Young people are driving an explosion of ecommerce in Bangkok and beyond

My friend Tony visited me in Bangkok last Saturday and I took him for a night on the town.

Everywhere was heaving. We eventually found a table in the Seven Spoons Bar and Restaurant.

Tucked away inside a tiny Chinese shophouse, Seven Spoons offers the best Mediterranean meal in Bangkok – and it’s not somewhere most tourists would know about.

We were seated in a small alcove by the window looking out onto the street. Even after waiting for half an hour, we had to share our table with another party, a 22-year old Thai man and woman on a date.

The man was bald with large ears and some soft stubble on his face.

The woman was much shorter and wore round, frameless glasses.

A rolled-up towel was laid between us to act as a divider but I couldn’t help glancing over at the couple throughout the meal.

They were glued to their smartphones. Even when the food came, I enjoyed the impressive sight of the man trying to eat tortellini while typing.

When the bill was paid (which they did via their phones), the couple got up and left. I don’t think a single word passed between them during the entire meal.

“What could they have been doing that whole time?” I said, after we’d left.

“Shopping,” said Tony.

Thailand’s ecommerce sales will rocket up

I see a lot of similar activity when I’m walking around the streets of Bangkok. These under-24s – over 22 million of them – are driving an enormous transformation in Thailand: the rise of ecommerce.

More and more consumers are choosing to do their shopping online, and ‘bricks and mortar’ businesses are suffering.

It’s a transition that has already happened in the UK, US and China.

In the UK and the US, ecommerce accounts for 8% and 12% respectively of total retail sales. It is fair to expect that proportion to grow over time.

In Thailand, ecommerce currently accounts for 1.2% but is set to catch up over the next few years.

Much of this growth will come from the countryside.

The week before my dinner with Tony, I had been out in the small town of Pai in northern Thailand. Passing down the main street, I saw far fewer young people on their phones. Within a few years, they’ll all be using their smartphones to shop online as well

This isn’t just a phenomenon exclusive to Thailand.

In Indonesia, Vietnam and the Philippines, the smartphone penetration rate also is set to almost double over the next couple of years.

Meanwhile, across Southeast Asia, online retail spending is projected to grow by 26% CAGR (compound annual growth rate) 2014-16 according international market research group Euromonitor.

Three massive implications for Asian consumer stocks

1. Bricks and mortar retailers are in trouble

It is hard to see how plain ‘bricks and mortar’ companies will be left unscathed. As shopping moves online, they will see their tenant base eroded and will subsequently be forced to cut their high dividends.

2. E-logistics companies will be big winners

Everything that’s bought online needs to be packaged and distributed at a low cost and in a timely manner.

The cost of logistics in Asia is often twice as high as in developed economies, acting as a tax on commerce.

This segment is in its infancy. Until recently, many e-logistics companies were involved in business with limited growth prospects. Thanks to far-sighted managers and occasionally capital injections from ecommerce companies, they are now being revamped into e-logistics stars.

Other big winners will be ecommerce aggregators (comparison sites for ecommerce).

3. Consumer stocks will be re-rated

Changes in the nature of retailing will force a re-think about what constitutes a consumer stock. A lot of funds have to construct their portfolios according to strict sector classifications.

A change to how sectors are perceived could lead to stocks being re-rated and that means there’s the possibility for us to make a lot of money if we find the right ones.

I’m exploring ways you can capitalise on this. Stay tuned.

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