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WEDNESDAY, September 28, 2022
nationthailand
Red flag raised on Chinese products in Thai e-commerce

Red flag raised on Chinese products in Thai e-commerce

WEDNESDAY, December 25, 2019
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E-commerce accounted for only 3 per cent of Thailand's total trade, but the country is one of the main markets of Chinese e-commerce giants as Thai consumers are more likely to shop online while Chinese products are popular in the country.

One of the reasons Chinese products keep flowing into Thailand, aside from their cheap prices, is the government's policies such as the Eastern Economic Corridor project (EEC) and tax privileges. The government wants to attract capital from foreign countries, it also allows foreign products, especially from China, to enter the country easily.

Government measures sought

Pawoot Pongvitayapanu of the Thai e-Commerce Association, who has been in the e-Commerce business for years, said Chinese e-commerce investors, especially those in the ECC are now allowed to invest in infrastructure. Previously, foreign companies set up factories and hired local operators while Chinese investors rented space in Thailand to stock export products under the Free Trade Zone agreement for distribution in country and other Asean nations. 
Pawoot said he recently had a talk with Kanit Sangsubhan, secretary-general of the EEC Office, and was told that the EEC office is planning to send more Thai products to the Chinese market which will benefit Thai manufacturers. 
He said the Revenue Department is adjusting the tax structure on foreign products sold in Thailand. They will be taxed from the first baht. The prices of goods ordered from abroad will be collected 7 per cent VAT from the first baht. If Thailand doesn't have any protective measure against the invasion of foreign goods online, the country will see a trade deficit with China, affecting a wide range of retail businesses nationwide including the production sector

Chinese products top market
Chinese products account for 60 to 70 per cent of sales on Thai e-commerce platforms and 20-30 per cent in total sales to foreign countries.
“I collected data from Lazada website on October 11, divided by category and origin of the product, and found that there were 41.77 trillion products on Lazada, comprising 21.99 trillion of domestic products or 52.65 per cent, and 18.65 trillion of Chinese products or 44.65 per cent, which was a significant share while not many products from other countries were available,” said Pawoot.
Some categories have a large numbers of Chinese products such as shoes, watches, luggage, sports equipment. There are 60-70 per cent of Chinese products in the infant, smart device and toy categories. Among IT products or gadgets, especially on Lazada, products from China account for over half of the total. 
After the opening of ECC, these products will be distributed more quickly.
However, consumers will pay less. What will be missing is the middleman who buys Chinese products for sale. The first batch of products to be affected are gadgets manufactured in China which carry cheaper prices since they come directly from the factory. There is also a dark side as fake items have been found among cosmetic products.

Thailand may lose Bt50 billion
"When China has a direct delivery channel and dumps millions of products into Thai hands in just a few days. I personally predicted that this year, Thais will order products through Lazada worth over Bt1 billion. By 2020, it is expected to be over Bt10 billion, or with an average growth rate of 30 per cent per year, and within 5 years, Thais will buy Chinese products through Lazada up to Bt50 billion," Pawoott said.
For Thai traders, the chance of competition is rather small. Entrepreneurs must try to look for other products and create their own brand in order to compete with these Chinese products.

Entrepreneurs should adapt

At the same time, Thai businessmean should not rely on any platform but balancing ports and analysing for positive channels. They also need to self-collect customer information and start marketing with those customers without going through anyone, be it marketplace or social media. The merchant should own channels which he can manage hinself. 
Thai e-commerce is currently growing although E-Market Place in Thailand has died since nobody can fight Lazada or Shopee. However, there is still another segment that still has potential, living on the side of social commerce - Merchants who sell and interact with customers on Facebook and LINE. Looking deeper into certain categories such as supplements, consumer products, or beauty products, Chinese products have not penetrated the market yet because of certian problems with the FDA
Research found that Thailand is the leader of the social e-commerce market, with a 40 per cent growth rate a year, outpacing all nations in the world. 
Thanawat Malabuppha, president of the Thai E-Commerce Association, said the Thai online market grew 30 per cent a year, with an annual value of Bt200 billion.
According to Priceza, a shopping search engine, SMEs and start-up business should penetrate into the online market which are social media 40 per cent, E Market Place 35 per cent, and E-Tailers or Brands website 25 per cent, with the most popular products being maternal and child products, health, beauty, fashion, clothing and electronic products, among others.
Borderless online commerce will begin to play a major role which could be seen from the number of Chinese products. According to data from three marketplaces in Thailand, this year the number of products has increased by 174 million per cent, with 77 per cent in Chinese products.

Control on Chinese products
Online traders need to know that at present, 80 per cent of the competitors of the same product are not based in the country, so there must be a direct way to sell products to customers while the Customer Lifetime Value (CLV) market is still developing. Currently, the Indonesian market is as attractive as Vietnam since it is a big market but a local partner is needed. 
Startups that invest in new products will find it difficult to compete amid the invasion of Chinese product. They must have a clear strategy for certain group. At the same time, the government should have measures to prevent Chinese goods from spilling in including encouraging startup investments, such as exempting tax for small traders.
"The e-commerce market has grown a lot since it's easy to access and fast. The most popular products are fashion, beauty, electronics devices, and smartphones. The only concern is the overflow of products from China. The government must take action and protect entrepreneurs before drowning in Chinese products" Pawoot said.