Image source: Pixabay

Temu has finally set up its third base in Southeast Asia.

Recently, Temu officially launched in Thailand, making it the third market entry in Southeast Asia after the Philippines and Malaysia in August and September 2023. Compared to its expansion in other regions, Temu has been more cautious in Southeast Asia, taking nearly a year to set up its third site.

There are also concerns in Thailand about Temu's entry. According to media reports, the Federation of Thai Industries believes that due to lower operating costs, including prices and wages, in China compared to Thailand, Temu will attract consumers with low-priced products. As Chinese imports increase, some manufacturers have stopped production and switched to importing goods from China for sale. The number of FTI industries affected by low-priced Chinese goods will increase from 25 to 30, impacting industries such as steel, textiles and apparel, and consumer goods.

Can Temu establish a strong foothold in the Thai market?

01

Use Low Prices Again

In the Thai market, Temu continues its usual low-price strategy.

During its initial launch, Temu offered discounts of up to 90%, coupons worth 70 Thai Baht, as well as policies such as free shipping, 30-day price protection, and 90-day free returns and exchanges. The low prices have indeed attracted initial traffic to Temu, with multiple products exceeding 10,000 or 100,000 sales on its Thai site.

However, Temu faces significant challenges. According to MobData, in 2023, Thai e-commerce was dominated by Shopee, Lazada, and TikTok Shop, with respective market shares of 49%, 30%, and 21%. There is limited incremental market for Temu to tap into.

Moreover, Temu's signature "low prices" may not offer a significant advantage in Thailand. Shopee, Lazada, and TikTok Shop all carry the "low-price" label and have amassed a loyal user base by leveraging the mature Chinese manufacturing supply chain and offering numerous promotional activities. These platforms also boast extensive logistics networks built over time.

Official data shows that Shopee's local logistics arm, SPX Express, has a coverage rate exceeding 90%, with 60% of Southeast Asian orders delivered within three days of ordering. In April 2024, Shopee Thailand announced the addition of a 5-day delivery option (SLS-5-Day-Delivery), ensuring customers receive their orders within five business days of placing them.

In July, Shopee Thailand further announced the shortening of the delivery time slot (DTS). Under the new policy, the delivery preparation time for items already shipped or in stock was reduced from two days to one day.

In the second half of 2023, Lazada established a parcel sorting center in Thailand, which is its largest in the country and can process over 2 million parcels per day with an average order management time of less than two hours.

Temu has also emphasized fast delivery. While building its logistics network can further enhance service quality, there are no reports of Temu planning to build its logistics infrastructure in Southeast Asia.

Whether Temu can establish a strong foothold in Thailand may determine its future expansion efforts in Southeast Asia. Its market share in the Philippines and Malaysia is not significant. According to MobData, Southeast Asian e-commerce transactions totaled $114.6 billion in 2023, with Temu accounting for less than $100 million.

When Temu launched in the Philippines and Malaysia, it also offered 90% discounts. However, after these promotions ended, Temu failed to retain many customers.

02

Will Thailand Be the Breakthrough?

Data shows that Thailand and Vietnam are the fastest-growing e-commerce markets in Southeast Asia, with Thailand ranking second in GMV. Thus, expanding into the Thai e-commerce market still offers opportunities.

However, Southeast Asian countries are increasingly protecting local products, gradually weakening the low-price advantage of cross-border e-commerce.

Indonesia announced on July 5, 2024, new import tariffs and anti-dumping measures on seven categories of goods to protect its domestic market from unfair competition and support local industries. The policy covers steel, aluminum, textiles, electronics, chemicals, food and beverages, and plastic products. It also strengthens oversight of imported goods to prevent tax evasion. Indonesia had previously set a minimum price of IDR 1.5 million for imported goods sold on e-commerce platforms and has repeatedly issued policies targeting imports since then.

Malaysia imposes a 10% low-value goods tax on imported goods priced below MYR 500 sold on e-commerce platforms. Vietnam plans to levy VAT on goods priced below VND 2 million.

Thailand has also taken action against low-priced goods. The Value-Added Tax Equity Act came into effect on July 5, meaning that goods priced below THB 1,500 sold on cross-border e-commerce platforms are no longer tax-exempt. Both low-priced imports and all goods sold by Thai merchants are now subject to a 7% VAT.

These measures aim to increase tax revenue and protect local industries. The "tax-free era" in Southeast Asia is coming to an end, prompting cross-border e-commerce platforms to move beyond low-price competition alone.

For Temu, Southeast Asia is a crucial piece in its global expansion puzzle. While Europe and the United States have always been important markets, they are now tightening policies. The European Commission is reportedly planning a significant policy shift to eliminate the duty-free threshold for goods valued below €150 ($161) from non-EU countries. The U.S. Customs and Border Protection (CBP) recently suspended the "de minimis" clearance eligibility of six customs brokers and intensified inspections of relevant packages.

Temu, which has expanded globally through marketing and low prices, faces pressure to turn a profit. BOCOM International expects Temu to become profitable in 2025. However, stricter policies in Europe and the United States may delay this timeline. Some argue that emerging Southeast Asia can support Temu's development under these circumstances.

Thus, Temu's performance in Thailand may influence its future expansion efforts in Southeast Asia. However, given the strong performance of Shopee, Lazada, and TikTok Shop, Temu may need more than just low prices to attract consumers in this region.

Author | Fanie

Source | WhaleDimension (ID: WhaleDimension)

END

Disclaimer

This account is dedicated to sharing financial knowledge for readers' reference and exchange and does not constitute investment advice for any individual or institution. Do not make investment decisions based solely on information from this account. Any direct or indirect losses arising from improper use of this information shall be borne solely by the user. This article is an original work of WhaleDimension and its copyright belongs to WhaleDimension. For reprinting, please contact us for authorization.