Thailand: Local e-commerce players ramp up price war
Thailand’s e-commerce price wars are intensifying as online retailers sacrifice margins by cutting product prices and offering discounts while reducing subsidies on shipping to ease losses.
Lazada, the e-commerce arm under China-based Alibaba, said Thailand ranks third in mobile shopping on its platform behind China and Indonesia. Lazada Thailand is also considering opening its first “physical shop” as part of an online-to-offline strategy.
“Despite a sluggish economy, online retail will continue its growth with double digits every year, as it still accounts for only 3% of total retail spending in Thailand,” said Thanida Suiwatana, chief marketing officer of Lazada Thailand.
Thailand’s e-commerce sector is locked in a fierce battle to attract buyers, with each major platform trying to set itself apart as the market leader while the industry is still young.
As of June 2019, Lazada has seen Thais shop mostly on Monday during 10-11am, with average time spent of 10.3 minutes on the Lazada app per day, Ms Thanida said.
Lazada has also seen monthly users increase by 58% and daily users up 69% in the first half of 2019 compared with the same period last year, while sales have risen 68.3%.
The three provinces that saw the greatest increases in sales were Narathiwat, Yala and Sa Kaeo.
Mobile phones and women’s clothing were the biggest-selling items. In the second half of this year, the company expects mobile phones, women’s and men’s clothing, diapers and complementary foods to be top sellers.
Ms Thanida said Lazada has reduced subsidies on delivery costs in its marketplace. It previously offered a 70% discount on shipping but has now lowered it to 30% for merchants in order to offer free delivery to buyers.
For products sold by Lazada itself, it will continue to make free shipping a part of its marketing campaign.
Currently, 80% of Lazada’s total platform is its e-marketplace, which consists of third-party merchants and LazMall, focused on leading premium brands. The other 20% is its own virtual department store, where the company sells products directly.
This year Lazada also increased its major sales campaign from 3 to 5 times per year to help its merchants. For the first time, it held a “mid-year festival” with millions of deals available on July 12, some discounted by up to 90%.
Lazada expects to serve 300 million customers in Southeast Asia by 2030. Lazada currently has 170 million mobile app downloads in the region.
Since early 2018, Lazada has been using Alibaba technology that can support heavy transaction volumes of 100,000 orders per second and uses artificial intelligence to check fake products.
Agatha Soh, head of marketing at Shopee Thailand, the local operating unit of the Singapore-based e-commerce site under Sea Group, said Shopee “has grown tremendously” in the past year in Thailand.
“With over 30 million users in the country, we can generate rich and detailed insights to design the best shopping experience tailored to the unique needs of Thai shoppers,” she said.
Ms Soh saw six trends in the first half of the year. Online shopping is expanding beyond Bangkok to upcountry provinces like Bung Kan, Udon Thani and Satun, which witnessed the highest growth in shopping activity on Shopee since the turn of the year.
Online shoppers in Thailand prefer to shop mostly in the health/beauty, mobile/gadgets and home/living categories. Popular products for Thais include skin creams and face masks, while more premium tech products such as smartphones and fitness watches are also in high demand.
Unlike Lazada, Thais on Shopee shop online most often in the afternoon and at night, especially between 12pm to 2pm and from 9pm to 11pm.
This is in line with the mobile nature of online shopping in Thailand,as smartphone adoption continues to grow rapidly and as Thais shop online in their spare time during lunch breaks and before bed.
Thais also browse online on their phones on the way home from work, as user activity starts to increase from 6pm to 9pm daily.
Moreover, online shopping activity in Thailand is highest during mid-week, with Wednesday being the busiest day of the week for Shopee.
Cash on delivery (COD) is the top choice of payment for Thais, still untrusting of online payments. Cashless solutions like credit cards are the top payment method for users in Bangkok, while COD and bank transfers are favoured by those outside the capital.
Shopee’s live streaming feature is becoming popular among Thai users because it offers real-time engagement between sellers and buyers.
According to Creden.co, all major e-commerce platforms lost money in 2018, with Shopee Thailand reporting a net loss of 4.1 billion baht on revenue of 165 million baht.
Lazada posted 8.1 billion baht in revenue with a net loss of 2.6 billion baht.
JD Central had revenue of 458 million baht and a net loss of 944 million baht.