Thai SMEs need to grow beyond Kingdom's borders

Thai SMEs need to grow beyond Kingdom's borders

E-commerce will be playing a critical role in the growth of the global economy. Cross-border retail volumes, as indicated in DHL Express' 21st Century Spice Trade report, are expected to increase at an annual average rate of 25% between 2015 and 2020 -- twice the rate of domestic e-commerce growth.

According to the Electronic Transactions Development Agency (Etda), Thailand's total e-commerce market size this year will be worth 2.52 trillion baht, a 12.4% growth from 2016. Still, more than 80% of Thailand's e-commerce market growth comes from domestic trade, leaving room to boost the country's economic growth by internationalising small and medium enterprises (SMEs).

Trade barriers between countries have significantly lowered in recent times, and Thailand is certainly one of the beneficiaries of this new climate. In fact, the Kingdom is also in the process of forging free trade agreements with the EU, US and India, all of which promise to substantially lower entry barriers to these high-consumption markets. This has created ample opportunities for SMEs in Thailand to stay competitive, by buying from a wider source of manufacturers, and selling to larger markets abroad.

The power of an e-commerce business lies in its ability to leverage the economies of scale to sell fast and cheaply. Thai SMEs should actively test demand in other markets with e-commerce sites and marketplace listings on platforms.

The Thai government's Industry 4.0 policy aims to digitise its industrial sector to allow it to better compete on a global level, and SMEs are at the forefront of this transformation. The strategy is similar to that being executed on the regional level, with emphasis being placed on exposure to innovation, soft skills and digital know-how to encourage businesses to explore new markets.

Collaboration with institutions such as the Organisation for Economic Cooperation and Development (OECD) as well as e-commerce giants, promises to bring in the necessary expertise to make Industry 4.0 a reality. Thailand has put its rhetoric into practice with initiatives like its e-commerce marketplace for rice sales. As more of these platforms emerge, Thai SMEs should use them to gain both reach and experience in selling online. They should also, wherever possible, take advantage of emerging government funds for digital technology adoption and up-skilling of their workers.

Understanding the entire building blocks of successful e-commerce value chain can be complicated for SMEs at the beginning. SMEs must first understand how to generate demand with digital marketing, manage online transaction and payment, fulfil orders, manage cross-border logistics management, handle and comply with customs regulations, and cope with customer service and return handling.

Typically, cross-border e-commerce operators struggle most on payments and logistics. These are also the two key elements that can create positive buying experiences and generate repeat purchases. Online payment methods must be convenient for the buyers. Ideally, buyers should know the total cost they need to pay, which include duties and taxes and merchandise and shipping cost. This will offer convenience and create a positive buying experience at the get-go.

After an online transaction has been completed, SMEs must fulfil their orders and deliver their products to worldwide buyers. This is where critical local knowledge comes in. A product that has entered a country may still be subjected to a variety of regulations unique to the market. For example, on top of standard customs clearance, food and technology goods often require licences from other governing agencies -- such as agriculture and telecommunications, respectively.

Understanding the destination market's rules and regulations is vital, as it will help minimise the risk of unexpected costs, logistics delays, and penalties for unintended errors or oversights on import.

For e-commerce in Thailand to shift from a market of great potential to one that is truly flourishing, several challenges must first be resolved. However, SMEs alone cannot surmount those challenges. These days, there are attempts in creating an ecosystem from both public and private sectors that have sprung to assist SMEs and e-commerce operators as an "e-facilitator" enabling or even aggregating all the activities in the e-commerce value chain into one platform, making matters more user-friendly and efficient.

Having to deal with these multiple agents in handling duties, taxes, and customs clearance from each and every market can turn into an administrative nightmare. Many SMEs opt to partner with a single door-to-door logistics provider to help them manage the import or export process and support them when fulfilling their responsibilities. They can therefore leave their customs and handling processes to logistics providers, allowing them to focus on growing the business and expanding their sales channels.

E-commerce is a complex, multi-faceted and evolving area. There is a need for all stakeholders in government and the private sector to understand its inter-linkages and complexities. It seems complex, but joint collaborations between private and public sectors will bring about massive opportunities to the Thai SMEs and help them go international in a sustainable way.

Chananyarak Phetcharat is managing director of DHL Express Thailand.

Chananyarak Phetcharat

Managing director of DHL Express Thailand

Chananyarak Phetcharat is managing director of DHL Express Thailand.

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