Competition in Thailand's e-commerce market is approaching an apex as Chinese e-commerce giant JD.com locks arms with Central Group to expand online exports to China by at least 100 billion baht over the next two years.
Central Group wants the joint venture's platform to help it derive 15% of its revenue from online channels by 2021. A bold prediction, given that the group derived only 1-2% of its 320 billion baht in revenue from online activities this year.
The new website jd.co.th is scheduled to launch in April 2018. The e-finance component for the partnership is expected to launch in the second or third quarter of next year, upon approval from the regulator.
"Central JD Commerce Co will combine the technology of the biggest e-commerce firm in China with the biggest retailer in Thailand to build a long-term sustainable business," said Tos Chirathivat, Central Group's executive chairman and chief executive. "We hope the joint venture becomes the market leader in Thailand and Asean."
The products on jd.co.th will also appear on jd.com's Chinese website, which will enable small and medium-sized enterprises (SMEs), particularly those in rural areas, to sell their products to a global audience and support Thailand 4.0 by promoting trade between Thailand and China.
"We hope Thai exports to China top 100 billion baht within two years," said Yol Phokasub, president of Central Group.
Moving forward, Central Group can tap into some of JD.com's biggest investors, including Walmart and Tencent.
In turn, partnering with Central will allow JD to export Thai products across Asia, US and Europe.
JD.com Inc sells some 10 billion baht of Thai products per year and plans to establish a procurement centre in Thailand in the near future.
"We aim to bring e-commerce expertise from China to Thailand," said JD.com chairman and chief executive Richard Liu. Some 57% of purchase orders on JD.com can be delivered within 5-6 hours to customers in urban areas, and within 24 hours to those in rural areas.
Mr Yol said Central JD Commerce Co will operate under the trademark "JD Central". A soft launch of the website is planned for the end of this year.
"In the future retail winners will be those that can provide seamless omni-channel experiences. It is that combination of online and offline business that will make them unique," he said.
The joint venture will not start from scratch like Alibaba's Lazada, the current market leader. JD Central will leverage Central Group's 14-million-strong customer database, warehouse network, and 10,000 suppliers of 40-50 million items.
Within its first year of operation, JD Central aims to attract 50,000-100,000 suppliers to its platform.
"Thailand has 3 million SMEs, 2 million of which are still not online. This gap represents a huge opportunity," said Mr Yol.
"We believe we can break even within 3-5 years, even taking into account the initial investment of 17.5 billion baht."
Over the next decade, at least 25% of the country's GDP will come from digitally-enabled businesses, he said.
In the next three years, the joint venture will spend about 100 billion baht to link China to its Southeast Asia regional headquarters in the Eastern Economic Corridor digital park. The site is expected to become a regional export hub and innovation centre.
The firm will also pour 500 million baht into "data lake technology" to analyse customer behaviour. JD Central expects to provide consumer and supplier finance services by the second or third quarter of 2018.
Vincent Yang, chief executive of Central JD Commerce Thailand, declined to reveal the venture's target revenue for 2018, saying the focus would be on customers rather than revenue.
The joint venture will initially operate out of one of Central's warehouses in Bang Na Road, said Mr Yang.
Mr Yol said Central's network of warehouses would eventually be integrated into the JD Central system.
JD.com posted 43% net revenue growth from 2015 to 2016. According to China Merchant Securities the company will post third-quarter net revenue of US$12.7 billion, up 40% year-on-year. The company is expected to announce earnings for the third quarter on Nov 21.