THE E-COMMERCE industry was shaken by Alibaba’s acquisition of Lazada.
The deal has raised concerns that Lazada may become a channel through which cheaper goods from China can flood the Thai market, while Jack Ma said SMEs in Asean would benefit from selling Thai goods to Chinese consumers.
This article will delve into whether Thailand is losing out from the Alizada phenomenon. Are there any products that Thailand stands a winning chance to sell?
The rapid income growth outlook for Asean’s middle class and its over 618 million-strong consumer base, mostly still without access to e-commerce, have prompted China’s e-commerce giant, Alibaba, to invest in full strength in the Asean market.
The acquisition of Lazada, the region’s largest e-commerce website operating in six Asean countries, marks the first step.
This move was followed by the disclosure of a partnership between Ant Financial Services – a parent of Alipay, which is China’s No 1 third-party online payment platform under the Alibaba Group umbrella – and Ascend Money of Thailand’s CP Group.
Lazada has also recently released its plan to invest in Thailand’s Eastern Economic Corridor, where the company will set up its e-commerce park and logistics hub, making Thailand its door to CLMV (Indochina).
Alibaba has joined hands with the Malaysian government to set up the Electronic World Trade Platform (eWTP) aimed at holistically promoting international trade via the platform and at helping SMEs overcome complex regulations, processes and barriers that hinder their participation in global commerce.
It is worth noting that “every step taken by Alibaba in the Asean region contributes to building the necessary infrastructure and creating an appropriate e-commerce ecosystem to flourish in the region, paving the way for a holistic provision of e-commerce services under the Alibaba umbrella”.
Jack Ma, founder and CEO of Alibaba, said the company builds the infrastructure and develops a favourable e-commerce business environment in Asean, both in logistics and payment systems, to make trade between China and Asean more efficient.
This would allow Asean SMEs to enter the Chinese market, tapping into its 1.37 billion population, through Alibaba’s Tmall.com.
However, a more efficient international trading system reduces the cost of foreign products to a level close to the cost of the domestically-produced counterpart, which in turn subjects the survival of Thai producers to the market mechanism.
A key question is whether Thai businesses stand to win or lose from the freer trade as a result of the Alizada phenomenon.
Upon learning of the acquisition of Lazada by Alibaba, many are concerned whether Lazada would become a channel through which Chinese goods would flood the Thai market.
It is feared that the Alizada phenomenon will further lower the cost of foreign goods to nearly as low as their domestic counterparts, which may lead to even more intense competition in many sectors.
Thailand’s gain from being able to enter the Chinese market may outweigh the loss from the increased competition.
However, the EIC views the Alizada phenomenon not as competition between Thailand and China alone, but rather competition between Asean and China, if the Lazada platform successfully connects shops from the various Asean countries with China.
Therefore, there may also be other countries in Asean that are able to compete with China, which should also be of concern to Thailand, but there may also be certain product categories in which Thailand still has a role to play.
This study uses the net export per capita index to measure the competitiveness of each country in the region and the role of each country in international trade.
The countries are Thailand, China, Indonesia, Malaysia, the Philippines and Vietnam, all of which are utilising either Lazada or Alibaba platforms.
The roles in international trade can be divided into two categories – the producer, for countries with a trade surplus, which would be reflected by a positive net export per capita index, and the consumer, for countries with a trade deficit, which would be reflected by a negative net export per capita index.
The study has shown that most of the countries in the region are producers. In addition, to measure the competitiveness among the producer countries, the net export per capita index can identify whether the population of Country A has a relatively higher production capability than the regional average if the net export per capita index is higher than 1.
Thai producers lead the market in health and beauty products as well as household appliances.
China and Vietnam are key producers of clothing and footwear, electronics and computers.
Amid the raging business war marked by intensifying competition, building brands and maintaining product quality are essential for long-term business growth.
New businesses seeking to fulfil a gap in the market need to innovate products with unique selling points.
Pimnipa is with Siam Commercial Bank’s Economic Intelligence Centre