Kulthirath Pakawachkrilers, chief executive of the Thailand e-Business Center (TeC) and president of the Thai e-Commerce Association, said the Thai market has a high potential.
“However, if compared to Indonesia and Vietnam, our cost per DAU [direct active user] is the most expensive among them,” she said. “That’s why other big e-commerce platforms like Kuaishou or some other giant haven’t decided to come here yet.”
Temu chose Thailand because consumers like the best prices for products, she added.
The company has already launched in other countries in Asia-Pacific like Australia, so it is now comfortable to launch here.
Temu will target Ali Express and Amazon shoppers, along with Shopee and Lazada consumers.
The company’s motto is “shopping like a billionaire”, meaning that they want shoppers to feel like they have unlimited budgets as they have all the best offers, said Ms Kulthirath.
Ms Kulthirath said TeC and the Thai E-commerce Association could help local SMEs tap the Hong Kong and China markets.
Alex Ng, chief executive of Kerry Express (Thailand), said Temu is another player that could disrupt Lazada, Shopee and TikTok.
It will push the volume of e-commerce to another level, but prices of products and logistic fees to a new low. J&T and Flash are expected to suffer from another price war.
Kerry Express will continue to serve e-commerce platforms but will focus on the higher-end market and international parcels, said Mr Ng.
Dumping effect
Sittiphol Viboonthanakul, chairman of the economic development committee in parliament, said Temu cannot be ignored as it is a growing company with huge capital.
Temu offers products 80-90% cheaper than in the US market. It has grown from 5 million to 100 million users in the US.
“It will use price and service to attract Thai online shoppers,” he added.
In the short term, the government should seriously enforce local product standards and safety measures for consumers.
In the long term, he said the government needs to study US, European and Indonesian tax measures, and the Trade Competition Commission of Thailand and the Electronic Transactions Development Agency need legal action to tackle this issue before the local economy is ruined.
“We will propose the establishment of a subcommittee to monitor illegal cross-border capital and push local standards to apply to import products,” said Mr Sittiphol.
In a related development, hundreds of merchants staged a rally at a PDD Holdings office in Guangzhou on Monday, protesting what they called unfair penalties that Temu is increasingly levying, Bloomberg reported.
According to Temu, the rally happened at the office of a Temu logistics affiliate in Guangzhou, instead of "a PDD Holdings office in Guangzhou".
According to Bloomberg, the protest was the culmination of growing frustration among merchants and third-party sellers, who feel PDD is increasingly squeezing them for revenue as it embarks on a costly global expansion.
Their complaints centre on PDD’s practice of withholding payments to merchants who are judged to have fallen short on customer expectations, the people said. That includes anything from missing delivery deadlines to mismatched product listings.
According to Temu, recently, a group of merchants gathered at the office of a Temu logistics affiliate in Guangzhou. They were unhappy with how Temu handled after-sales issues related to the quality and compliance of their products, disputing an amount worth several million yuan.
These merchants have declined to resolve the disputes through the normal arbitration and legal channels stated in the seller agreements. The situation is stable, and the company is actively working with the merchants to find a solution.
