Central joint venture with JD.com hailed as game changer for country
A Bt17.5 BILLION joint venture between Central Group and JD.com, China’s largest retailer, not only marks a significant advance for the giant Thai retail group while aiding the country’s digital transformation, it will also bolster trade ties between the countries, Central Group CEO Tos Chirathivat said yesterday.
The partnership provides for the launch of an open-system online marketplace in Thailand starting in April.
The joint venture is in line with Central Group’s vision to increase the revenue contribution from e-commerce from the current 1 per cent to about 15 per cent over the next five years. JD.com is committed to increasing its product sourcing from Thailand from Bt10 billion annually now to about Bt100 billion within that time.
Tos said the partnership with JD.com would mark a significant step for Central Group and the country in moving towards the digital economy era. The joint venture will enhance strategic co-operation in area of technology, cyber-trade, e-commerce, logistics, e-finance, and international trade. The move also will bring quality Thai products into China.
“It will be an important step for Thailand and Central Group,” he said, adding that Central Group had also shown interest in participating in the government’s Eastern Economic Corridor (EEC) project.
Tos said that Central Group had been in Thailand for 70 years and was confronting a major change in the retail landscape driven by digital technology.
“The partnership with JD.com will be another step leading us into sustainable growth in the future,” he said.
Tos said the Bt17.5-billion joint venture embarked on with JD.com - a global leader in technology, e-commerce, logistics, financial technology (fintech) , Big Data and artificial intelligence – would deliver a new e-commerce platform at JD.co.th, under the trademark of JD Central. It is scheduled to open in 2018.
“Our objective is to establish the first complete digital ecosystem alongside developing Central Group businesses to be the truly largest omnichannel operator in Thailand,” Tos said.
“This will fully cater to customers’ needs in the age of Thailand 4.0, while providing Central Group with a healthy growth path, with online sales accounting for over 15 per cent of the group’s business within five years.
“This cooperation will not only create a seamless shopping experience for customers, but is will also support the government’s Thailand 4.0 initiative. This project stresses developing personnel to keep up with the digital world, increasing employment and promoting the exports of SMEs, as well as developing the Eastern Economic Corridor by establishing a head office to be a digital hub for Southeast Asia.”
Yol Phokasub, president of Central Group, said that the group aimed to double the size of its online shopping business every year over the next five years. “We want to increase revenue contribution from e-commerce from only 1 per cent today to about 15 per cent in the next five years,” said Yol.
He added that half of the Bt17.5-billion investment would be for the development of e-commerce and logistics, while the remainder would be allocated to the e-finance business. “We (Central Group) are not joining the joint venture with JD.com from zero,” Yol said, adding that the group has 14 million customers on its database, together with 10,000 suppliers and 50 million products. It posted Bt320 billion in sales last year.
“The new digital ecosystem not only allows every customer to access the services, but also assists Central Group’s project of community products,” Yol said. “This gives opportunities to over 10,000 Thai SMEs, OTOP craft makers and local farm producers to grow and achieve success together with Central. Exports of quality products to international markets will be boosted as they can expand their markets and distribution channels to cover both domestic and international customers. Products on the JD.co.th website will also appear on the JD.com webpages in China. It is projected that Thai exports to China will be no less than Bt100 billion within five years.”
Central Group, which also has retail operations in Vietnam and Europe, said the joint venture will create a different online shopping experience for Thai customers with the digital ecosystem to be built on JD.co.th
Richard Liu, JD.com’s chairman and chief executive, said that Thailand’s large population, developed infrastructure and the high penetration of Internet information services gives it tremendous potential for both e-commerce and fintech services.
“Working with Central Group, Thailand’s strongest retail conglomerate, we will use a localised strategy to build out our efforts in the market,” Liu said. “JD Central will work to offer the best consumer experience, empower SMEs, promote the export of Thai products, and develop the best e-commerce experience in the region.”
Vincent Yang, CEO of Central JD Commerce Thailand, said that JD.com set up the first such joint venture in Southeast Asia, in Indonesia, two years ago, and the online shopping business had been operating smoothly over the time.
“Thailand is the second country in Southeast Asia for us to set up a local joint venture, which is in line with the company’s strategy to expand its business in Asean,” Yang said.
“With a good geographical factor, we will use Thailand to be a hub in distributing products in the region,” he said, adding that the group would like to encourage the Thai government to increase its policy support for the development of e-commerce in Thailand.