A WAY TO GO Arnat Leemakdej realises it will be quite a struggle to make Thai businesses feel comfortable using e-commerce.The Thai government is pushing along e-commerce, with mixed results.
Late in 1998, a medium-sized motorcycle - helmet company decided to join a free Thai government e-commerce website to attract overseas sales. Nearly a year later, their first order had came in. An American was trying to buy his son a helmet for Christmas, but the order was never filled. Arnat Leemakdej, the government's technical adviser for the site, got an angry e-mail from the customer complaining about the company.
Arnat quickly called the merchant. "You received this order over a year ago and you still haven't sent out the merchandise. What's the problem?" he asked.
The embarrassed vendor apologised. "We've had the site up for a year and we've never gotten an order," he explained. "We forgot our password and can't access our site anymore."
This incident typifies the problems associated with Thailand's nascent e-commerce industry says Arnat. "It's very difficult to get the first order," he says. "People don't trust websites they aren't familiar with. If they trust you and submit an order, you should take it very seriously. This was your first order from the United States. If it worked, word of mouth could spread."
Such are the trials of the Thai government's experiment with trying to promote e-commerce in Thailand. In October 1998, the Commerce Ministry launched thaiecommerce.net, a government website that allows pre-screened companies to sell their products online at no cost. The government set up the encryption system, negotiated with banks to accept online card use, and even designed pages for merchants.
The site was established to promote Thai exports via the Internet during the crisis. A study of 200 companies conducted by Thammasat University before the launch of the site found that most Thai merchants considered e-commerce risky and expensive. Bank-loan managers confirmed that view to those seeking loans to set up e-commerce websites.
Thailand has about 800,000 Internet users and nearly 40% of those are students - not a prime market for e-commerce, says Arnat. In addition, the country has only about 1.2 million credit-card users. That tiny domestic market, compared with 10 million Internet users in South Korea and twice that number in Japan, encouraged the government to direct Thai merchants overseas to sell their products.
But as the helmet company's experience illustrated, the government site has had limited success. Arnat acknowledges that only about 10% of the hundreds of companies using the site have seen a significant impact on sales.
"Sometimes the company president will agree to get on the website and then he will just turn it over to his IT people," says Arnat. "The company doesn't spend any time on it. They just put up the site and leave it."
In part due to this complacency, the government is trying to nudge some companies to use commercial website designers or to develop the capacity to set up an e-commerce site internally. That kind of investment might encourage companies to take a more active role in their Internet presence, says Arnat.
Web designers in Thailand charge about 500 baht (US$12) a month to set up a page that sells about 20 items and will also charge a 200 baht fee per transaction if they have to facilitate credit-card purchases. Other companies charge about 3,000 baht per month per static page without e-commerce features. Another popular model is to offer free web hosting in return for a percentage of sales that range from 5% to 10%.
Arnat credits the government website with helping to spur the proliferation of webpage designers in the country. He noted that when the site began, few companies in Thailand were online. Today, thousands have sites and banks are more comfortable with online transactions.
And a few companies, such as Khao-La-Or Laboratories, have had significant success online with the help of the government website. The company has sold Thai herbal medicine for more than 70 years, marketing a very traditional product in traditional ways.
The company set up its own site, but established a presence on thaiecommerce.net as well, says managing director Dominic Pongboriboon.
In addition to having the Thai government's stamp of approval, the thaiecommerce.net site had technical advantages. It included a basket system and a real-time credit-card authorisation system that the company's own site did not yet feature.
Pongboriboon's 40-employee company doubled its exports last year as a result of e-commerce, though he declined to disclose revenue figures. And more significantly, it has helped establish a global brand name for Khao-La-Or.
Traditional importers would often buy the company's products and then market them in their home countries under their own brand name. Now, with a growing Internet presence, buyers are looking for the Thai company's products by name. "This has really helped bring us through the economic crisis," says Pongboriboon.
Though success stories like Khao-La-Or are limited, Arnat thinks it is inevitable that most Thai merchants - particularly small- and medium-sized companies - will find their way onto the Internet.
Large firms that already have a well-established distribution link to their customers have to be careful when setting up a site, particularly if they are using a middleman, says Arnat, because they risk losing existing customers by bypassing their existing distributors.
"But small businesses and entrepreneurs have nothing to lose," he says. "They don't have a global distribution channel to jeopardise. They can only benefit from e-commerce."
Those Thai businesses that do come online could stand to benefit from an e-commerce boom in the country, says Arnat. Though the domestic market is small, Thailand is well positioned to be an e-commerce gateway for Indochina.
"We have good infrastructure and good relationships with merchants in Vietnam, Cambodia and Laos," he says. "As those countries come online, Thailand will become their portal."
The Thai domestic market also has potential on its own, says Arnat. He says that despite the fact that thaiecommerce.net is presented in English and denominated in US currency, Thais are the third largest buyers from the site. A recent Andersen Consulting report notes that Thailand has the highest proportion of online shoppers with 40% of the country's users having made a purchase online.
Arnat counsels small- and medium-sized merchants to focus on products or aspects of their merchandise, which are unique and competitively priced in order to obtain e-commerce exports. The thinking is that overseas buyers won't have much interest in a product that they can get at home for about the same price.
Kris Takkabutr, the managing director of KTI Ltd, appears to have followed that advice. His travellers' pillow has a patented design and sells for a competitive US$5.50 each. Despite that, his presence on the thaiecommerce.net site has yet to generate a single sale. His ten-employee company, that used to manufacture printer's ink before marketing the pillow, is still hoping to reach international buyers through the government site.
"I'll just leave the web page there and see what happens," he says.