UK-based grocer Tesco recently announced it was looking at online shopping in Thailand. The company has yet to reveal details of the initiative, but if it succeeds in replicating the success of its online shopping model in Thailand, it should point the way for plenty of other retailers in the region.
Tesco launched online shopping in the UK in 2000 and now has about one million active customers. In Asia, the only market it has tried online shopping services is web-savvy South Korea, where it has 950,000 registered customers.
Tesco has been in the Thai market for 15 years and will have 577 outlets in its hypermarket, Lotus and Express formats by year-end. After a bit of experimenting, Tesco also recently launched Clubcard, a loyalty programme, one of the first in Thailand - and the data gleaned from this will help it establish and market its online offer, according to John Goodman, president of Ogilvy Action, Asia Pacific.
“Tesco has a long and deep experience of online shopping globally,” says one source. “It has most issues like supply chain sorted, so it wouldn’t be difficult for it to enter the online shopping arena in any market. It has witnessed a lot of growth in Thailand and also has in-depth knowledge of the market so is in a position to lead in this sector.”
The source adds that Tesco’s brand in the Kingdom is already very Thai-oriented, as the company has invested in localising its operations and should be able to transfer some of its local knowledge into the online offer. “It already has a very savvy Thai website, which is a good start.”
The biggest challenge that the retailer will face is “getting local traffic and marketing the benefits of the concept from scratch,” the source adds.
Phil Smiley, president of Glendinning Asia-Pacific, which is part of WPP’s Kantar Group, adds that it is worth bearing in mind that in many Asian markets, including Thailand, home delivery already exists. In local neighbourhoods people can phone their local small shop and have goods delivered.
However, he believes that there are still hurdles to online retailing, including low spend per customer, which makes the economics more challenging, difficult infrastructure, which increases the cost to deliver, and lower penetration of credit and debit cards than in the West. “In addition, pricing may be a factor; if consumers feel that the online price is higher than the in-store price, they will go to stores.”
Low internet penetration in Thailand (it was 24 per cent in 2008) may also be a challenge, though there is a counter-argument that by getting in early Tesco will secure first-mover advantage as the broadband network grows.
Goodman argues that the middle-class residents of Bangkok will be the target consumers at first, since they have high internet usage and constitute the city’s biggest working population.
Despite the low internet penetration, a survey of web users released in June by MasterCard revealed that Thai consumers are willing to shop online. Shopping emerged as the fifth most popular reason for people accessing the internet, with 43 per cent purchasing online. Home appliances and electronic products were the most popular online buys.
Analysts argue that Tesco’s biggest competitors in Thailand, like Big C, Carrefour and Tops, are likely to follow suit. As Thailand’s retailers move online, however, the challenge they will all face is replicating their in-store brand online - whether it’s the eye-catching promotions or the commitment to customer service. “It’s partly about maintaining the shopper interface in a similar way,” says Goodman. “It’s also about the end-to-end service. Retailers must maintain quality and reputation.”
Got a view?
Email [email protected]
This article was originally published in 19 November 2009 issue of Media.
Tesco launched online shopping in the UK in 2000 and now has about one million active customers. In Asia, the only market it has tried online shopping services is web-savvy South Korea, where it has 950,000 registered customers.
Tesco has been in the Thai market for 15 years and will have 577 outlets in its hypermarket, Lotus and Express formats by year-end. After a bit of experimenting, Tesco also recently launched Clubcard, a loyalty programme, one of the first in Thailand - and the data gleaned from this will help it establish and market its online offer, according to John Goodman, president of Ogilvy Action, Asia Pacific.
“Tesco has a long and deep experience of online shopping globally,” says one source. “It has most issues like supply chain sorted, so it wouldn’t be difficult for it to enter the online shopping arena in any market. It has witnessed a lot of growth in Thailand and also has in-depth knowledge of the market so is in a position to lead in this sector.”
The source adds that Tesco’s brand in the Kingdom is already very Thai-oriented, as the company has invested in localising its operations and should be able to transfer some of its local knowledge into the online offer. “It already has a very savvy Thai website, which is a good start.”
The biggest challenge that the retailer will face is “getting local traffic and marketing the benefits of the concept from scratch,” the source adds.
Phil Smiley, president of Glendinning Asia-Pacific, which is part of WPP’s Kantar Group, adds that it is worth bearing in mind that in many Asian markets, including Thailand, home delivery already exists. In local neighbourhoods people can phone their local small shop and have goods delivered.
However, he believes that there are still hurdles to online retailing, including low spend per customer, which makes the economics more challenging, difficult infrastructure, which increases the cost to deliver, and lower penetration of credit and debit cards than in the West. “In addition, pricing may be a factor; if consumers feel that the online price is higher than the in-store price, they will go to stores.”
Low internet penetration in Thailand (it was 24 per cent in 2008) may also be a challenge, though there is a counter-argument that by getting in early Tesco will secure first-mover advantage as the broadband network grows.
Goodman argues that the middle-class residents of Bangkok will be the target consumers at first, since they have high internet usage and constitute the city’s biggest working population.
Despite the low internet penetration, a survey of web users released in June by MasterCard revealed that Thai consumers are willing to shop online. Shopping emerged as the fifth most popular reason for people accessing the internet, with 43 per cent purchasing online. Home appliances and electronic products were the most popular online buys.
Analysts argue that Tesco’s biggest competitors in Thailand, like Big C, Carrefour and Tops, are likely to follow suit. As Thailand’s retailers move online, however, the challenge they will all face is replicating their in-store brand online - whether it’s the eye-catching promotions or the commitment to customer service. “It’s partly about maintaining the shopper interface in a similar way,” says Goodman. “It’s also about the end-to-end service. Retailers must maintain quality and reputation.”
Got a view?
Email [email protected]
This article was originally published in 19 November 2009 issue of Media.
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