Thailand E-Commerce & Online, part 2 confessions of an e-commerce exec - planet retail interview Mr.Pawoot

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Welcome Christina Rosén
News & Insight Thailand Online, part 2 ­ confessions...
Pawoot (Pom) Pongvitayapanu is the
Managing Director of Rakuten TARAD.com.
© Rakuten Tarad
Tags: Rakuten Thailand Singapore Japan Indonesia China
In 2012, Japanese e­commerce
giant Rakuten withdrew from China. Now the retailer is looking for its
big break in South­East Asia ­ a region which is still up for grabs. To
discover how Rakuten is seeking to ride the wave of online growth in
the region, adapting to shifting consumer behaviour and what future
awaits Thailand’s digital economy, Planet Retail caught up with
Bangkok­based Pawoot (Pom) Pongvitayapanu, Managing Director of
Rakuten TARAD.com, in an exclusive interview.
Pongvitayapanu currently serves as President of the Thai E­Commerce
Association. He founded TARAD.com in April 1999 ­ the first business of
its kind in Thailand. It grew into a major provider of integrated online
marketplace, e­commerce, merchant services and marketing tools in the
country. In 2009, Rakuten acquired a majority stake in TARAD.com,
forming a partnership which marked the Japanese company's entry into
the Thai market. ​
Since Rakuten acquired the majority of TARAD.com in 2009, how
closely does the current business model resemble the one in Japan?
And what makes you different from your competitors?
Originally, Tarad.com’s platform derived money from merchant payments for online shop space rental and ads, whereas
Rakuten Japan had a commission model. That means the more their merchants’ sales grow, the more revenue and business
growth for Rakuten. After joining Rakuten, we took over their commission model, which also includes e­commerce
consultancy services. It wasn’t that hard because our fundamentals were similar.
Thailand Online, part 2 ‐ confessions of an e‐
commerce exec
15 May 2015 (Updated: 19:11 GMT)
By Christina Rosén
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2. Rakuten has a B2B2C (Business to Business to Consumer)
model where merchants in different regions can form an
virtual online shopping mall. It has a less product­centric focus
and encourages more active interaction between merchants
and shoppers. © Rakuten
© Digital in Asia
In comparison to other players in South­East Asia like Lazada, we’re quite different in terms of our philosophy. Their main
concern is to source the cheapest products to achieve a huge margin. But we want to empower small businesses in Thailand,
like the mom and pop shops* in the countryside. Certainly, their [Lazada's] model is different in that they try to make a profit for
themselves, while for us, it’s about giving profit back to society.
Also, our model uses open data ­ merchants can freely connect to customers. Our competitors, on the other hand, control the
data by taking on the role of middlemen, to earn revenue. As a result, merchants cannot see their customer data or directly
interact with shoppers.
Rakuten TARAD.com features 800,000 products from
2,500 merchants, from apparel and electronics to
second­hand goods. Which product categories are
selling particularly well ?
In terms of product trends, every category is growing. The
top categories for us are fashion, watches, gadgets and
food ­ including supplements and dietary products. In
terms of sales and revenue, IT products and gadgets
lead, but in terms of the total number of merchants, the
fashion category dominates.
What shifts in online purchasing patterns have you
seen in Thailand? How does purchasing behaviour
differ from neighbouring South­East Asian markets?
I’ve been in e­commerce for more than 15 years and have seen huge changes. Ten years ago, confidence levels in online
shopping were low, with purchases in fewer product categories. With more merchants joining, this meant a greater variety of
products and pricing, which resulted in more people shopping online. And in the last two years, we had a lot of Groupon
clones. That discount and voucher model really convinced consumers to shop online.
What’s unique to Thailand and Indonesia is that people
spend a lot of time on social media – they buy through
Instagram, Facebook ­ so it has become another sales
channel. Mainly it's fashion and cosmetics products that
are sold on these platforms, since young women are the
heaviest social media users. Rakuten TARAD is also
utilising the power of social media to engage with
customers.
But overall, ASEAN consumers are similar in the sense
that they don’t trust e­commerce. They want to see the
product before they pay. That’s why cash­on­delivery
(COD) has been growing rapidly.
What is Rakuten TARAD.com doing to cater to Thai
consumer behaviour and expectations? What trends
are you seeing in mobile, social media and fulfilment in
Thailand?
Actually we do a lot in m­commerce; we believe in m­commerce. In fact, Tarad.com first ventured into mobile commerce in
2003, when Nokia phones had enabling functions. Today, we have a Line account with 12 million members. Every time we
send a message on Line, we get a lot of orders. But we don’t only depend on Line. We also use other social media like
Twitter, Facebook and Instagram. We do everything to reach customers via mobile, as it’s increasingly more used than PCs.

3. Line, Japan's social messaging mobile app, has more than 180 million monthly active users, primarily with a large Thai user
base. Similar to China's WeChat, it has 'subscription accounts' ­ a feature for brands to directly engage with customers and for
celebrities to interact with fans, which is seen as ideal for B2C marketing. In 2014, Line launched a shopping app in Thailand,
followed by an online grocery store a few months ago.
This year, e­fulfilment is going to be a “blue ocean”** because more companies want to tap into the opportunities created by
the growth of e­commerce. Regardless of whether it’s a large or small online retailer, as they expand they won’t be able to
sustain fulfilment operations themselves. They’ll have to increasingly outsource to e­fulfilment providers. And, as competition
heats up in this market with aggressive price­cutting, this will soon turn it into a “red ocean”.
South­East Asia is a key expansion region for Rakuten (Japan), and so far, Rakuten TARAD.com in Thailand is the one
shining light in terms of sales growth and the number of merchants using the portal. What role will your Thai business
play to support regional expansion?
For Rakuten, South­East Asia is really significant. After the first overseas footprint in Taiwan in 2008, we moved on to
Thailand, then Indonesia, Malaysia and Singapore. Although all these markets have become important, we [Rakuten TARAD]
are quite different because of our long company history. We have a huge membership and a lot of data.
One important aspect is that we understand local markets, so we can share our experiences with Rakuten HQ. Our regional
ASEAN HQ is in Singapore. We regularly hold regional HQ meetings, exchanging knowledge and sharing best practices. Our
feedback informs Rakuten HQ’s strategic decisions on how to react appropriately in different markets. We cannot apply the
same principles and technology used in Japan, but have to adapt to local markets and their consumers.
In the next few years, we’re going to do cross­border sales. That means we can sell freely from Thailand to Singapore,
Thailand to Indonesia, or Indonesia to Thailand. We will be a combined marketplace, a global platform. That is a key thing for
e­commerce because you cannot sell locally. Since in Thailand we have such a large membership base, this will be really

4. Rakuten TARAD.com office in Thailand. © Nikkei Asian
Review
efrastructure has more than 200 dedicated specialists and
three associated companies which provide payment
solutions, search marketing and social media consultancy
services. © efrastructure
beneficial for the Rakuten group of companies.
You’ve recently launched efrastructure, the first
company in Thailand to provide provide complete
digital infrastructure and online solutions. Please tell
us more. What does it mean for Rakuten?
According to the Rakuten model, merchants have to do
everything themselves, despite positive aspects like
being empowered and having control. But some SMEs
lack digital resources and capabilities, so I noticed a
business gap.
That’s why I created efrastructure ­ a one­stop service to
support those merchants with a variety of digital
solutions. We have online marketing, Big Data and
search engine marketing companies, which provide a
synergised end­to­end e­commerce service to
businesses.This will allow us to support Rakuten
merchants in Thailand.
efrastructure will also be able to help large corporations
that lack digital capabilities, but want to expand online, to
launch on Rakuten. It will be one of the jigsaw pieces of
efrastructure.
How do you see the future for e­commerce in
Thailand/South­East Asia progressing?
All e­commerce companies have the same goal: we want
to move people from offline to online. That’s why I
founded the Thai E­Commerce Association and invited
all our competitors to join, as we need to work together in
order to achieve this. There is ample space in e­
commerce for many players, as each brings their own set
of strengths. Lazada may be good with short­tail or
branded products, while we may be better with long­tail,
SME products.
Although Alibaba still hasn’t embarked on a large­scale overseas expansion ­ who knows? In the future, they might enter
here. But it’s going to be more fun. Whoever moves fastest and can grow the market faster, will be the winner. But there can’t
only be one winner ­ we can all win together.
* Rakuten TARAD.com features merchants from Thailand’s countryside, such as a maker of traditional folk costumes in a small town in the north‐east. It adheres to the
company’s philosophy of actively helping small‐ and medium‐sized merchants to develop.
** Terms coined by business school INSEAD professors, who use the concepts of blue and red ocean to describe the market universe. Blue ocean describes the wider,
deeper potential of market space that is not yet explored. Like the “blue” ocean, it is vast, deep, powerful, in terms of profitable growth, and infinite. Red oceans refer to
the known market space, with defined, accepted industry boundaries and clear competitive rules. As it gets crowded, profits and growth prospects are reduced, and cut‐
throat competition turns the “red” ocean bloody.
This interview is the second part of a two­part feature spotlighting e­commerce in Thailand. Please click here to read the
exclusive interview with the Director of E­Commerce at DHL.