The Current State & Future of Social Commerce in Thailand
Key Takeaways
- E-commerce is the talk of the town but almost all public attention is devoted to the marketplace giants, neglecting social commerce which makes up 40% of Thailand’s e-commerce market
- Social commerce in Thailand is currently dominated by conversional commerce, or c-commerce, which predominantly takes place on social media platforms Facebook, Instagram & Line.
- Social commerce in Thailand is here to stay and the segment is set to grow alongside the massive growth in e-commerce that is expected to take place in the coming years
- China is currently the most mature social commerce ecosystem in the world and looking at China’s social commerce landscape provides insights into what types of innovation might be on the horizon for social commerce in Thailand. How this innovation will play out locally remains to be seen: The Thai market is much smaller and local user preferences cannot be neglected
- Marketplace giants Shopee & Lazada have been entering the social commerce space on their journey to becoming super-apps & look certain to become massive players in the Thai social commerce landscape of the future
- Even with the marketplace giants making moves into social commerce, there is still a massive opportunity for local entrepreneurs in the social commerce space
Introduction
It is a well-known fact that e-commerce in Thailand is booming. Between 2015 and 2019 the industry grew by more than 5x, with GMV increasing from $0.9B to $5B, according to the e-conomy 2019 report published by Google, Bain & Temasek.
It is equally well-known that SEA’s marketplace giants — Shopee & Lazada — are major players that are responsible for driving and capturing a lot of this GMV growth.
What may come as a surprise to many is that a whopping 40% of e-commerce GMV in Thailand is generated on social commerce platforms such as Facebook, Instagram & Line. This massive contribution to GMV paired with the comparatively little attention given to the space makes social commerce the hidden champion of Thailand’s e-commerce boom.
In times where COVID-19 has put e-commerce even more into the spotlight for businesses & consumers alike, the majority of public attention is given to the marketplace giants due to their size, the frequency & cult-like status of shopping festivals, and their omnipresence thanks to their huge marketing apparatus.
The massive attention devoted to marketplaces and the relative negligence of social commerce propelled me to write a piece that puts the spotlight on Thailand’s social commerce space.
Keep reading to learn more about:
- The current state of social commerce in Thailand
- Why social commerce in Thailand is here to stay
- How the state of social commerce in Thailand compares to China, the most advanced social commerce ecosystem in the world
- How the future of social commerce in Thailand might look like
- Where the opportunity lies for local entrepreneurs
The Current State of Social Commerce in Thailand
According to a BCG study quoted in the Bangkok Post, up to 40% of Thais say they have shopped through social commercial platforms, more than in any other country, making Thais the world champions of social commerce.
A large contributor to the prevalence of social commerce is the popularity of conversational commerce, or c-commerce. In a BCG study commissioned by Facebook, c-commerce is defined as when people and businesses connect through chat or voice assistance with the intent to drive the purchase of goods or services. Focus groups conducted with Thai consumers as part of this study yielded several interesting insights that deserve a closer look.
54% of c-commerce buyers in Thailand stated that chat was how they first started buying online, hinting that conversational commerce via chat platforms like Line and Facebook messenger is the true pioneer of e-commerce in Thailand. This is not surprising given the high penetration of mobile phones, the large user base of these platforms in Thailand, the low-entry barriers to use these platforms to sell, and the size of the informal economy in Thailand. The prevalence of messaging platforms makes c-commerce a potent tool for tech & commercially savvy Thais to make extra income.
The BCG study also demonstrates that c-commerce buyers in Thailand are very satisfied with their shopping experience: 97% of c-commerce buyers plan to increase or maintain their c-commerce spending in the future. When asked why they chose to chat with businesses, c-commerce buyers mentioned the following reasons: Product or pricing information, Instant responses at any time, Easy way to shop, Personalized advice, Establish trust in brand or seller. Reading between the lines, these responses hint at a very user-friendly & highly convenient customer experience, which explains why 75% of buyers even plan to increase their spending via c-commerce in the future.
The study also reports that 65% of people in Thailand who engage in c-commerce via social or messaging platforms do so using Facebook products — Instagram, Facebook & Messenger. However, the contribution of the Japenese messaging app Line to the popularity of social commerce should not be underestimated. Whereas Facebook’s products are a collective force with massive adoption in Thailand — 94% of Thais use Facebook, 76% use Messenger & 65% use Instagram according to Hootsuite — Line is also a force to be reckoned with: 85% of Thais use Line and the platform is heavily used for conversational commerce as everyone who’s ever lived in Thailand can testify.
The convenience & value of c-commerce: a real-life example
To demonstrate the value c-commerce generates for both businesses and consumers, here’s a real-life example: A friend of mine recommended a bakery to me and I found out that I could just place an order via Facebook Messenger. Here’s a summary of how that worked out:
- I opened the app to contact the bakery and was immediately presented with an option menu that let me select if I wanted to see the menu, place an order, or inquire about opening hours.
- Since I was a first-time customer, I chose to see the menu and automatically received a picture with the different kinds of bread on offer, followed by the option to place an order.
- After describing the order, an actual human took over the chat, requested my address, quoted the total amount including delivery, asked me to transfer the amount to their bank account, and provide proof of transfer by sending the transfer slip.
- 30 minutes later a Grab delivery driver showed up at my condo to deliver the fresh bread
As a customer, ordering via c-commerce proved to be a phenomenal customer experience due to convenience & speed: It took me less than 2 minutes and a few clicks to place my order, which I received merely 30 minutes later.
For the business I ordered from, c-commerce presents a low-cost & low-entry barrier way to attract more customers by leveraging social platforms:
- The Facebook presence is free
- The funds are directly deposited into the bank account
- The delivery is arranged through third-party platforms (usually Grab, LineMan or LalaMove) with costs covered by the customer
- There are no transaction costs for the business (unlike with Grab, Foodpanda etc.)
- Existing staff can easily be trained to manage & dispatch online orders alongside business-as-usual
I probably would not have made the trip to the bakery to purchase the bread in person but because I was able to order online, I ended up buying and the bakery won a new customer.
As this simple example illustrates, c-commerce is a win-win for businesses and consumers alike, which explains why it is so popular in Thailand.
Why Social Commerce in Thailand is Here to Stay
Social commerce in Thailand is currently dominated by conversational commerce mainly conducted via Facebook products & Line. Given the dominant role of social commerce in Thailand’s e-commerce, two predictions can be made with confidence:
- Social Commerce is here to stay: The BCG study commissioned by Facebook demonstrated that 97% of c-commerce buyers in Thailand plan to increase or maintain their c-commerce spending in the future, highlighting satisfaction with & preference of social commerce by Thai consumers
- There will be massive innovation in the Thai social commerce landscape: Given the expected overall e-commerce GMV growth in Thailand, the large % contribution of social commerce to e-commerce GMV, and consumer satisfaction with & preference for the channel, it is highly likely that this space will attract a lot of attention from existing e-commerce players & aspiring entrepreneurs alike.
Looking Ahead: The Future of Social Commerce in Thailand
The e-conomy report 2019 by Google, Bain & Temasek predicts Thailand’s e-commerce GMV to grow from $5B in 2019 to $18B in 2025. The impact of the COVID-19 pandemic on these predictions remains to be seen but the general consensus seems to be that growth will accelerate with a much larger CAGR expected in the years to come and potentially an even higher GMV by 2025.
With a massive second wave of e-commerce on the horizon, how will social commerce grow and how will the Thai social commerce landscape evolve in the near future?
To answer this question, let’s take a closer look at the state of e-commerce and social commerce in China, the most advanced social commerce ecosystem in the world, to understand what may lie ahead for Thailand.
Unless indicated otherwise, information on China’s social commerce ecosystem used for this analysis is based on a Social Commerce report by Fung Business Intelligence, market statistics are from We Are Social & Hootsuite’s digital reports, and views on how the market in Thailand may evolve are my own.
Benchmarking against the #1: China vs. Thailand
Looking at the Numbers
As a starting point to understand how Thailand compares to China, let’s look at the proliferation of e-commerce and social commerce in both countries.
It does not come as a surprise that e-commerce proliferation as % of GDP is much more advanced in China than in Thailand. What is surprising is that the % contribution of social commerce to overall e-commerce GMV is almost 6x larger in Thailand than in China, pointing to the massive preference for & opportunity in social commerce that presents itself in Thailand.
Things get even more interesting when taking into account and comparing general demographics & user behavior between both countries.
Although e-commerce proliferation is much more advanced in China, overall digital proliferation is more advanced in Thailand on every single dimension, reinforcing the magnitude of the digital opportunity that exists in Thailand, both in e-commerce and overall. The most striking figures are the incredible amount of time Thais spend online daily and the very high social media penetration & usage rates. These figures provide context why such strong e-commerce GMV growth is expected in the following years: Thailand is a hotbed of digital opportunity.
Looking at the maturity: Comparing the stage of social commerce in Thailand to China
Where better to look at how the future of social commerce might look like than China? As previously mentioned, China is often referred to as the most advanced social commerce ecosystem in the world.
Fung Business Intelligence clusters the evolution of the social commerce landscape into three stages:
In which stage does the current state of social commerce in Thailand fit?
I would argue that Thailand is currently in the booming & experimental stage, here’s why:
- Micro-stores are evolving and becoming more sophisticated: leveraging paid advertising, using advanced social media accounts (e.g. Line official account), usage of more sophisticated technology (chatbots, marketing automation etc.)
- Prevalence of KOL marketing: Given the popularity of social media it comes as no surprise that Thailand has plenty of influencers of all tiers who have already successfully commercialized their social media popularity by partnering with brands
- E-commerce platforms start recognizing the opportunity: Shopee & Lazada have both started tapping into social commerce and transformed from a transaction-only to a transaction + content sharing platform (More on that below)
If Thailand is currently in the booming and experimental stage, how might the social commerce landscape evolve when Thailand moves into the proliferation stage?
Moving Towards Proliferation: Insights from the Chinese market
First, let’s take a closer look at how the current social commerce landscape looks like in the proliferation stage.
Fung Business Intelligence clusters the current landscape into three categories: content-sharing platforms, membership-based platforms, and team purchase platforms. Players in all three categories share some common characteristics: They are online marketplaces that allow customers to look for product information and compare products, place orders, and also share their product usage experiences and recommendations. These marketplaces also provide value-added services and functions such as IT infrastructure support and embedded marketing tools, as well as create and provide content for merchants and users on their platforms.
Content-sharing platforms are communities where the focus lies on various types of user-generated content — pictures, videos, live streams, etc. — and users are able to effortlessly place orders through embedded links.
Membership-based platforms employ an innovative approach to e-commerce which utilizes micro-store owners as to distribute products in an S2b2C model. What reads like someone’s password is actually a very interesting e-commerce business model, where the platform acts as an intermediary that sources products from suppliers/brands (S), sells them to micro-store owners (b), who in turn distribute them to consumers ( c ). This sector has experienced particularly rapid growth in recent years, with market size skyrocketing from 0.9 billion yuan in 2015 to 84.2 billion yuan in 2018 and forecasts to reach 564.4 billion yuan in 2021.
Team purchase platforms are similar in nature to group buying platforms (Groupon etc.) in that they allow consumers to unlock lower prices for items when they team up with at least one more person. The person who initiates the purchase can share the deal with their social circle on social media, to tempting others to buy. When the initiator successfully attracts others, he benefits from the discounted price and from commissions for their friends’ purchases. In China, this model seems to work particularly well for consumers in “lower-tier” cities who are more price-conscious and for brands who use the platforms as an outlet store to clear inventory.
Moving Towards Proliferation: Using China as a Proxy for How Proliferation Might Play Out in Thailand
When comparing the Chinese and Thai social commerce landscape, one instantly notices the absence of large-scale specialized platforms focussing on social commerce.
Two potential explanations for this come to mind:
- Specialized platforms are yet to arrive: The massive e-commerce boom will yield to massive growth in Thailand’s social commerce market. This will make the space even more attractive & sustainable for new entrants who are fully dedicated to social commerce.
- Thailand’s market is not big enough: China’s population is 20x higher than Thailand’s and its GDP is 25x larger, hinting that the Thai market is too small to support a similarly large & diversified ecosystem of specialized social commerce platforms like in China.
I believe that both of these explanations are true.
Given the size of the social commerce opportunity in Thailand, there will be new players entering the field but due to the smaller market size, the Thai social commerce ecosystem will not be home to as many massive players as in China. However, the Chinese market still serves as a great source of inspiration for innovation in the social commerce space that is very likely to find its way to Thailand. How this innovation plays out locally will be distinctively different and remains to be seen.
There is one specific group of existing players that will play a large role in the future of social commerce in Thailand: marketplaces.
Social Commerce as Part of the Super Apps: Predicting the Future of Social Commerce in Thailand
I personally believe that much of the social commerce innovation will be driven by marketplaces who will slowly but surely encroach more of the social commerce space on their journey to becoming super-apps. Given their existing foothold in the market, massive war chest of funding, and appetite for further growth, Shopee & Lazada are uniquely positioned to become behemoths in the social commerce space. Furthermore, all of the promising business models in the Chinese market mentioned previously are marketplaces, meaning that Shopee & Lazada can leverage much of their existing capabilities and expertise to conquer the social commerce space.
Looking at the current state of Shopee & Lazada’s offerings in Thailand, it is evident that they have already recognized the potential of the social commerce space and started expanding more and more towards social commerce by integrating features of popular Chinese content-sharing and team purchasing platforms. Both Shopee and Lazada have already integrated live-streaming platforms, LazLive and Shopee Live, that leverage user-generated content and well-known KOLs to induce people to purchase, which can be seamlessly done while consuming the content. Shopee even includes Shopee stories on its home page as a further way for consumers to discover and purchase products via user-generated content. Group-buying has also already found its way to Thailand. Lazada previously offered and heavily advertised group buying, although the feature seems to have disappeared from the application.
David vs. Goliath: The Social Commerce Opportunity for Local Entrepreneurs
The disappearance of group buying from Lazada serves as a reminder that, as with all innovations, not everything that works in China will work in Thailand. If the marketplaces are serious about social commerce in Thailand, Shopee & Lazada will have to adapt and localize their social commerce offering in order to be successful in the long-run.
The need to understand & cater to the preferences of the Thai consumer also makes me hopeful that there is still a massive opportunity in the social commerce space for local entrepreneurs. Local start-ups are much better suited to understand and cater to local consumers than the massive regional marketplaces, who are prone to overlook nuances in local preferences in order to facilitate mass-rollouts of social commerce features in multiple markets.
One such opportunity might be to create a social commerce platform that localizes the membership-based S2b2C model. Thailand has a large informal economy and many business-savvy Thais are always on the lookout for a side hustle that allows them to make extra income. A membership-based S2b2C platform could empower these individuals to become small business owners, providing a fairer and more lucrative alternative to multi-level marketing or selling goods on the street.
Another promising business opportunity presents itself in the c-commerce space. As the BCG study commissioned by Facebook shows, Thai consumers have a strong preference for conversational commerce, which savvy entrepreneurs can exploit with technology solutions that plug into the ecosystem of Line & Facebook and improve the c-commerce experience for users and businesses. The only risk for entrepreneurs eying the c-commerce space is the inherent dependency on Line & Facebook. If these platforms launch their own c-commerce innovations or restrict access for third-party technology solutions, small start-ups might be doomed overnight.
However the Thai social commerce space will evolve and whoever the main players in the space will be, there is definitely a lot of exciting innovation on the horizon.
