E-Commerce In Vietnam - The Journey Of The Rose

Whispers began in March stating that Amazon – the online e-commerce super-store – will enter the Vietnamese market. Whilst we wait for the possible confirmation of the rumour, let us look at the development of everything e-commerce within Vietnam – where it has been, where it is now, and where it is going. 

Quantity and quality

Many experts and consumers believe that traditional shopping is now dominated by the e-commerce industry largely due to the rise in popularity of online shopping platforms. Most consumers are no stranger to electronic devices and the advantages that these online platforms provide. 

In addition to the more well-known shopping sites such as Lazada, Thegioididong, Sendo, Shopee, and Tiki, Vietnamese consumers also undertake retail therapy via social networks such as Facebook and Zalo. This form of shopping allows everyone to be the seller, and even though sales segment is extremely small, the size of the market is quite large and has low overhead costs. 

The low costs of the ‘sales via social network’ method leads to low product prices, and is popular amongst those who regularly use online shopping platforms. On the flipside, well-known websites that have heavily invested in human resources and operating systems are facing numerous difficulties from ongoing cost burdens.

A marketing budget plays a key role in any e-commerce set-up. As noted, the budget for marketing plan in the first two years of e-commerce fluctuates around $US 2 million, and a company’s "survival" will be determined after this period of time. Brands such as Beyeu, Deca and Foodpanda all failed within two years of launching, with other companies quietly withdrawing from the market. Although it is considered to be fertile, the e-commerce market doesn’t always offer ease of business, with many brands in this field still attempting to find their footing within the sector. 

Attractive but also thorny

The above headline describes how Savills Retail department views e-commerce in Vietnam as the ‘journey of the rose’. According to the E-commerce and Information Technology Department, Vietnam's e-commerce sector will increase by 25% from 2018-2020. Over the next four years, the domestic e-commerce market is expected be worth $US10 billion. In addition to businesses, foreign investment funds and global corporations are also actively buying shares and investing in e-commerce sites in Vietnam, making this market more and more exciting.

Although potential development is real, obstacles that the e-commerce sector in Vietnam may encounter include unsustainable development, monotonous information, lack of detail, lack of attractiveness as well as not having the necessary tools to support customers.

 According to the study, more than 50% of Vietnamese shoppers prefer to shop abroad because of product quality, service, payment, delivery, promotions, etc. The shopping habits of Vietnamese people are "seeing, touching and try", with many customers browsing ecommerce sites beforehand in order to compare prices. As lives get busier, the time for ‘physical’ shopping will be very limited, and e-commerce will become a more realistic form of consumerism. In terms of market, online shopping in Vietnam still has many opportunities to develop but e-commerce retailers need to study more consumption behaviour.

Assimilation thinking makes it easy to access both consumers and merchants, especially for long-term, sustainable development.

The entrance of large e-commerce companies such as Amazon will certainly create more incentives for this segment, as well as restart the race for market share.

The remaining difficulties of e-commerce in Vietnam arise from a variety of causes. Many well-known brand names do not have e-commerce sales policies, leading to a lack of variety, with only domestic brands on offer. Normally, the profit margin of the domestic brand is about 40-45%, while the cost for the e-commerce segment is quite high at an average of 30%. In order to limit the risk of goods returned, inventory, seasonal goods, retailers must sell at higher prices. In addition, e-commerce is a strong channel for retailers to raise branding awareness.

It can be said that the e-commerce has endless potential but also contains a great amount of risk. Investors should place emphasis on the consumer culture of the Vietnamese and take various cautions before planning to enter this market.

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