Targeting Thailand 4.0
PChome Stakes Out its Territory
The key to the ‘Thailand 4.0’ plan is digitalization, with e-commerce participation a critical element of development. Taiwan-based PChome has set its sights on the opportunities presented by Thailand’s digital transformation.
PChome Stakes Out its TerritoryBy Brian Chen
From CommonWealth Magazine (vol. 630 )
Following on the heels of China, Southeast Asian countries are showing the most potential as major manufacturing bases. In recent years, companies from around the world, including those from Taiwan, have shifted their manufacturing operations from China and its rapidly rising wages, and headed to Southeast Asia.
In addition to manufacturing, Southeast Asia’s Internet industry and e-commerce market are also taking off.
Amazon’s setting up of offices in Singapore in late July was the first move by the world’s largest online retailer to go after the Southeast Asian market. The strategy pits Amazon directly against Alibaba, which acquired Lazada, the region’s largest e-commerce platform in 2016, in a regional turf war.
For their part, Taiwan’s top e-commerce portal PChome, online cultural and creative enterprise Pinkoi, and the popular Momo shopping network, have all chosen to make Thailand the beachhead for their push into the Southeast Asian market.
As Southeast Asia lags behind other more mature markets in terms of digitalization and the penetration of Internet access and smart phones, these companies believe that there is relatively ample room for growth in the region.
More importantly, governments across the Southeast Asian region are aggressively promoting various digitalization policies, most notably Thailand with its Thailand 4.0 strategy. Rolled out over the past two years, the initiative looks to utilize digitalization and access to e-commerce to help lift Thailand’s broad low-income population out of poverty, drive economic transformation, and will create tremendous opportunities in digital commerce.
Bullish on the Southeast Asian e-commerce market’s potential, PChome partnered with Cal-Comp Electronics & Communications, a Taiwan-based manufacturer with over 20 years making consumer electronics in Thailand, to create PChome Thailand in 2015 as the company’s first stop in the region, offering a C2C auction market to test the waters.
“We recognize the potential of e-commerce in Thailand,” related PChome chief operating officer Tsai Wen-hsiung, explaining the company’s choice of Thailand for its first foray into Southeast Asia.
Thailand’s e-conomy on the Rise
The potential Tsai is talking about refers to how accustomed the Thai population already is to conducting all kinds of consumer and social activities online. However, the gap between those habits and the current degree of digitalization and penetration of the Internet and smart phones presents considerable room for growth.
According to information from the Thailand Bureau of Investment (BOI), the number of smart phone users in Thailand has reached 48 million. This is more than double Taiwan’s entire population, and around 70 percent of Thailand’s population. In fact, smart phone, Internet, and social media users have all doubled in growth each year over the past several years.
Explaining, Tsai notes that Thailand’s e-commerce market has not yet reached maturity, and must attract more users to the fold. With this in mind, PChome has targeted the C2C auction space with its low barriers to entry as its first foray into the Thailand marketplace.
As for facing tough competition from such formidable adversaries as Amazon and Alibaba, Tsai remains optimistic. “Their arrival will be beneficial to Thailand’s e-commerce market because of its positive impact on market education, which will further attract the entry of more buyers and sellers.”
Escaping the Middle Income Trap
Apart from the immaturity of the market, the potential of Thailand’s e-commerce market comes largely from the government’s concerted efforts to promote socio-economic digital transformation.
Although Thailand is one of the most highly economically developed countries in Southeast Asia, assorted structural problems have held back developmental breakthroughs. For instance, with the national GDP unable to break US$10,000, the vast wealth gap, and large population of rural poor, the country has fallen into what economists term the “middle income trap.”
Aiming to help Thailand escape the middle income trap, Prime Minister Prayut Chan-o-cha rolled out his Thailand 4.0 strategy, a critical component of which is the “digital society” strategy that heavily promotes digital transformation and e-commerce.
“Thailand 4.0’s promotion of digitalization and e-commerce is the key for Thailand to escape the middle income gap,” asserted Meetham Na Ranong, vice president of the Digital Economy Promotion Agency (DEPA). DEPA’s work is all about introducing the entrepreneurial process of e-commerce to the general population.
Digitalization’s Goal: Expand Reach of e-commerce
The Thai government plans to hook up citizens in remote villages to the Internet to bring e-commerce to the countryside. On the one hand, farmers will be able to sell quality products throughout Thailand and even reach overseas markets via e-commerce platforms, while employment opportunities can be created where none existed before, raising incomes.
“Helping citizens engage in e-commerce is the crux of Thailand’s digitalization program,” relates Chung Chin-hsi, research fellow at the Taiwan Institute of Economic Research’s Department of International Affairs. This is the top consideration for Thailand’s officials.
The Thai government is working aggressively towards this objective by installing Internet infrastructure. The Ministry of Digital Economy and Society plans for 24,700 of Thailand’s 70,000 villages nationwide to have full Internet access by year’s end, driving a wave of extensive commercial opportunities in Internet hardware, software, and facilities.
Mobile Devices Power e-commerce Development
PChome’s developmental strategy in Thailand dovetails nicely with the direction of the Thai government’s policy. While the gap in Internet usage habits between Thailand and Taiwan’s consumers is fairly small, PChome must still confront certain divergent aspects from its experience in Taiwan, along with assorted challenges.
Tsai explains that Taiwan already had a mature e-commerce user population in the PC era, whereas only since the widespread adoption of smart phones has the volume of e-commerce users grown significantly in Thailand. “Thailand’s e-commerce has followed a completely different model of development from that of Taiwan,” observes Tsai.
“On-line shopping using smart phones is the development trend for e-commerce in Thailand,” relates DEPA’s Meetham Na Ranong. At present, 41 percent of Thailand’s total population has engaged in online shopping with mobile devices, far higher than the 29 percent using personal computers.
The flow of money is another difference.
Credit card use is quite high in Taiwan, but government policy permitting the establishment of third-party payment platforms has stalled, impeding e-commerce development. In Thailand, where credit card use is low, e-commerce currency flow is largely reliant on inter-bank transfers. This has given rise to payment methods where all that is needed to complete a transfer is the counterparty’s phone number.
“In Thailand, currency flow happens to be the greatest convenience of e-commerce development,” says Tsai Wen-hsiung.
Logistics and Distribution Biggest Challenges
The biggest challenge to e-commerce operations in Thailand is traffic congestion in urban areas, and poor transportation infrastructure in remote regions. Both issues make logistics and distribution a major problem.
“The convenience of on-line shopping has always been the most critical factor for e-commerce consumers,” offers Chung Chin-hsi, who believes that offering quick, convenient services is even more important for e-commerce merchants than their products.
Tsai Wen-hsiung counsels Taiwanese businesses “to test the waters for yourself locally,” and to dive right in if they decide to proceed after evaluating the prospects, then make adjustments as they go along.
Translated from the Chinese by David Toman