The ecommerce market in Thailand has never been healthier and all the signs indicate huge potential for growth in the next few years. With the Thai government’s Thailand 4.0 initiative set to encourage commercial investment and an upgrade to the transport infrastructure imminent, there may be no time like the present for enterprises in the ASEAN region to expand ecommerce operations into this fast-developing nation.
Statistic: By 2022, Thailand’s ecommerce market is expected to be worth around $5.8 billion (US).
If this is something that’s on the agenda for your company, one of the first things to consider is your ecommerce-logistics strategy, or to be a little more specific, whether you should set up operations inside Thailand or fulfill customers’ orders from outside the country.
Considerations for Choosing Between Thai and Cross-Border Logistics
As with so many strategic decisions, the right or wrong path will depend entirely upon the circumstances under which your business operates, and of course, a logistics strategy that serves one company well might be less beneficial for another.
That said though, there are some generic pros and cons of local versus cross-border strategies for ecommerce logistics in Thailand. Let’s take a brief look at the advantages of each.
Advantages of Cross-Border Fulfillment
Assuming your enterprise has a base in East Asia, Australia, or New Zealand, cross-border fulfillment may be a good way to get a first foothold in the Thai ecommerce market. Advantages include:
- The relatively inexpensive cost of entering the market
- The ability to operate without substantially increasing inventory levels
- Relative simplicity compared to starting a new operation within Thailand
Certainly, if Thai demand for your product offerings is uncertain, it can make sense to stick with a regional strategy and control fulfillment from your home country. Of course, you will probably need to engage some international supply chain partners to help execute your strategy. Depending on the scale of your business and the demand for your products, these might include:
- A freight forwarder
- International parcel carriers
- A customs broker
- A logistics partner in Thailand
Because of the number of partners involved though, you might find that visibility of your customers’ orders is difficult to achieve and that managing exceptions is complicated. Reverse logistics (an important consideration in ecommerce) can be especially problematic, and complicated for customers, in cross-border ecommerce operations.
Statistic: 72% of consumers will shop more with a retailer that offers a simple returns process.
Local Thailand Ecommerce Logistics: Advantages
While there is obviously more involved in establishing local operations, the benefits shouldn’t be ignored if you’re serious about grabbing a decent share of the Thai ecommerce market. The advantages of going local include…
- Proximity to your customers, enabling you to offer short lead times for order fulfillment;
- Increased transparency in the logistics network;
- Reduced transportation costs (because inbound logistics is cheaper than outbound);
- Access to local expertise in marketing, sales, and logistics;
- Increased ability to work with cash-based payment solutions, which still predominate in Thailand (although lately there is a more pronounced shift towards electronic transactions).
The last two points on the list above are particularly important for ecommerce fulfillment in Thailand. For one thing, cash-on-delivery is still a very popular payment method here. For another, in comparison with some Asian countries like Singapore, Malaysia, and the Philippines, Thai consumers are less inclined to interact commercially with cultures and languages that differ from their own. Therefore, you can gain an advantage over other foreign competitors by having a local presence and a predominantly Thai workforce.
“Understanding and overcoming local country regulations are the keys to enabling commerce, which can be difficult to manage from abroad.” – Mitch Bittermann, CEO Singapore & Malaysia, aCommerce.
Get Some Help to Go Local with Thailand Ecommerce
The decision whether to establish a cross-border or local ecommerce logistics strategy in Thailand requires careful consideration. The advantages of each option are not absolute, and depend upon the characteristics of your business, along with numerous other factors.
If you do decide to go local with an ecommerce operation in Thailand, it’s important to understand that the country has its own distinct business culture and commercial regulatory environment. This can generate challenges for a foreign enterprise joining the local market. However, it doesn’t have to be an insurmountable barrier.
With help from partners that understand the legal and cultural landscape, your company should not have too much trouble establishing a domestic ecommerce logistics operation in Thailand—and being in at the start of what looks to be a lucrative period of market growth.
Logistics Bureau helps companies to establish, grow, and improve their supply chain and logistics operations throughout the ASEAN region. To find out how our Thailand-based logistics specialists can help you grow your ecommerce enterprise, contact us online or at +66 2207 2680.