Accessing the Thai Consumer Market (Interview with Herkomst)
15 March 2017
Michael Li is a seasoned retailer and distributor with extensive experience in both Hong Kong and on the Chinese mainland. He has worked across a wide variety of industries, including food, precious jewellery and giftware. He is currently the Brand Director of Herkomst Holding, a specialist in the design and sale of fine gift soaps and home fragrances.
In 2016, Li met with a Thai retailer who was keen to offer Herkomst’s products in his shop in Bangkok’s Siam Paragon mall, Thailand’s third-largest shopping complex. Inspired by this, Li conducted extensive market research into the market and came to believe that there was considerable potential for Hong Kong’s lifestyle products in Thailand. He then arranged for the import of a number of the brands featured in the HKTDC Design Gallery. His sales figures to date indicate that his hunch was correct.
Asked as to the challenges of entering the Thai market, Li maintains that cultural differences pose certain difficulties. He said: “While we have a fast-moving culture, Thais in general tend to be laid back and jovial. Very often, my Thai counterparts do not respond as quickly as I expect and I have to follow up with them closely. Fortunately, red tape is not a serious problem in Thailand. I have not encountered much difficulty, for instance, when filing product registrations with the Food and Drug Administration of Thailand.”
Li was also keen to highlight one small, technical issue relating to distribution in Thailand, saying: “In Hong Kong – and in many markets around the world – the barcode system has been standardised among retailers. In Thailand, that is not the case and that adds to the cost of distribution”. Other than factoring in this higher cost of distribution, Li said brand owners should also expect profit margins of around just 35% in Thailand, compared to the 50-60% that is standard in Hong Kong.
According to Li, Hong Kong companies are highly regarded by Thai retailers. Expanding on this, he said: “I cold-called some 10 retailers in Bangkok and the response rate was 100% enthusiastic. Hong Kong people are known to be trustworthy and our lifestyle products are seen as stylish and good value for money. I think you can sell all kinds of lifestyle products – gift items, housewares, toys, fashion jewellery, etc – in Thailand, provided you don’t price yourself out of the market.”
With regard to entry strategy, Li believes Hong Kong companies should adopt a pro-active approach. He said “Many importers and distributors in the ASEAN market – unlike those in the US and Europe – are less active when it comes to sourcing and bringing in new suppliers. In light of this, I recommend that Hong Kong companies directly approach retailers, the majority of which tend to be concentrated in the relevant capital cities. Once a deal has been struck, you can then find an importer or distributor to help facilitate the logistics and handle the trade documentation. If you have a direct connection with the retailer, you have a better feel of market responsiveness and a lower risk of being replaced.”
As a first step, Li believes Hong Kong companies can simply introduce their existing products as a way of testing the market, without worrying about brand registration and the need to alter product designs to cater to ASEAN preferences. He said: “You never know if consumers like your products before you enter a market. Additionally, in Thailand competition is not as fierce as it is in China, where people rush to register your brands. I would suggest companies only register their brand trademarks after meeting with some initial success. Brand registration is simple and inexpensive in Thailand, with any local lawyer able to help.”
Li believes Malaysia, Vietnam and Indonesia also have considerable market potential for Hong Kong lifestyle products. He does, however, warn that in dispersed island nations – such as Indonesia and the Philippines – the costs of distribution can be high, something that inevitably reduces profit margins. In the case of Singapore, he sees the market as small and very competitive, with its economy just as open as Hong Kong’s.
Even though e-commerce is a growing trend across the ASEAN region, Li has no plans to explore this route at present. He said: “In the case of lifestyle products, consumers still want to touch and feel them before they buy.”
For Li, his current priority is to open a number of pop-up stores across Thailand as a means of building the brand awareness of his products, before gradually expanding into other ASEAN markets. Overall, he said: “I think it is high time for Hong Kong companies to start tapping the ASEAN consumer market.”
- Gifts & Premiums
- Hong Kong
- Southeast Asia