E-commerce titans Lazada and Shopee, which have splurged on spending, racking up some 20 billion baht in losses the past five years, are unsettling local distributors, dealers and modern trade operators that are losing revenue to these e-marketplace giants, says a pundit.
Pawoot Pongvitayapanu, founder of local e-commerce platform Tarad.com, said it is imperative for local brands to collect customer data to gain insight and engage in customer relations management (CRM) as a way to bolster customer loyalty.
He was speaking on a recent podcast on Facebook page "eight and a half sentences", which focuses on business issues.
"Thailand's e-commerce industry is dominated by two major e-marketplaces: Lazada and Shopee," said Mr Pawoot.
Lazada is owned by Chinese e-commerce giant Alibaba, while Shopee is a Singapore-based e-commerce site under Sea Group.
Citing Creden.co, which engages in business analysis, including for Lazada and Shopee, Mr Pawoot said Shopee saw an accumulated loss of 10.8 billion baht from 2016-19, while Lazada racked up 10.9 billion in losses from 2017-20.
"This shows high expenses shouldered by the two platforms, including price subsidy, promotion, spending on TV ads and celebrities, and even free delivery," said Mr Pawoot. This spending is aimed at attracting Thais to online shopping, he said.
The giant e-marketplaces also encourage brands to engage with their customers on their platforms by opening online shops on Shopee Mall and LazMall.
"This direct-to-customer trend mainly focuses on fast-moving consumer goods, while the platforms eliminate the role of modern trade, dealers and offline traditional stores," Mr Pawoot said.
Brands pay a commission fee, also known as gross profit (GP) fee, for e-marketplaces at a lower rate than for modern trade, and they can leverage the lower expense for promotional campaigns, he said.
Within the next 2-3 years, these giant platforms would reduce subsidies to raise profits and embark on a series of new business models, said Mr Pawoot. For example, they might adopt the Amazon Prime model, which offers a subscription-based service for free delivery.
Lazada has booked 10 billion baht in revenue so far this year. The platform's gross merchandise value is expected to have reached 100 billion baht, assuming a 10% GP rate of the company's revenue is applied, he said.
Mr Pawoot said digital media agencies must not only focus on creating brand awareness, but also support sales conversation with their customers or else brands may come up with their own digital marketing teams.