The recent entry of Temu, China’s e-commerce giant, into the Thai market last month is anticipated to heighten cross-border competition, impacting both online and offline businesses in Thailand, according to e-commerce experts.
Thailand’s e-marketplace has largely been dominated by foreign players, including Lazada (backed by China’s Alibaba), Shopee from Singapore’s SEA, and TikTok Shop from China. Many local sellers have relied on these platforms for sales but are now facing increased service fees.
The Thai e-commerce market is projected to reach nearly 700 billion baht in 2024, up from an estimated 634 billion in 2023.
In recent years, stakeholders in Thailand’s e-commerce sector have urged the government to take measures against extremely cheap imported products to foster fair competition for local manufacturers.
Temu, owned by PDD Holdings, offers a wide range of products, many produced at low costs in China. Since its launch in September 2022, Temu has gained popularity and intensified competition with established e-commerce platforms globally.
Temu positions itself as a marketplace that connects consumers directly to third-party manufacturers, cutting out intermediaries and reducing costs.
EMERGING THREAT
Simon Torring, co-founder of Cube Asia, a company specializing in market insights for Southeast Asian e-commerce, noted that Temu’s arrival in Thailand poses a limited challenge to existing platforms initially but could grow to be a significant threat over time.
He mentioned that Temu has quickly expanded into new markets over the past year. After establishing itself in Thailand, the platform is now present in over 70 markets worldwide and has emerged as a key player in several, thanks to aggressive branding, substantial digital marketing investments, and appealing promotions, particularly for unbranded Chinese products.
Mr. Torring suggested that Temu’s successful strategies in developed markets like the US and Western Europe would likely be replicated in Thailand.
This marks the third Southeast Asian market for Temu, following the Philippines and Malaysia, where it has also gained considerable user awareness and high download rates. However, its market share in these countries remains limited compared to more established players like Shopee, Lazada, and TikTok Shop.
“A primary reason for this limited success is that Southeast Asia’s e-commerce platforms already offer a variety of affordable Chinese goods, particularly through Shopee’s and Lazada’s cross-border sales. While Temu has some novelty appeal, its value proposition isn’t as revolutionary in Southeast Asia,” Mr. Torring explained.
To expand its market share, Temu is expected to diversify its offerings by including well-known brand products.
IMPACTING EVERY MARKET
Paul Srivorakul, group chief executive at aCommerce, an e-commerce enabler, indicated that Temu’s entry into Thailand would lead to intensified competition among online retailers. Rival platforms will need to enhance their offerings and strategies to compete with Temu’s unique group buying and marketplace models.
Group buying enables multiple consumers to purchase goods and services together at lower prices, benefiting both consumers and vendors.
“This trend has already emerged in the US, affecting major players like Amazon and offline retailers such as dollar stores. Cross-border tariffs and import duties will impact Temu, but it is likely to further subsidize prices to gain a stronger foothold in the market,” stated Mr. Paul.
Thailand has recently imposed a 7% value-added tax (VAT) on imported goods exceeding a value of one baht. Previously, items under 1,500 baht were exempt from VAT.
Mr. Paul emphasized that brands must adapt their e-commerce strategies as the market will soon be flooded with new products through various channels, eroding existing retail and distribution models.
He referred to a US study suggesting Temu’s presence affects local offline retailers, particularly concerning low-cost items from local small and medium-sized enterprises (SMEs), chain stores, and street vendors.
The influence of Shopee and TikTok Shop has already significantly impacted Lazada and local retailers, and Temu’s entry could exacerbate this situation, Mr. Paul noted.
He highlighted that Temu utilizes artificial intelligence (AI) and gamification techniques to create engaging retail and merchandising strategies. Their pricing and product promotion strategies are designed to elicit specific psychological responses from consumers, encouraging continuous shopping through game-like elements to enhance the overall experience.
Mr. Paul added that Temu’s global annual advertising budget of $3 billion sets a high bar for digital marketing, potentially making other platforms more competitive, driving up online marketing costs for all and overshadowing local online retailers that already struggle for consumer attention.
RULES ARE RULES
Visanu Vongsinsirikul, secretary-general of the Trade Competition Commission (TCCT), stated that the commission will review whether Temu’s practice of offering low-cost products violates Thailand’s anti-dumping regulations.
Thailand’s Trade Competition Act addresses products sold below cost, aimed at eliminating competitors or creating price pressures that force suppliers to lower their prices.
“If any sellers are found engaging in such practices, we are prepared to enforce the law. In instances where these sellers do not have a local presence, Section 58 of the law allows us to act if foreign operators collaborate with local partners and harm the local economy,” Mr. Visanu mentioned.
He added that private operators would need to provide details of their cost structures for anti-dumping investigations.
Chaichana Mitrpant, executive director of the Electronic Transactions Development Agency (ETDA), indicated that the agency has developed a “recommendation standard” for digital platforms across various sectors, encompassing over 100 items.
This standard, under the Ministry of Commerce, aims to define standards and share information about certified products and is awaiting approval for public consultation.
Mr. Chaichana stressed that effective governance of digital platforms requires collaboration among multiple government agencies, including the TCCT for competition laws, the Revenue Department for tax matters, and the Customs Department for customs duties.
ADDITIONAL STEPS REQUIRED
Apichit Prasoprat, vice-chairman of the Federation of Thai Industries (FTI), revealed that the federation has urged relevant authorities to implement new measures to address the influx of low-cost imports from China.
He warned that if the government does not take action regarding the influx of cheap products from China, local factories could face closures. The heightened competition due to low-cost Chinese products is expected to escalate, putting pressure on local manufacturers, particularly SMEs, as Temu pledges discounts of up to 90% on its platform.
The federation is conducting a survey to gauge the impact on SMEs and their operations. Preliminary findings suggest that about half of the 46 industries under FTI are struggling with the deluge of cheap Chinese products.
“Some entrepreneurs are shifting their businesses from manufacturing to importing products, primarily from China,” Mr. Apichit noted.
The Ministry of Commerce has pointed out that if Thai manufacturers are adversely affected by the influx of cheap imports, anti-dumping measures and regulations for reviewing import tax rates are available for the types of goods that impact Thai SMEs.
Vuttikrai Leewiraphan, commerce permanent secretary, indicated that Temu’s emergence would grant consumers direct access to cheap Chinese products, which could negatively impact SMEs acting as intermediaries for importing products from China.
Moreover, original equipment manufacturers (OEMs) may also suffer as consumers favor cheaper Chinese goods, forcing SMEs to lower their prices, thereby reducing profitability.
Mr. Vuttikrai called for government action to shield local businesses from the influx of inexpensive Chinese goods, particularly through e-commerce channels. This might include enforcing anti-dumping rules, imposing tariffs on Chinese imports, and enhancing customs inspections for inbound goods.
Ensuring the quality of imported products is critical, given that many items purchased online do not meet standards and pose challenges for consumer inspections.
Measures are necessary to validate the standards of these products, he stated.
The Revenue Department mandates that e-commerce platforms must establish “electronic special accounts” to report revenue and business information from online merchants, effective January 1 of this year.
“Consumer protection laws must be strengthened to encompass e-commerce, with stiffer penalties for violations of consumer rights or the sale of substandard products. Such actions would help foster a fair competitive environment, support local producers, and boost consumer trust and confidence,” Mr. Vuttikrai concluded.
TIE-UP ON THE HORIZON
Dhanant Subhadrabandhu, president of Thailand Post, remarked that Temu’s entry into the Thai market could affect all stakeholders, particularly online and offline retailers, due to the competitive pricing strategies and unique offerings from the Chinese company.
Mr. Dhanant stated that Thailand Post is monitoring Temu’s activities, seeking to establish a logistics partnership, similar to arrangements made with other e-commerce and social platforms.
He indicated that Thailand Post is eager to collaborate with all platforms to secure significant revenue streams.
Recently, Thailand Post announced plans to form a joint venture with a major Chinese logistics firm early next year to enhance the volume of logistics transactions between China and Thailand, as well as domestically within the country.