Sunday, 14 September 2014 22:25

Thailand: Offline vs. Online retailing

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Offline vs. Online retailing in Thailand Offline vs. Online retailing in Thailand
Thailand is currently one of the largest markets for Internet retail in Asia, but despite enjoying growth in 2013, Internet retail sales in Thailand represented only 1% of total retail.

According to market research, firm Euromonitor International, Internet retailing in Thailand is stagnating in terms of its share of overall retailing and is expected to remain at this level through 2018.

Valued at U$1.054 billion, Thailand is currently one of the largest markets for Internet retail in Asia, and is expected to see its value growing by 74.9% to reach $1.843 billion in 2018. However, the bigger picture remains that the share of Internet retailing in Thailand is weak and will continue to stagnate.

The slow uptake of Internet retailing is according to Euromonitor International, mainly due to strong competition from brick-and-mortar based channels. With 63%, Grocery retailing in Thailand dominates the retail market as large chains move aggressively in the expansion of new outlets in urban and regional areas.

Overall retail sales are expected to improve as consumers regain confidence and show a 6-7% full-year growth from 1 trillion Thai baht last year according to Thai Retailers Association (TRA).

Unfavorable economic and political factors in the first months of 2014 led to a sales decline of 4.5% in durable goods, 3% in semi-durable goods and 5% in non-durable or consumable goods. This reflected the reduced spending power in the low-income segment in the first half with family debt also reaching a relatively high level.

Growth in the first half came mostly from the convenience and specialty store sectors, which grew by 7% and 4.5% respectively in terms of store count. The number of hypermarkets and supermarkets rose by 3.5%, while department stores saw 3% growth.

Thai Retailers Association (TRA) expect growth will improve on the back of an injection by the military regime to stimulate demand beginning in October. TRA has proposed the junta consider several economic stimulus measures to propel the economy and retail business including lowering the cost of living for Thais in areas such as food, transport and fuel.


Young professionals supporting convenience stores growth

In 2013, lower income consumers gained stronger purchasing power due to government policies, like the increase of the minimum wage to THB 300 (U$ 9.30) per day, as well as a policy of supporting the agricultural sector. Urban families are shrinking, with an increasing number of young people moving out of the family home into condominiums and thereby supporting growth demand for convenience stores, notably for purchases of everyday groceries.

Foodland Supermarket will accelerate its expansion plan next year to take advantage of the huge purchasing power of the Asean Economic Community (AEC). Foodland aims to open four new supermarkets a year starting in 2015, compared with the plan of three per year for the past two years. Foodland projects tougher competition in Bangkok and wants to access young families in suburban areas as the market in downtown areas is saturated.

Robinson Department store plans to open new branches across the country this year. Five of the new branches are scheduled to open in Chachoengsao, Roi Et, Samut Prakan, Prachin Buri and Mukdahan provinces.

Central Pattana Plc (CPN) plans to capture the high spending power in the South by opening CentralPlaza in Nakhon Si Thammarat this year.

Japan's Tokyu Department Store has announced its first local expansion in 29 years by joining hands with local MBK Plc to develop a new store at Paradise Park mall on Srinakarin Road in Bangkok next year.

The Platinum Group, is branching out with a community mall on Koh Samui due to open by the end of this year as part of an effort to build sustainable growth in the long term. Central Pattana Plc recently opened CentralFestival Samui on Chaweng beach, the island's main resort and a major economic zone.


Luxury is in trend for High-income consumers

Central Ladphrao

High-income consumers are among the top priorities of retail players, as the segment was not impacted in the same way by economic circumstances. High-end department stores such as Siam Paragon entered into cooperative strategies with credit card companies and banks such as Siam commercial Bank (SCB) to promote weekend shopping with discounts of up to 80% from early morning to noon, exclusively for platinum and beyond cardholders. Likewise, the new department stores in Bangkok, such as Central Embassy and The Emquartier are moving towards high-end, luxury-style shopping segments.

Euromonitor expects the launch of the Asian Economy Community (AEC) in 2015, should bring a new dimension in retailing to Thailand, thanks to the entrance of new international chained players, as well as seeing new varieties of grocery products becoming widely available. Price competition will become more intense due to reductions in tariff barriers, which will push up the free flow of goods to Thailand.


Internet retailing driven by mobile users and social media

Internet retailing in Thailand remains fragmented, with many small online shopping websites. However, among these small players the major brick-and-mortar chains have also expanded into Internet retailing. Department stores and supermarkets such as Big C, Tops and Tesco Lotus have developed and promoted online sales targeting urban consumers.

Tesco Lotus Online shop

Tesco Lotus has more than 20,000 products available at its online shop. 10 stores in Bangkok and three in the provinces functioning as distribution centers for delivering products to online customers.

Children's products, beverages, and household products are the top three categories Thais like to shop online at Tesco Lotus and the average purchasing value online was three times that of an offline purchase at a Tesco Lotus store. On average, customers shop online once every two weeks, and prefer to pay with their credit cards via an online payment method.

Having just launched a pay-on-delivery service, for both credit card and cash payment, most of the customer still pay with their credit cards online while 10-15% of the online customers prefer to pay with cash on delivery. The company will also launch "Tesco Shop" on where it will offer electronic goods and other non-food products for online shopping.

According to Chief marketing officer, Wanna Swuddigul adding more online channels was a priority for Tesco Lotus as Thais spend more time online and do more e-commerce. Tesco Lotus marketing budget for promoting online business is spent mainly on - search engines, social networks, and banner ads.

“We cannot disclose the proportion of revenue between online and offline. Online is very small but is growing healthily," Wanna Swuddigul told The Nation.

Online sales of fashion clothing, gadgets and accessories tended to receive a very positive response. Due to the large popularity of mobile social media services in Thailand, such as Line, Facebook, Twitter and YouTube which enables retailers to promote their products and exchange messages directly with consumers, have become necessary tools and channels that retailers needs to develop. The new emerging trend in 2013 was the introduction and promotion of mobile retailing.


Low computer and broadband internet penetration

Although online shopping has increased in popularity, due to the increasing popularity of smartphones and a huge shift from 2G to 3G, most Thais still prefer to visit brick-and-mortar stores to see and touch the products before buying, combined with low trust in online payment and the delivery process has benefited the store-based channels.

Low computer and landline broadband internet penetration is limiting the uptake of online retailing in Thailand. Although Thailand is, in front when it comes to mobile internet usage it lags behind other emerging regions in terms of broadband Internet users, with a broadband penetration per population of only 7.62% and only 5.5 million of the 23.8 million Thai households owning a computer.

A survey conducted by market research firm TNS found 40% of 421 respondents had never shopped online and showed no interest in online shopping over the next 12 months.

16% of respondents who never shopped online said they would be open to making an online purchase because friends and families told them they had a good experience doing so, while 14% said they would buy online if vendors provided a cash-on-delivery service.

In addition, 47% of respondents who never shopped online said they were interested in purchasing fashion products online but concerned about product quality and payment security.

Delays in telecom infrastructure projects and investments due to severe flooding, political unrest and uncertain new regulatory decisions have led to slow progress for improved broadband connectivity within the country.

According to Mylan Nguyen, retailing analyst at Euromonitor International. "Internet retailing in Thailand is unlikely to grow faster without more efforts by the Thai government to develop the country's telecommunications network". 


Yozzo is a Telecom Consulting Firm, based in Bangkok, Thailand. The company specializes in MVNO, Devices, Media & Broadcasting - mostly, but not limited to ASEAN. 


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