Cost-wary SMEs fuel growth in e-commerce industry

Pawoot Pongvitayapanu, managing director of the www.tarad.com e-market place and vice president of the Thai e-Commerce Association, cited a National Statistical Office forecast that the value of the country's e-commerce market this year would surge about 40 per cent from last year's Bt400 billion.

He said there were four main drivers of Thailand's e-commerce growth.

One is the economic downturn, which has prompted many firms to try e-commerce channels. Opening an online shop requires less money and can reach a wider customer base, he said.

The second driver is the declining price of accessing broadband Internet, making it more accessible for both vendors and potential customers.

There are more than 1 million broadband-Internet users in Thailand.

Pawoot said the third contributor was a push by government agencies to use e-commerce. The Industrial Promotion Department and the Department of Export Promotion have encouraged SMEs to conduct business over the Internet and leverage it as a tool for enhancing their competitiveness.

The fourth driver is behavioural change among SMEs, which are more open to adopt new technology to support their businesses, Pawoot said.

"They want to increase their sales on a lower-cost basis. The answer is technology, especially the Internet, which helps them reach greater customer numbers," Pawoot said, adding that opening online shops also means 24-hour service.

The www.tarad.com website, which features an e-marketplace where online merchants set up shops, plans to increase revenue 50-60 per cent this year, but Pawoot declined to specify a specific revenue figure.

The website earns revenue from collecting hosting fees from online merchants and its provision of e-commerce solutions to them.

About 150,000 online merchants offering more than 1 million items altogether can be found at www.tarad.com. The site recorded about 240,000 product-purchase transactions in the first half of this year, up from 190,000 transactions in the same period last year. The top three products are fashion items, mobile phones and cars.

Most buyers still prefer to pay offline for products and services purchased online. From the total transactions conducted on its market place, 80 per cent are paid for offline, including via counter services, bank accounts and ATMs. Only 20 per cent of buyers pay via the online channel, Pawoot said.

Teeravut Wongwiboonsin, managing director of Asian Star Trading, which owns major e-market place www.tohome.com, said the growth drivers of e-commerce this year included the growing number of Internet users, which he expected to reach 16 million this year, from over 10 million at present.

Other factors are consumers' growing familiarity with the technology and the availability of more online payment methods. Another factor is rising transportation costs and oil prices, which have driven consumers to spend more time at home and shop online.

There are two business models at www.tohome.com: selling its own items and acting as an e-market place for businesses to set up their online shops. The top sales items are mobile phones, health and beauty products and home furniture.

The site averages 4,000-5,000 purchase transactions a month. It has about 150,000 customers, 90 per cent of whom are in Thailand. Some 60 per cent of customers are men, while 55 per cent of all customers in Thailand are in Bangkok.

"In the next few years, the number of women and upcountry customers will increase. We expect the ratio of women to men will be 50:50 soon and that of customers in Bangkok to those upcountry also to be 50:50 in the near future," Teeravut said.

This year, www.tohome.com will add new product categories, such as travel and tourism products, and increase beauty and health items to woo women customers aggressively.

"Our business has typically grown 30-40 per cent annually these past three years. This year, we expect a similar growth rate," Teeravut said.

The rising number of online merchants has also driven growth in the business of providing ready-made homepage solutions for those who want to set up e-commerce homepages.

Songyot Kanthamanon, managing director of Grand Planet Enterprise, which owns the ready-made homepage provider www.readyplanet.com, said his company planned to grow 40 per cent this year and meet a revenue target of Bt50 million.

At present, it has about 8,000 customers, 70 per cent of which are SMEs in the tourism, manufacturing and fashion segments.

Besides offering ready-made homepages, www.readyplanet.com provides total solutions for customers, starting from domain-name registration, website design and development, website management and online payment systems to marketing services. The company has about 100 competitors in the area, reflecting rapid growth in the readymade website business.

Songyot said that the present economic situation was a major driver of e-commerce growth, because more businesses were looking to market products via efficient channels on small budgets.