Indonesia’s digital economy is an excellent opportunity for online shopping. With almost 20,000 islands, Indonesian eCommerce distribution necessitates specialized methods integrating marine and land transportation infrastructures. Businesses that provide consumer products and services have much to gain from investing in the nation. 

Indonesia is a promising eCommerce industry in Asia-Pacific, with several regional and international businesses vying for market share. eCommerce growth has been fueled by increased internet usage, rising digitization, and the proliferation of websites.

Future eCommerce growth in Indonesia is predicted to be in the high double digits. The 260 million+ Indonesian population will drive eCommerce growth, drawing millions of new online buyers every year. However, their online marketplaces are less developed than eCommerce in Thailand or Singapore. With a nearly 75.47% internet penetration rate in 2022, Indonesia has one of the highest rates in Asia.

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Indonesia’s logistics sector has been booming in the past few years but is also marked by extreme inefficiency. This is evidenced by the high cost-to-GDP ratio of more than 23% since 2015. Intending to be the fifth to seventh-largest economy in the world by 2045, Indonesia has begun to emphasize improving the efficiency of the logistics and supply chain sector. The nation has already taken steps to reduce logistics and supply chain expenses to 17% by 2024. One of their major initiatives was creating a national logistics platform and a marine toll program.

Current Challenges of Logistics in Indonesia

Indonesia improved its Logistics Performance Index rating in less than ten years by strengthening its logistics and supply chain infrastructure, particularly roads and highways. These developments have allowed it to move up 29 ranks from 75th in 2010 to 46th in 2018. However, Indonesia’s performance still needs to catch up to other nations due to subpar logistics and supply chain services and many underlying problems. Thus, Indonesia must develop a mature logistics and supply chain industry with effective and affordable services.

The Indonesian government has actively worked on improving this, and they have made noteworthy improvements. President Joko Widodo has launched a big infrastructure campaign since taking office in 2014, investing as much as $450 billion in urgent infrastructure improvements. In addition to other infrastructure improvements, this has led to the construction of over 3,382 km of new highways, 782 km of new toll roads, 19 km of new seaports, and 10 km of new airports.

This improvement, nevertheless, has slowed. According to the most current World Bank evaluation of logistics in Indonesia, highlighted by the Ease of Doing Business Index, the country showed minor gains, rising to a score of 69.6 in 2020 from 68.2 in 2019. 

The logistics industry in Indonesia is fragmented despite having one of the largest eCommerce markets in the world. The logistics industry must embrace digitalization if it hopes to maintain its expansion. Indonesia is an archipelago with thousands of islands. Projections are optimistic as the Indonesian freight and logistics market is projected to grow at a Compound Annual Growth Rate (CAGR) of 10.27%.

An Expensive and Inefficient Supply Chain

There are many different obstacles that logistics service providers must overcome, particularly in the area of last-mile delivery. Due to strict timetables, conventional shipments, for example, take longer to arrive. On-demand services may deliver more quickly but at a higher cost and over shorter distances.

Indonesia’s logistics cost-to-GDP ratio is three times higher than in five benchmark countries (Germany, Japan, Singapore, South Korea, and China). This is the result of underutilized transportation capacity and lengthy domestic delivery times. Additionally, Indonesia needs clear information about the state of the market to plan supply and demand to maximize utilization effectively. 

Shipping is also notably more expensive in Indonesia compared to its neighboring countries in Southeast Asia. An outbound load can be three times more costly than an inbound load, which illustrates inefficient capacity usage. Additionally, logistical difficulties result in subpar operations and two to three times longer domestic delivery times than in competitor countries.

The country’s inadequate ports, trains, and roadways present a significant problem for the logistics sector as it takes a long time to deliver commodities. Only Java and Sumatra have access to commercial train operations. Inter-island connectivity faces significant challenges due to the unreliability of domestic shipping caused by underperforming ports. There are also considerable ship backhaul issues, intricate supply chains, and delivery delays.

Lack of Support

Logistics in Indonesia and its supply chain ecosystem perform below expectations due to an extremely fragmented industry and insufficient technological adoption. Suppliers need more capabilities in technology and funding to deliver high-quality goods and services. Inland modal and warehouse managers are widely dispersed and need access to digital technology. Local trucking companies lack the technology and skills to automate their processes. They also do manual recording of delivery logs. 

Customs procedures in Indonesia take nearly a day longer compared to China, Singapore, and Malaysia. Many logistics providers operate in a subpar environment without the assistance of effective administrative processes for exports or imports. Due to physical and technological infrastructure issues, Indonesia’s logistics and supply chain ecosystem isn’t as efficient as other countries.

The nation’s progress toward a better national logistics and supply chain is being delayed by these underlying problems, causing a vicious loop. Digital solutions are being used by nations worldwide to rebuild their supply chains and logistics industries. In this industry, digitalization has the potential to significantly enhance operations and provide the ecosystem with the necessary capabilities.

The Future of Logistics in Indonesia

The country is home to many Southeast Asian eCommerce juggernauts, including Tokopedia, Lazada, Shopee Indonesia, and BukaLapak. As the market expands, so will the volume of goods stored in warehouses. The country’s internet penetration rate is rising at the same time. Many foreign investors are investing in the eCommerce logistics industry due to the prospects in the Indonesian eCommerce market. Investors know money is to be made and are already making moves to reap the benefits.

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All logistics players must adopt advanced technologies if Indonesia’s logistics industry is to be digitized. Although many participants in Indonesia’s logistics ecosystem have begun to use technology, it still needs to be improved. For instance, the quality of port operations is still largely dependent on manual labor. Last-mile services such as storage and in-land distribution still use outdated infrastructure. Looking at the success tales of benchmark nations, Indonesia will need to speed up the adoption of cutting-edge technologies. Service providers can study and compare the digital logistics solutions being used in Singapore, Vietnam, and Thailand. The government is already working with local start-ups that offer training and software to logistics providers. Better tools lead to higher-quality services, reduced national logistics costs, and more market competitiveness.

The essential building block for powering e-logistics is a national logistics platform. Opening the digital infrastructure will improve logistics and supply chain services and offer greater nationwide access with an integrated platform. The National Logistics Ecosystem (NLE) is an integrated platform that connects and streamlines Indonesia’s end-to-end logistics process. It was first introduced as the nation’s logistics platform in 2020. The adoption rate is still quite low, with less than 30 organizations now working together. The NLE platform is still not connected to other service platforms but presents a strong foundation for digitized logistics.

Indonesia’s Industrial Revolution (IR)4.0 national road map wants to implement a modern logistics and supply chain across the country by building a “smart logistics” plan. But implementation has slowed because the government has mostly focused on projects involving physical infrastructure. The project is one of the most critical upgrades for Indonesia’s logistics and supply chain sector. It will serve as a crucial foundation for the digital industry to enable the growth of logistics companies that will provide significant benefits and value. Logistics providers will be able to improve their services by adopting digital solutions. More advanced logistics and supply chain technologies are easier to adopt with a minimum standard for technology across the nation.

With the country’s favorable demographics and the enormous growth of the retail and eCommerce sectors, logistics in Indonesia are expected to continue to grow rapidly.  

When the local government’s efforts to strengthen the nation’s logistics infrastructure are complete, it may significantly help the industry and the nation’s economy expand even more.  

ZhenHub is your gateway to the Indonesian eCommerce market. Overcome logistics challenges with our eCommerce solutions, such as trackable shipping services and inventory management. Sign up at our website and get instant access to our online dashboard.

Customers might think all your products are conveniently located in just one warehouse near your business office.

However, many successful online merchants operate differently. The top eCommerce retailers can process and distribute customer orders far more quickly than they could in the past with a “single warehouse” thanks to a virtual warehouse.

The capacity to view an integrated view of your inventory across channels and locations is referred to as a virtual warehouse. It may also be called multi-location inventory control. Virtual warehouses depend on specialized software that compiles data on stock and inventory from across your enterprise. The physical spaces where items are housed are equally important.

Any business, big or small, that has outgrown manual inventory management using spreadsheets can employ virtual warehouses. Your company might need to reevaluate delivery practices due to increased client demand. Alternatively, you might prefer to do so to respond to consumer requests more quickly. If you manage several brands and subsidiaries, combining warehouse operations necessitates real-time data transfer across your divisions and locations.

A company’s entire product line, including all incoming raw materials and components, stored inventory, and finished goods ready for sale, is listed in its virtual stock. Virtual inventory management is frequently maintained as a virtual warehouse software system component. Digital tools enable businesses to optimize order fulfillment by positioning the product and the warehouse nearest to the customer. Additionally, it aids in monitoring inventory turnover, a crucial indicator of how frequently a product is sold over time. Systems for virtual inventory can help prevent the build-up of dead stock or unsold merchandise.

Public corporations must keep track of their inventories to adhere to local authorities. Specific paperwork is also required to prove businesses are adhering to these regulations. This tracking is easier and much simpler than manual checking, thanks to a virtual warehouse.

Why You Should Consider Setting Up a Virtual Warehouse

Fast shipping has made virtual warehouses all but necessary to remain competitive, especially for e-commerce companies.

A virtual warehouse covers real-time worldwide visibility for logistics assets, including inventories and transportation. Simply put, the software provides a clear view of your inventory and assets for logistics and fulfillment needs. 

This system allows you to distribute and store your merchandise as needed, wherever in the world. Real-time access to all your goods will enable you to meet increasing customer demand in a fast-paced eCommerce industry.

The exciting part about using virtual warehouses is that it works for various businesses. Whether your company sells the latest fashion or tech and gaming accessories, many online merchants can use a virtual warehouse.

Despite their evident differences, virtual and physical warehouses are nonetheless closely related. As you know, a physical warehouse is usually a building where products can be housed until they are sent to clients. This is also where warehouse staff collect, arrange, and store incoming merchandise. It’s common for any retail company to have multiple physical locations to keep their inventory. 

However, virtual warehousing collects and tracks the data when goods are delivered, stored, picked, sent from, or returned to a physical warehouse. It enables a company to manage many warehouses and other inventory-holding facilities. An excellent example of this would be retail store stockrooms. 

Different stores across multiple locations can be managed as a single sizable distribution and fulfillment center. This offers a real-time, comprehensive view of all manufacturing and customer fulfillment inventory.

A virtual warehouse can assist online stores in promptly and affordably fulfilling customer orders. It’s made possible by determining which product fulfillment options are the fastest or least expensive for a specific consumer. It also lessens the likelihood of sending clients late or inaccurate deliveries. 

Today’s consumers expect fast, quick shipping. Thus, a virtual warehouse is necessary to have a clear competitive advantage in the eCommerce space.

Online businesses need excellent inventory management and order fulfillment in an omnichannel sales and eCommerce environment. You’ll need speed, efficiency, and reliability to meet customers’ ever-growing expectations better. Virtual warehouses are crucial for completing consumer orders more quickly and accurately. 

Your company’s performance depends on effective manufacturing procedures, product management, and order fulfillment.  But keeping track of these elements may not always be straightforward. Companies may increase accurate, on-time delivery to their consumers without increasing their total cost of operations or ownership (TCO) with virtual warehouses. The right warehouse management system (WMS) can help you manage all your goods.

The Distinct Advantages of the Virtual Warehouse

Virtual warehouses track inventory data and product movements in real time, which lowers costs and improves flexibility overall. Depending on your company’s business goals, the specific advantages of virtual warehouses can vary. You can expect expedited customer order fulfillment, reduced inventory risk, and streamlined omnichannel sales.

When properly configured, a virtual warehouse can reserve, store, and distribute merchandise for many channels. This function alone makes it a helpful tool to boost productivity across your supply chain network. Using company data to establish cheaper ways to satisfy client expectations can improve efficiency. It also raises profit margins. 

Back-office tasks can be easily automated when used in conjunction with an enterprise resource planning tool. As a result, online merchants can use integrated systems, such as warehousing and electronic data interchange, for various tasks. 

Expedited Fulfillment

Virtual warehouses enable a business to avoid transit delays by determining which physical fulfillment facility is nearest to the consumer. This way, shipping costs can be kept to a minimum while being able to deliver within 1-2 days.

Varied Product Offerings

Virtual warehouses enable organizations to expand their product offerings without buying or leasing more warehouse space. This can be achieved by gathering data from their entire supply chain. Experimenting with new items is made easier when you have access to a network of warehouses. 

Faster Turnaround of Dead Stock

A business can maintain real-time inventory control with inventory software. Monitoring item expiration dates helps prevent the build-up of dead stock in your warehouse. You can set notifications to alert you that an item is about to expire. This knowledge can then be used to plan and execute special promotions and sales to unload potential dead stock.

Avoid Inventory Risk

Virtual warehouses decrease inventory risk by minimizing the amount of actual inventory and stock a company must maintain. Many businesses need help finding enough physical space, so they cannot afford to keep merchandise that doesn’t sell well. A bigger company can carry less inventory by using a virtual warehouse. It allows them to readily see and fulfill requests from many locations rather than stocking every item in every warehouse.

Omnichannel Capability

A virtual warehouse can make omnichannel retailing easier for a business. For instance, it might enable a retailer to provide goods outside its storefronts. This software can communicate with and update the inventory management system. It will then share that data with customer relationship management (CRM) and order management systems which can allow opportunities for procedures like buying online, pickup in-store, buying online, and returning in-store. By streamlining communication, distribution, and customer care, such an omnichannel system makes it easy for customers to purchase products from the company through several sales channels.

Optimized Inventory Management

An online business can optimize order fulfillment by managing inventory virtually. To deliver items on time, your business should facilitate inventory building in numerous locations.

For instance, a virtual inventory management procedure helps streamline the flow of goods into and out of warehouses. Even before it physically reaches the warehouse, inventory that is on its way to the warehouse from the supplier can be assigned to open orders thanks to the inventory management system. An employee registers the products with inbound stock and inventory by scanning a barcode. Then they can compare it to a purchase or inbound transfer order. An employee can choose the facility nearest the customer for an outgoing order. It can be shipped there or to a different office, along with any required paperwork.

Virtual warehouses benefit businesses looking to optimize their manufacturing, distribution, and fulfillment processes. They are essentially multi-location inventory management systems. They may make it possible for companies to service customers through various sales channels. Additionally, they enable businesses to store and access inventory anywhere in the world. Access to a more significant network of warehouses enables them to fulfill orders more quickly and affordably while improving customer satisfaction.

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By 2023, eCommerce sales are expected to account for 10% of all retail sales in Thailand, according to Statista data. This is notable, especially given Thai’s preference for offline shopping. Thailand’s eCommerce industry is also expected to grow at a CAGR of 11.93% (2023-2027), resulting in a projected market value of US$32.81bn.

eCommerce will undoubtedly be one of Thailand’s best industries in 2023 in terms of consumer acquisition and return on investment.

Internet shopping is becoming increasingly popular among consumers compared to traditional retail. Thailand’s society is becoming increasingly dependent on the Internet. Its usage will grow, especially as new technologies emerge and new ways are used to deliver to customers.

Increased internet, mobile phone use, enhanced logistics, and e-payment systems give consumers the confidence to shop online.

The Thai government has committed to online expansion through its “Thailand 4.0” policy. National leaders and lawmakers have set aside a budget to build a nationwide broadband network for every town and city. This nationwide broadband network will support modern economic development by fostering eCommerce and bridging the digital gap. 

Their government plans to develop new digital application platforms to support and improve online operations, including e-government, e-payments, and the e-marketplace. The ultimate objective is for the locals to begin operating eCommerce enterprises for their goods and services. Government support is expected to boost the widespread adoption of digital wallets to coincide with rising smartphone usage. 

A Quick Look at Thailand eCommerce Consumers

Thailand is Southeast Asia’s second-largest digital economy, after Indonesia, and ahead of the Philippines. Online travel and media are only second to eCommerce in the nation’s thriving online retail business. The largest forces behind Thailand’s eCommerce businesses are e-transportation and food delivery. According to reports, there are about 43.5 million potential consumers in Thailand’s e-commerce market, with a gross merchandise value (GMV) of $19bn.

Thai consumers can be classified into three groups based on their shopping habits: ages 51 to 71, ages 37 to 50, and those aged 17 to 36. eCommerce participation rates for the first section are 5.39%, the second segment is 32.69%, and the third sector is 61.92%.

Those from 17 to 36-year-old consumers are often seen as the best target market for online businesses. In addition to spending the greatest time on any eCommerce site, they also have the highest expectations of these companies. 

Online shoppers from Thailand have expressed satisfaction with the online marketplace. A report said that 71% of the population uses these platforms twice a month, raising the website or app engagement and retention rates. Thai consumers’ ability to make purchases online is steadily growing. There is no better time for online merchants to explore expanding their businesses into Thailand. 

Many international eCommerce platforms have been drawn to Thailand’s growing online shopping scene. Business owners start online stores in several marketplaces to meet local customer demands. 

Lazada

Lazada is a well-known eCommerce platform globally, as it presents every category on its application and website. It features electronics, fashion & lifestyle, health & beauty, groceries, toys, automobiles, etc. Lazada covers almost everything a customer would want, thus, making it one of the best marketplaces for Thais. 

Shopee

A Singaporean multinational company has established a strong foothold in Thailand. It is among the top marketplaces in the country. It encompasses a variety of lifestyle categories, such as apparel, electronics, and others. Additionally, it offers the convenient option of doorstep grocery delivery. 

Jib

This online platform exclusively sells tech products. This includes IT products, personal computers, laptops, and gaming accessories. Jib provides customers with an appealing selection of electronics at reasonable prices. This marketplace targets tech-savvy consumers who want to purchase new goods and equipment online. While Shopee and Lazada are accessible in several Southeast Asian nations, practically all of Jib’s revenue comes from the Thai market.

HomePro

HomePro is a local marketplace that, as the name suggests, focuses on selling home products. On their website, you can find everything from toilets, refrigerators, shower handles, and doorknobs. Examples of well-known brands sold on the website include LG, Samsung, Electrolux, Hitachi, and Xiaomi.

Kaidee

The biggest classifieds site in Thailand was launched in 2011. Platform users can purchase and sell various products and services, including cars, houses, electronics, apparel, and more. Kaidee facilitates transactions by bringing together buyers and sellers in nearby communities Kaidee is one the top-rated marketplace for buyers and sellers in Thailand for real estate, cars, and other goods and services. 

Note that the website is only available in Thai and offers no cross-border sales.

Rising Trends for Thailand eCommerce

At the height of the COVID-19 pandemic in 2020, Thailand’s online retail growth experienced phenomenal growth. That year, the nation had the largest percentage of new users participating in the digital economy. And 58% of families were grocery shopping online.

Online product browsing time is increasing among consumers. Time spent browsing products on eCommerce and social commerce platforms in 2022 is around 1-3 hours. The largest market and source of 48.6% of Thai eCommerce sales is Food & Personal Care. Other notable segments include:

• Furniture & Appliances at 7.2%
• Electronics & Media at 27.0%
• Fashion at 8.8%
• Toys, Hobby & DIY at 8.5%
• Fashion at 8.8%.

Due to the increase in foreign interest in Thailand’s eCommerce sector, local businesses are investing more in online commerce, fintech, and artificial intelligence (AI). As a result, more collaborative relationships between physical wholesale enterprises and online businesses emerged.

Digital Financial Services

Despite eCommerce gains, Thailand is still very much a cash-based country. However, online payment methods are now becoming widely used. Fifty-five percent (55%) of Thai consumers use credit cards as payment for online purchases. The convenience of doing so has significantly fueled the rise of online shopping in Thailand. Other payment options are also gaining popularity because of the widespread use of smartphones. Digital wallets like TrueMoney, PromptPay, and Rabbit-LINE Pay have grown in popularity over the past two years.

Specialized Marketplaces

Vertical and horizontal markets are vying for market dominance in Thailand, where the terrain changes quickly. Incumbent marketplaces, which comprise 51% of the Thai eCommerce business, are currently valued at 770 billion baht or $22.18 billion.

Thailand’s e-commerce is moving toward vertical category-specific markets that meet specific consumer demands, following international trends. Some local examples are Pomelo for clothing and Konvy for cosmetics. With a focus on delivering groceries and meals in under an hour, quick commerce is another vertical marketplace growing quickly.

Soon, more vertical business-to-consumer markets should quickly appear, opening up opportunities for handicrafts, luxury goods, pets, and even vehicles.

AI Integration

More online merchants are engaging in and implementing AI across all facets of their retail and eCommerce operations. Eighty-four percent (84%)of e-commerce companies are either actively working on integrating AI solutions or have it as a high priority.

A focused marketing strategy that uses deep personalization based on client interactions is one advantage that comes with integrating AI into eCommerce operations. AI systems can accurately meet customer demand by analyzing large data, thus increasing retention rates and sales.

A more effective and seamless sales process can be achieved by automating customer assistance, discount choices, invoicing, and email marketing.

Using customer data insights can help improve the efficiency of the sales process.

The adoption of AI tools reduces operating expenses and boosts productivity by lightening the workload of employees.

What You Need to Know Before Getting into Thailand eCommerce

Starting an online business is simple, but it takes much effort to succeed. Along with creating the company, you must also complete some legal documents & requirements before you start selling in Thailand.

You need legal permission documents for your business before selling online. These include an eCommerce license and registration under the Office of the Consumer Protection Board (OCPB). This safeguards the consumer’s rights as it considers your eCommerce company as a registered one, fit for direct sales. Foreign businesses must also acquire a Foreign Business License (FBL) or Foreign Business Certificate (FBC) from the Department of Business Development (DBD). 

As a legally licensed online merchant in Thailand, your business will be subject to product liability, data protection, and customer protection laws. You will also need to be current on any regulations regarding payment solutions and foreign exchange. 

Every Thai corporation is legally required to have a Thai shareholder holding 51% of the company’s shares or one of the owners listed in the Foreign Business Act of 1999. However, a foreigner can launch an online store in Thailand with a Board of Investments (BOI) company license. With this BOI company license, you can benefit from tax and non-tax advantages and full control of the business.

The growth of Thailand’s eCommerce isn’t slowing down. Online retailers can play a more significant role as consumers continue to engage in the digital economy. By bringing a seamless online shopping experience to the locals, you can reap the benefits of one of the largest eCommerce markets in Southeast Asia. 

ZhenHub is your gateway to scaling your business globally. With multiple marketplace integrations, our international network of fulfillment partners will get your products to a broader audience. Getting started is as easy as signing up at our website now.

Online platforms are becoming the most popular method for distributing goods and services. Due to the increased demand for online retailers, more people choose digital shopping experiences. Customers in Thailand choose eCommerce because of lower online prices, a wide selection of goods, free delivery, and excellent customer service. 

Understanding the ins and outs of shipping to Thailand is a great jump-off point to expanding your business to the region.

Thais have demonstrated an unprecedented interest in internet shopping after the COVID-19 pandemic. According to a 2022 survey, over 54 million people in Thailand, mostly between 16 and 64, are Internet users. eCommerce businesses are eager to establish themselves in Thailand since they have a vast customer base.

JP Morgan claims that rising domestic eCommerce vendors will significantly increase sales volume. The Thai eCommerce market is composed of roughly 30% cross-border transactions.  Nearly 50% of online buyers have already made an international transaction.

The top five e-commerce websites currently are Shopee, Lazada, Kaidee, AliExpress, and Amazon, all of which are seller platforms with cutting-edge shipping and logistics systems.

The Basics of Shipping to Thailand

To get to Thailand, you’ll need a logistics service that can reliably and quickly deliver your goods to Thai customers. Look for partners who know what you can and cannot transport into the country and how to get paid for your goods. Although shipping partners’ experiences may differ, it always pays well to research and communicate your needs properly.

Cargo delivery involves several steps in cross-border shipping. That includes the first mile, customs clearance in the country of origin, air freight, customs clearance in the land of destination, distribution, and final mile delivery.

For example, your merchandise could be transported by truck from an Indonesian supplier’s warehouse to Jakarta’s Soekarno-Hatta Airport (CGK). After clearing customs, it takes air freight to travel to Bangkok’s Suvarnabhumi Airport (BKK). The final delivery is then made to the customer’s address using a vehicle or motorcycle.

Different shipping partners are more efficient in specific supply chain segments. While some businesses solely focus on a single delivery stage, others offer end-to-end fulfillment services that cover every step. Find a shipping partner that can best meet your eCommerce logistics requirements. 

It’s a good idea to take your delivery deadline, the shipping partner’s areas of expertise, and the mode of transportation into account when choosing a shipping partner. Here are the three main ways that global goods are transported into Thailand.

1. Air Freight

Due to its quick and dependable deliveries, air freight is the preferred means of transportation for many online retailers when shipping to Thailand. Bangkok Airport, often known as Suvarnabhumi Airport, and Don Mueang Airport are Thailand’s two main airports.

2. Sea Freight

Sea freight is much slower than air freight but also significantly cheaper. Be aware of any lead times when transporting your items by sea. Bangkok Modern Terminal (THBKK), Laem Chabang (THLCH), Map Ta Phut (THMAT), and Sattahip Commercial Port (THSAT) are Thailand’s principal ports.

3. Cross-Border Trucking

Road transportation accounts for a sizable share of freight transportation in Thailand due to its advantageous location in the Greater Mekong Subregion. Roads in Thailand are well-developed and connect up to 98.5% of the population. They serve as a crucial last-mile transportation route, especially for many Thai eCommerce clients in Greater Bangkok.

You might consider road freight as a fulfillment option if your supply sources are closer to Thailand, such as Southern China or Malaysia. Trucks are more affordable than air freight for shorter distances, and goods reach Thailand. When choosing your road transport partner, consider their geographic coverage of Thailand and the costs of transporting your clients.

Shipping to Thailand: Customs Clearance, Import Duties, and Tax

The Thai government introduced its “Thailand 4.0” economic model to reorient and improve the nation’s economy from production to knowledge- and service-based. Thailand wants to lead South East Asia’s digital hubs within the next ten years.

Before approving products for import, Thailand’s customs demand significant documentation. For this, most carriers work with regional customs brokers familiar with the established practices and necessary documentation formats. 

For you to be able to start shipping to Thailand and bringing your products into the country, you’ll need to provide the following documents to the concerned agencies:

• Import Declaration
• Commercial & Pro forma invoice 
• Packing List
• Airway bill or Bill of Lading, if needed

The Thai Ministry of Commerce has authority over some products, and those goods are subject to various standards and regulations. For instance, to simplify their clearing through customs, some commodities require additional paperwork, such as a permit and/or import license from organizations like the Thai Food and Drug Administration.

You’ll need to be aware of the import laws before shipping to Thailand. A quick look at Thailand’s restricted and prohibited items reveals the following:

Restricted Goods

• Fresh Food
• Hazardous Goods
• Firearms and Weapons
• Medicine
• Explosives
• Cosmetics

Prohibited Items

• Drugs
• Questionable Publications
• Fake Currency
• Counterfeit Goods

Imported goods may be held in a customs-bonded warehouse for up to 45 days without submitting an import entry and 60 days with the request of an import entry. Customs duties are due upon the vessel’s arrival carrying the imported goods.  Before the goods are released, all landing and storage fees must be paid.

The cost, insurance, and freight (CIF) method is employed in Thailand to determine import duties and taxes. This is based on the imported products’ value and related shipping expenses.

Customs law violations typically result in the recovery of back taxes and fines. The most severe offenses include smuggling and evading customs duties. Other common offenses are failing to follow customs procedures and making false claims. The applicable Customs Act clauses specify the statutory penalties.  

Depending on the duty shortfall stated in the import entry, a duty evasion offense is usually resolved with a punishment ranging from 50 to 200 percent.  A value-added tax (VAT) fine will also be assessed based on the duty fine. 

In addition, import taxes will be assessed depending on the Harmonized System Code‘s classification of the items. You can use the search feature on the Thai Customs website to find out how much import duty will be applied to your items. Typically, depending on the type of goods being sent, they impose an import duty of between 5 and 30 percent.

On the other hand, there is a VAT exemption for online purchases made from merchants outside Thailand and delivered to Thailand that cost less than 1,500 Baht (about US$45). For online purchases of goods costing more than 1,500 Baht, the VAT is currently set at 7%.

Import Duty Product Categories

Depending on which is higher, duties are assessed on a specific or ad valorem basis. The applied ad valorem taxes range from 0% to 80%. According to the Customs Tariff Decree, certain commodities are eligible for exemptions from import taxes.  Preferential duty rates are available on imported goods from nations with which Thailand has a preferential free trade agreement (FTA). 

These include the member states of the Association of Southeast Asian Nations (ASEAN). Other countries also enjoy preferential trade agreements when shipping to Thailand. They are Australia, New Zealand, Chile, India, Japan, Peru, China, Hong Kong, India, Japan, and South Korea.

For your reference, here are the applicable import duties for the various goods that can be brought into Thailand.

Importing your goods and shipping them to Thailand can be complicated and intimidating. That’s why it’s a great idea to work with a third-party logistics (3PL) partner that knows the in-and-outs for moving goods into and around Thailand. 

ZhenHub helps you connect globally with ease. Get integrations to some of the most popular online marketplaces. We’ll help manage your supply chain and give you complete visibility and control with our suite of digital eCommerce tools. Get started by signing up at our website for free.

Streamlined workflows and tighter supply chain management leverage product development, strengthen business relationships and provide new opportunities.

Companies must have a procurement strategy, whether employing an ad hoc procedure or managing a sizable yet thoroughly documented procurement practice. While the way that the procurement budget is managed and tracked may differ, the actual process itself shouldn’t. 

The act of locating and sourcing goods and services for a company is known as procurement. Due to the necessity of purchasing products and seeking out services for a business to expand, the procurement process is most frequently connected with the retail industry. 

The term “procurement” typically refers to the final act of purchasing. Still, it can also apply to the entire procurement process, from contract administration to invoice approval and new supplier onboarding. 

Some companies have historically equated the terms procurement and purchasing, but there’s actually a difference. Purchases are now merely a step in a longer, more strategic procurement process. 

The straightforward act of purchasing is more responsive to internal requests when compared to procurement. Procurement is centered on strategic, long-term goals, including corporate strategy and acquiring a competitive edge. On the other hand, purchasing is more concerned with short-term goals and company demands.

Before making a final purchase choice, you must consider the entire procurement cycle carefully. A company can participate in the procurement process on either the buyer or the selling side.

A Better Understanding of the Procurement Process

Procurement management can take up a sizable percentage of a company’s resources. Most of the time, the procurement process is governed by corporate standards centralized by accounts payable controls. Along with receiving and approving payments, this also involves creating and processing demands.

A procurement budget will give managers a specified amount of money they can use to buy products and services for the company. This system is essential to a business’s strategy since the ability to purchase particular goods and services can influence whether or not operations are profitable.      

Every online merchant needs supplies, products, and services to reach their business goals. Running a business involves purchasing communication tools, raw materials for manufacturing goods, or building maintenance services. 

Finding the best deals on the products you need is the primary goal of a procurement team. Building relationships with suppliers, negotiating favorable terms, and expediting the procurement process are all sought-after skills of procurement experts. They should also be proficient in identifying a need for goods or services to handle invoice payments. 

Organizations can maximize cost savings, reduce unnecessary expenditures, and assess how and where budgets are used most effectively by streamlining their procurement processes. The money saved by sound procurement procedures fosters expansion and protects the company from economic downturns.

Depending on the demands of the business and short-term objectives, companies engage in two types of procurement. These are:

Direct Procurement

This involves buying products and services specifically needed for your company’s manufacturing. Examples could be raw materials, software, services, or goods that help produce your business’s goods.

Indirect Procurement

Indirect procurement refers to everything not directly involved in the creation of commodities. Office supplies, communication software, and facility services unrelated to a specific product a business sells fall under this category. However, these goods and services can affect how efficiently you produce your products.

When purchasing goods and services, different accounting principles are used for revenues and expenditures. Businesses focusing on products (physical goods) will have to manage purchasing material goods. These companies will give careful consideration to supply chain management. Non-physical things like software subscriptions can also be included in the procurement of goods, and direct and indirect procurement techniques may be used.

As their main source of income, service-based businesses offer one or more services. These businesses might need to buy products for tech-based services, but they only sometimes rely heavily on the supply chain for inventories.                                                                                                                                             

In general, the hourly cost of labor accounts for most service-based businesses’ cost of sales. As a result, purchasing costs as a direct outlay is never a significant concern. But service-based businesses handle their procurement as an indirect expense through marketing.  They frequently have more indirect significant expenditures. 

The 9 Steps of an Effective Procurement Process

Any business’s ability to operate efficiently financially depends on its procurement procedures. It helps you find the best partners to work with your company and reduces delivery times. Efficient processes help you pay the proper amount for goods and services. 

The company’s size and nature will significantly impact the procurement process’s structure. No “one size fits all” technique works for all businesses. The procurement strategy must be completely customized for each company to ensure optimum efficiency. 

The procurement process may change since different businesses have distinct demands and objectives. While there may be differences in the specifics of their procurement process, there may be some similarities in the overarching processes.

1. Identify Your Business Needs

Businesses can start by determining what products and services are necessary for employees to achieve their objectives. They might speak with staff from different departments to determine what products and services to prioritize for internal procurement. The team may also decide what equipment or supplies are required to continue developing profitable goods. One strategy they might employ is drafting a plan considering price, profitability, value, and the time to acquire specific goods and services.

2. Submit a Purchase Request

The next step is to submit a purchase requisition, essentially a request for authorization to incur the expense in writing. Employees use it as an internal form to request the products and/or services needed to finish a task.  

A purchase request should include information required to satisfy the current need and maintain operations. The purchase requisition should always contain essential information for buying goods, services, or works. 

3. Choosing a Vendor/Supplier

After the procurement team approves a purchase, you must select a supplier. To do this, the procurement team may send requests for quotations (RFQs), also known as requests for proposals (RFPs). This allows suppliers to provide statements of interest, cost estimates, and a list of their products or services. Requests must be as specific as possible to ensure that potential suppliers are aware of the company’s requirements. Another choice is to contact former vendors with company records and working relationships.

4. Negotiate Terms & Conditions

Once the best supplier has been selected, the negotiation process begins. The procurement team will work with the sales rep to establish pricing and terms for the purchase. Negotiations should be completed only after all departmental prerequisites have been met. A binding contract is established as soon as the vendor recognizes and accepts the purchase request.

5. Purchase Order Creation

Procurement creates a purchase order (PO) to obtain the products or services from the provider. Procurement creates a purchase order (PO). The PO typically undergoes a different approval procedure to ensure all transactions satisfy expectations. Staff will need to look for any potential problems or anomalies. The purchase order is subsequently forwarded by procurement to the supplier for fulfillment.

6. Receive and Review Goods/Services

Your chosen provider completes the order. The procurement team receives the items and inspects them to confirm the quality and accuracy of the shipment once the product or service is delivered. The receiver may ask the supplier for changes if the order exceeds expectations or returns the cargo. 

7. Order Audit

A three-way match is performed once the goods have been fully received. This ensures the shipment, invoice, and PO are accurate. The procurement team also evaluates suppliers to ensure that all contract requirements and terms are satisfied during the delivery process. 

8. Invoice Approval and Settlement

Once three-way matching is completed, the supplier invoice is sent for processing. These bills are coded, batch-processed, and scheduled for payment.  Each business may have a different procedure and payment schedule. Using the format specified in the contract, the financial department processes the payment before sending it to the provider.

The procurement team also evaluates suppliers to ensure that all contract requirements and terms are satisfied during the delivery process. 

9. Bookkeeping

The entire procurement process should be documented. This includes keeping complete records of your purchase requests, pricing negotiations, invoices, receipts, and anything else. These documents could be helpful for a variety of reasons. They aid in tax calculations, auditing procedures, and future orders of items at the right price for the business. Additionally, accurate, clear records may assist in settling any future disputes.

Procurement can significantly impact your eCommerce company’s profitability and success. However, procurement entails a wide range of linked activities, which necessitates close attention to detail. Keeping track of all these documents and data results in maximizing profits. Analyzing data and maintaining an efficient procurement process are challenging tasks. Procurement may deal with dozens of vendors and thousands of invoices, even in small and expanding businesses. As a result, an abundance of data can only be wholly utilized through technology. 

The burden of manual procurement operations can be reduced by using procurement software to automate procedures and centralize data. Digital dashboards also provide visual data to business teams to help them decide how to spend budgets better.

ZhenHub upgrades your procurement process with a digital platform of eCommerce logistics services. Connect to our online dashboard to access our inventory management software, which has multiple online marketplace integrations. Sign up today and bring your business to the global stage.