Temu enters Thai market, intensifies e-commerce competition

Temu, China’s e-commerce giant, recently entered the Thai market, stirring up competition across both online and offline sectors in Thailand. The move, according to industry experts, is set to intensify cross-border competition, challenging existing players and local businesses alike.

Thailand’s e-marketplace has long been dominated by foreign giants like Lazada (owned by Alibaba), Shopee (under Singapore’s SEA), and China’s TikTok Shop. These platforms have become essential for local sellers, who now face rising service fees.

Projections suggest that the value of Thailand’s e-commerce market will rise to nearly 700 billion baht in 2024, up from an estimated 634 billion baht in 2023.

Over the past five years, Thailand’s e-commerce representatives have urged the government to combat ultra-cheap imports to ensure fair competition for local manufacturers.

Owned by PDD Holdings, Temu offers a variety of low-cost products, many sourced from China. Since its launch in September 2022, Temu has rapidly expanded, competing with established e-commerce platforms in the United States and other markets.

Temu positions itself as a marketplace connecting consumers directly with third-party manufacturers, cutting out intermediaries and reducing costs.

E-commerce challenge

Simon Torring, co-founder of Cube Asia, noted that Temu’s entry presents an initial limited challenge but could become a serious threat to existing e-commerce platforms in the future.

“Temu has expanded into over 70 markets worldwide within the past 12 months, leveraging aggressive branding and heavy investments in digital marketing.”

After its launch in Thailand, Temu became the third market it entered in Southeast Asia, following the Philippines and Malaysia. Despite high user awareness and download rates in these markets, Temu has only captured a limited market share from established players like Shopee, Lazada, and TikTok Shop, said Torring.

“The value proposition of Temu is less of a game-changer here compared to other regions, as local platforms already offer a wide range of cheap Chinese goods.”

Temu plans to expand its offerings to include well-known brands to increase its market share in the region.

Paul Srivorakul, Group Chief Executive of aCommerce, remarked that Temu’s entry would heighten competition among online retailers. Existing platforms will need to innovate to compete with Temu’s group buying and marketplace models.

“This scenario is already unfolding in the US, impacting players like Amazon and offline retailers. While cross-border and import tariffs will affect Temu, it will likely subsidise prices further to capture the market.”

Imported goods

Thailand recently imposed a 7% value-added tax (VAT) on imported goods worth one baht or more, aiming to level the playing field for local sellers.

Paul highlighted that brands must adapt their e-commerce strategies as the market becomes inundated with new products and channels, impacting existing retail and distribution models.

“A US study shows Temu’s presence affects local offline retailers, especially SMEs, chain stores, and street stalls,” he said.

The entry of platforms like Shopee and TikTok Shop had already impacted Lazada and local retailers. Temu’s arrival could exacerbate this situation.

Srivorakul added that Temu employs artificial intelligence (AI) and gamification to create addictive retail strategies, with promotions designed to trigger specific consumer responses.

“Temu’s global annual advertising budget of US$3 billion sets a high bar for digital marketing efforts, driving up online marketing costs and challenging local retailers.”

Marketing strategies

Local players must reassess their marketing strategies and budgets to compete with Temu’s significant investments. Global and regional platforms like Google, Facebook, and Line are expected to benefit from Temu’s ad spend.

Visanu Vongsinsirikul, Secretary-General of the Trade Competition Commission (TCCT), stated that the commission would evaluate whether Temu’s practice of offering cheap products warrants anti-dumping actions under Thai law.

Thailand’s Trade Competition Act addresses products sold below cost to eliminate competitors or create price pressure, Visanu said.

“We need clear and specific information for anti-dumping investigations.”

Chaichana Mitrpant, Executive Director of the Electronic Transactions Development Agency (ETDA), mentioned that the ETDA has developed a “recommendation standard” for digital platforms, awaiting approval before a public hearing.

Collaboration among state agencies is required to govern digital platforms effectively, including aspects like competition laws, corporate tax, and customs-related issues.

Chinese products

Apichit Prasoprat, Vice-Chairman of the Federation of Thai Industries (FTI), called for additional measures to manage the influx of cheap Chinese products, warning that local factories might close if the government fails to act.

The high competition from low-cost Chinese products is expected to force local manufacturers, especially SMEs, to exit the market. Temu has pledged discounts of up to 90% on its platform.

The FTI is surveying how many SMEs are affected and found that many industries are struggling with the influx of cheap products from China, Apichit said.

“Some entrepreneurs are shifting from manufacturing to importing products mainly from China.”

The Commerce Ministry indicated that anti-dumping measures and regulations could be reviewed to protect Thai manufacturers, reported Bangkok Post.

Local businesses

Vuttikrai Leewiraphan, commerce permanent secretary, noted that Temu’s presence would allow direct access to cheap Chinese products, impacting SMEs and OEMs.

“The government should implement measures to protect local businesses from cheap Chinese goods.”

Dhanant Subhadrabandhu, President of Thailand Post, mentioned that Temu’s entry could impact all related parties, particularly due to its competitive pricing strategy.

“Thailand Post is exploring a logistics partnership with Temu and has already established joint ventures with other e-commerce platforms.

“Thailand Post aims to create a joint venture with a major Chinese logistics company next year to boost logistics transactions between China and Thailand.”