Business Advisory firm focusing on company setup in Thailand, including BOI application, Thai limited, Immigration and labor consulting.

Write my essay No more promotion for direct-sale e-commerce in Thailand?

E-commerce is by definition the buying and selling of products via electronic channels such the internet. Pioneered by big players such as Amazon or Ebay, nowadays e-commerce companies are major players in the worldwide economy. Only a few years ago, also Thailand’s merchants started to go online, forming a quickly growing industry today.

E-commerce stores traditionally follow different business models. The two most general forms are the marketplace model and the direct selling model. In the direct selling model, customers purchase the goods from the e-commerce store itself. There are three different ways of handling the stocks and sales. The consignment model is the most used one. Goods are received from the suppliers on consignment basis and stored at the own warehouse. If products cannot be sold they are returned to the supplier. The second one is the outright model. In this case, goods are bought in large amounts from the suppliers and stored in the own warehouse. Afterwards, they are sold to the customers. The third method is the drop-shipment model. In this model, purchases are done at the online store, but the delivery is fulfilled by the suppliers themselves. Thus, online stores do not have to hold their own stocks. The marketplace model is the setup of a virtual marketplace. Customers buy at the online shop directly from the suppliers. The online shop itself receives a commission for its service of bringing both parties together.

business models

When the Board of Investment (BOI) decided on their promotion criteria, they understood e-commerce as marketplace model. Nevertheless, for many years the Board of Investment (BOI) promoted e-commerce companies who very apparently run direct selling models. This practice has suddenly stopped and all companies who have been promoted under e-commerce and don’t run a marketplace model are under review now. The question remains what this strategy shift means for the biggest direct sale e-commerce players in Thailand, namely Zalora and Lazada, both funded by Rocket Internet. Would the Board of Investment (BOI) promotion being revoked, both companies could not be owned majorly by foreign nationals and it seems obvious that currently more than 49% of Zalora and Lazada Thailand are owned by foreign investors. Will investors be concerned about the legal security of their investments?

Stein Advisors is expert for Board of Investment (BOI) promotions of e-commerce companies. So far, our success rate to get projects approval is 100% – because we don’t only understand the legal but also the business aspect of an e-commerce business.

In the past, governmental regulations have been formulated vague and therefore offer the potential for many surprises in the future. This is why having a legal advisory on its side that understands Board of Investment (BOI) politics makes a difference.

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