China’s e-commerce giant, Temu, has recently entered the Thai market, intensifying competitive tensions across both digital and physical retail sectors in Thailand.
Industry insiders predict this move will escalate cross-border trade battles, putting pressure on existing market leaders and local enterprises alike.
Historically, Thailand’s online marketplace has been dominated by foreign giants such as Alibaba’s Lazada, SEA’s Shopee, and TikTok Shop from China. These platforms have become critical for Thai vendors who are now grappling with increased service charges.
Estimates indicate that the value of the Thai e-commerce sector will climb to approximately 700 billion baht in 2024, a significant rise from the 634 billion baht recorded in 2023.
Over the past five years, advocates from Thailand’s e-commerce sector have called for governmental action against excessively low-priced imports to promote fair competition for domestic producers.
Owned by PDD Holdings, Temu offers a range of affordable products, primarily sourced from China, to the global marketplace.
Since its launch in September 2022, the platform has swiftly grown, positioning itself as a significant competitor to established e-commerce platforms in the United States and beyond.
Temu markets itself as a direct bridge between consumers and third-party manufacturers, eliminating middlemen to lower costs.
E-commerce Challenge
According to Simon Torring, co-founder of Cube Asia, while Temu’s introduction into Thailand poses a modest initial challenge, it may soon become a formidable contender against long-standing e-commerce operators.
“Temu has expanded into over 70 markets worldwide within the past 12 months, leveraging aggressive branding and heavy investments in digital marketing.”
Following its launch in Thailand, Temu marked its third foray into Southeast Asia, after the Philippines and Malaysia.
Despite high levels of user engagement and app downloads in these regions, Temu has only secured a small portion of the market share from established entities like Shopee, Lazada, and TikTok Shop, Torring notes.
“The value proposition of Temu is less of a game-changer here compared to other regions, as local platforms already offer a wide range of inexpensive Chinese goods.”
Temu is looking to broaden its product range to include well-known brands to augment its regional market presence.
Paul Srivorakul, Group Chief Executive of aCommerce, commented that Temu’s market entry is poised to intensify competition among online retailers. Existing platforms will have to innovate to stay competitive against Temu’s group buying and marketplace strategies.
“This scenario is already unfolding in the US, impacting players like Amazon and offline retailers. While cross-border and import tariffs will affect Temu, it is likely to subsidize prices further to capture the market.”
Imported Goods
Thailand recently implemented a 7% value-added tax on imported goods valued at one baht or more, aiming to provide a level playing field for local vendors.
Paul emphasized that brands need to adjust their e-commerce strategies as the market becomes saturated with new offerings and channels, reshaping traditional retail and distribution frameworks.
“A US study shows that Temu’s presence affects local offline retailers, especially SMEs, chain stores, and street stalls,” he said.
The arrival of platforms like Shopee and TikTok Shop had already impacted Lazada and local stores. Temu’s entrance may further aggravate this situation.
Srivorakul mentioned that Temu utilizes artificial intelligence and gamification to devise compelling retail strategies, crafting promotions that elicit specific consumer behaviors.
“Temu’s global advertising expenditure of $3 billion annually sets a high standard for digital marketing efforts, escalating online advertising costs and posing challenges for local businesses.”
Marketing Strategies
Local enterprises must reevaluate their marketing tactics and budgets to compete with Temu’s significant promotional investments. Major global and regional platforms like Google, Facebook, and Line stand to benefit from Temu’s advertising expenditures.
Visanu Vongsinsirikul, Secretary-General of the Trade Competition Commission (TCCT), stated that the commission would assess whether Temu’s practice of offering low-priced products justifies anti-dumping measures under Thai legislation.
Thailand’s Trade Competition Act addresses issues related to products sold below cost to eliminate competitors or create pricing pressures, Visanu explained.
“We require precise and detailed information to proceed with anti-dumping investigations.”
Chaichana Mitrpant, Executive Director of the Electronic Transactions Development Agency (ETDA), noted that the ETDA has developed a “recommendation standard” for digital platforms, pending approval before a public consultation.
Effective governance of digital platforms requires collaboration among state agencies, encompassing areas such as competition laws, corporate taxation, and customs issues.
Chinese Products
Apichit Prasoprat, Vice-Chairman of the Federation of Thai Industries (FTI), has called for more stringent measures to regulate the influx of inexpensive Chinese products, warning that local manufacturing sectors may suffer if the government does not intervene.
The intense competition from low-priced Chinese goods is likely to push local manufacturers, especially SMEs, out of the market. Temu has committed to offering discounts of up to 90% on its platform.
The FTI is conducting a survey to determine the impact on SMEs, revealing that many sectors are struggling due to the influx of cheap products from China, Apichit stated.
“Some entrepreneurs are shifting from manufacturing to importing products mainly from China,” he added.
The Commerce Ministry has indicated that it might reconsider anti-dumping measures and regulations to protect Thai manufacturers, according to a report from Bangkok Post.
