Temu enters the Thai market, intensifies competition in e-commerce

Photo courtesy of Los Angeles Times

You, Chinese e-commerce giantrecently entered the Thai market, sparking competition in both the online and offline sectors ThailandAccording to industry experts, the move is expected to intensify cross-border competition, posing a challenge to both incumbent players and local companies.

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

The Thai e-commerce market is expected to grow to nearly 700 billion baht in 2024, up from an estimated 634 billion baht in 2023.

For the past five years, representatives of the Thai e-commerce sector have been calling on the government to crack down on very cheap imports to ensure fair competition for local manufacturers.

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

It positions itself as a marketplace connecting consumers directly with third-party producers, eliminating intermediaries and reducing costs.

E-commerce challenge

Simon Torring, co-founder of Cube Asia, noted that Temu’s entry into the market poses a minor challenge initially, but in the future it could become a serious threat to existing e-commerce platforms.

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

With its launch in Thailand, Temu became the third market it entered in Southeast Asia, after the Philippines and Malaysia. Despite high user awareness and download rates in those markets, Temu only gained limited market share from established players like Shopee, Lazada and TikTok Shop, Torring said.

“The value proposition of Temu is not as relevant here compared to other regions, as local platforms already offer a wide range of cheap Chinese goods.”

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

Paul Srivorakul, Group Chief Executive of aCommerce, noted that Temu’s entry will increase competition among online retailers. Existing platforms will have to innovate to compete with Temu’s group-buying and marketplace models.

“This scenario is already playing out in the US, affecting players like Amazon and offline retailers. While cross-border and import tariffs will impact Temu, it is likely to lower its prices even further to capture the market.”

Imported products

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 stressed that brands need to adapt their e-commerce strategies as the market is flooded with new products and channels, impacting existing retail and distribution models.

“A study conducted in the US showed that the presence of Temu has an impact on local retailers, especially small and medium-sized enterprises, chain stores and street vendors,” he said.

The entry of platforms like Shopee and TikTok Shop has already had an impact on Lazada and local retailers. Temu’s arrival could make things worse.

Srivorakul added that Temu uses artificial intelligence (AI) and gamification to create addictive retail strategies where promotions are designed to trigger specific consumer responses.

“Tem’s $3 billion global annual advertising budget sets the bar high for digital marketing efforts, driving up online marketing costs and posing a challenge for local retailers.”

Marketing strategies

Local players need to reassess their marketing strategies and budgets to compete with Temu’s significant investment. Global and regional platforms such as Google, Facebook and Line are expected to benefit from Temu’s advertising spend.

Visanu Vongsinsirikul, Secretary-General of the Trade Competition Commission (TCCT), said the commission will assess whether Temu’s practice of offering cheap products justifies anti-dumping action under Thai law.

Thailand’s Trade Competition Law targets products sold below cost to eliminate competitors or exert pricing pressure, Visanu said.

“We need clear and specific information to conduct 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, which is pending approval before a public hearing.

Effective governance of digital platforms requires cooperation between government agencies, including competition law, corporate taxation and customs issues.

Chinese products

Apichit Prasoprat, vice-chairman of the Federation of Thai Industries (FTI), called for additional measures to stem the influx of cheap Chinese products, warning that local factories could be closed if the government fails to act.

It is expected that the high competition from cheap Chinese products will force local manufacturers, especially SMEs, to leave the market. It has promised them discounts of up to 90% on its platform.

FTI is investigating how many SMEs are affected by this problem and has found that many industries are struggling with the influx of cheap products from China, Apichit said.

“Some entrepreneurs are switching from production to importing products, mainly from China.”

The Commerce Ministry has suggested that anti-dumping measures and regulations could be reviewed to protect Thai producers, the Bangkok Post reported.

Local business

Vuttikrai Leewiraphan, permanent secretary of commerce, noted that Temu’s presence would allow direct access to cheap Chinese products, which would negatively impact small and medium-sized enterprises and OEMs.

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

Dhanant Subhadrabandhu, chairman of Thailand Post, said Temu’s entry into the market could have an impact on all related entities, especially due to the company’s competitive pricing strategy.

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

“Thailand Post intends to establish a joint venture with a major Chinese logistics company next year to increase logistics transactions between China and Thailand.”

Business NewsEconomy NewsThailand News