Online and clicking: Web-based shopping increases in popularity

While the e-commerce market in Thailand still lags behind those in regional peers, it is fast making up for lost ground. With a population of some 21m internet users in 2011 (up from 18.3m in 2009), a full 12m of whom connect via mobile devices, there is certainly scope for further growth. Indeed the increases are not just in Bangkok. “While the value of handset sales in the greater Bangkok region accounts for more than half the total market, we are seeing significant growth in demand in provincial markets,” Adisak Sukumvitaya, the CEO of Jaymart, told OBG. Moreover, the National Electronics and Computer Technology Centre (NECTEC) expects that the pool of internet users will reach 36m by 2015 on the back of the implementation of the government’s national broadband policies.

ON THE UP: NECTEC estimates that the share of Thai users shopping online rose from 47.8% in 2010 to 57.2% in 2011. Siam Commercial Bank (SCB) expects internet sales to sustain 8% annual growth to 2015 on the back of growing internet penetration, increased confidence in e-payments and the diversification of product offerings online. The total value of e-commerce transactions grew from BT527.5bn ($16.83bn) in 2008 to BT595bn ($18.98bn) in 2010. Roughly 55% of this came from business-to-government sales, 36% in business-to-business and 9% from business-to-consumer, according to the National Statistics Office.

Yet one of the key drivers of growth in recent years has been the consumer segment, backed by stronger regulations and clear government promotion. Thailand’s web surfers are increasingly shopping. Indeed, a 2010 survey by MasterCard found that a full 67% of local internet users shopped online in 2010, up from 40% in 2008. SCB expects the number of online shoppers to reach 24m by 2015. Similarly, Worawoot Ounjai of OfficeMate, a leading online-shopping platform, projects 20% annual growth over the next five years.

CONFIDENCE BUILDING: One challenge has been lack of confidence in internet-based transactions, with half the respondents to the MasterCard survey expressing security concerns about online shopping. In a bid to improve security, the Ministry of Information and Communication Technology keeps watch through the Electronics Transactions Development Agency, which was established in mid-2011. While all Thai banks provide e-payments options, three firms have emerged as strong contenders in online payment services: Paysbuy, PayPal and TARAD. Although debit cards and credit cards still account for most transactions, at 46% and 41%, respectively, e-payment systems have helped enlarge the pool of online shoppers. The government, through the Office of Small and Medium-sized Enterprise Promotion (OSMEP), launched the “Thai Business, Go Online” initiative in June 2011 in partnership with Google, the Thai e-Commerce Association, KasikornBank and the Dot Arai domain registration service to encourage businesses to move online. The government’s offer of free hosting and subsidised domain names has already boosted SME website numbers. According to OSMEP, 20,000 SMEs launched websites in 2010, rising to 50,000 in 2011, of which 40,000 had online shops.

NEW CHANNELS: Searches on bricks-and-mortar retailers’ internet sites are playing an increasingly complementary role for traditional sales: OSMEP found that 80% of shoppers first look online before buying offline in 2011. Retailers are seeking to capture a slice of this interest through online sales. The Mall Group established its M-online Department Store in December 2010, increasing the number of products sold from 30,000 initially to over 100,000 by early 2012. While hypermarkets have moved more slowly, Big C runs an online store, although no delivery service is included.

According to the MasterCard survey, the average online transaction size was BT18,150 ($579) in 2010, a significant rise on the BT5000 ($159.50) reported in 2005. According to NECTEC, Thai consumers have especially taken to buying books online (some 34.7% of online sales in 2011), as well as reservation services (31.3%) and clothes (26.7%). Purchases of electriconics, toys and cosmetics seem to be also growing apace.

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The Report: Thailand 2012

Retail chapter from The Report: Thailand 2012