US-China tensions fuel e-commerce growth in Thailand

The mounting geopolitical tension between the US and China is precipitating an influx of new e-commerce entities into Thailand, a development set to escalate market rivalry and broaden the scope of the cross-border e-commerce industry.

Thanawat Malabuppha, the CEO of Priceza and honorary president of the Thailand E-Commerce Association, asserts that the escalating US-China geopolitical strife has triggered an expansion of Chinese brands and manufacturing firms into Southeast Asia and other markets. This move is aimed at reducing their export reliance on America and circumventing the stiffening domestic competition.

It is worth noting that a significant number of Southeast Asian e-commerce operators depend on product imports from China, South Korea, and several other nations.

Thailand’s e-commerce market, worth 980 billion baht, equivalent to US$28 billion, ranks as Southeast Asia’s second-largest, only surpassed by Indonesia. These details were shared by Thanawat during the E-Commerce Insight 2024 and Thailand’s E-commerce Landscape 2024 event.

Marketplaces in Southeast Asia account for 55% of the total e-commerce market. Social commerce contributes 28%, TikTok 9%, grocery quick commerce 11%, and e-tailers and e-commerce websites by product brand owners make up 6%. Shopee is anticipated to intensify the competition amongst e-commerce platforms this year by focusing on marketing subsidies. The aim is to outdo TikTokShop and PDD Holding’s newcomer, Temu-online e-marketplace., Thanawat said,

“Temu targeted lower-tier cities in the US first and this led to a good outcome. It has expanded to 17 countries as of May 2023.”

Gross merchandise value

Each platform possesses unique strengths. For instance, Shopee boasts a vast inventory with gross merchandise value (GMV) derived from various product categories. Its average regional order value stands at US$6-8 (213-285 baht).

Approximately 43% of Lazada’s GMV originates from electronics and appliance products, resulting in an average order value of US$8-10 (285-356 baht). Lazada also concentrates on brands and its malls.

TikTokShop’s GMV share in Thailand is 16% of its total global GMV, the second-largest after Indonesia, which contributes 42% of its total GMV. However, its Thai average order value stands at US$6, in comparison to Indonesia’s US$5 as of April 2023. TikTokShop will need to increase its average order value shortly, Thanawat stated.

Content convergence with commerce is another emerging trend set to boost business for agents engaging in affiliated marketing sales, said Thanawat.

“Content, in particular entertainment, will lead users from shopping and commerce. This is seen from the collaboration of Amazon and Instagram in the US. We can expect those e-marketplaces to collaborate with Instagram or Facebook.”

Thanawat envisages the future availability of YouTube Shopping in Thailand to enable creators to earn revenue from affiliated marketing. He also predicts the emergence of mega-live sellers in Southeast Asia in 2024, with million-dollar live-selling stars cropping up in all markets.

Silk Road

An overwhelming 81% of Thais make purchases based on influencers’ recommendations. Another trend is the e-commerce Silk Road connecting Thailand with China from general import/export to cross-border e-commerce. This development also presents opportunities for Thai exports to China.

Regulatory changes in Southeast Asia, such as Indonesia’s restrictions on cross-border sellers, have led e-commerce platforms to diversify their stock-keeping units by onboarding local sellers and selling cross-border products through the business-to-business-to-customer or dropshipping format.

Dropshipping is a supply chain model that allows businesses to ship products directly from a wholesaler’s warehouse to the customer’s address, eliminating the need to handle logistics and operations.

The cross-border dropshipping for local sellers already encompasses millions of orders daily. This trend has resulted in the growth of ancillary industries servicing cross-border e-commerce, including logistics, warehouses, and payments.

Another trend is new retail that combines online and offline sales through the so-called omnichannel. Thanawat also anticipates leading department stores will have live sales sections in their shops, similar to the Yowant X27 Theme Park, a newly established online + offline consumer commercial complex in China.

The latest trend involves a continual rise in the cost of online advertising. As a response, brands are shifting their advertising budgets towards online retail media channels, aiming to achieve more precise targeting and leverage affiliated marketing. This approach empowers users to promote sellers’ products, making viral marketing more effective.

Online retail in Thailand is continuing to grow but is not expected to reach the heights it did during the pandemic when the sector registered growth of 47%, said Chayanit Somsuk, an analyst at the Economic Intelligence Center under SCB, reported Bangkok Post.

The local e-commerce market will reach 910 billion baht (US$25 billion) in 2024, up 10% from 820 billion baht (US$23 billion) last year. It is expected to post a compound annual growth rate of 8% during 2025-2027.