Fierce Race for E-Commerce Market Shares

2:06:08 PM | 9/7/2019

E-commerce businesses in Vietnam are suffering a loss of trillions of Vietnamese dong in the race to gain market share.

No surrender to loss

In spite of enormous cumulative losses, Tiki, Shopee, Lazada and dozens of others are still throwing their money into an ongoing e-commerce race. They are generously supporting customers and partners with attractive policies such as free delivery, simple procedures and multiple promotions. Shopee incurred a loss of more than VND1,900 billion in 2018, triple that of 2017. Tiki lost nearly VND760 billion in 2018. Lazada suffered a back-to-back loss of VND1 trillion in 2015 and 2016. In 2017, its loss exceeded VND1 trillion, bringing its loss to VND4 trillion to date.

In the costly battle, many players had to give up their ambition. After Thegioididong shut down its Vuivui e-commerce floor, others like Beyeu.com, Deca.vn and Lingo.vn also ended their operations. Recently, Robins.vn also suddenly announced bringing to an end to online sales.

According to industry specialists, e-commerce is a long-term game for financially viable businesses. In other words, this is a long-distance race, not possible to conclude in a day or two.

According to iPrice Group, among 10 most visited e-commerce websites in Southeast Asia, five are present in Vietnam. Notably, apart from Shopee and Lazada owned by multinational corporations, three others are Vietnamese. Currently, they are competing in prices. According to iPrice, in the coming time, e-commerce businesses will shift to entertainment and customer experiences rather than price reductions.

Great potential

According to Google, by 2025, Vietnam will be the fastest growing e-commerce market in Southeast Asia where competition is very stiff. However, iPrice’s latest e-commerce data showed that companies like Tiki, Sendo, Shopee, Lazada have ground for a prospective future.

A research by Facebook showed that e-commerce revenue in Asia may reach US$150 billion by 2025. Trans-boundary data transmission creates the foundation for new business models, helping grow 10% of global gross domestic product (GDP) over the past decade. In the Asia-Pacific region, the digital economy is expected to account for 60% of regional GDP by 2021.

If the growth is at 30% in 2019 - 2020, the market size will reach US$13 billion by 2020, higher than the target of US$10 billion set in the Overall E-commerce Development Plan in 2016 - 2020.

Vietnam holds clear advantages of e-commerce development but this sector needs a favorable environment and ecological environment to grow. Specifically, telecommunications infrastructure and advanced information technology help most people easily access the internet via mobile devices and rely on online transactions. Along with logistics services and order fulfillment, online business startups have easy access to public services as well as flexible mobilization funding.

If the growth is maintained at 30% in 2019 - 2020, the market size will reach US$13 billion by 2020, higher than the target of US$10 billion set in the Overall E-commerce Development Plan for 2016 - 2020.

A survey by Vietnam E-commerce Association (VECOM) also found high e-commerce growth. Particularly, some sectors staged spectacular growth, e.g. online retail. Data collected from thousands of e-commerce websites showed that e-commerce revenue grew by 35% in 2017. Indirect surveys from delivery enterprises indicated a revenue expansion of 62 - 200%. With respect to online marketing, a number of affiliate marketing companies posted a growth rate of 100 - 200% in 2017.

A VECOM representative analyzed that, in order to develop quickly and strongly in this field, companies need to approach and experience online services and solutions such as Omni - channel (multi-channel sales application), chatbot for answering customer questions and blockchain technology for food traceability.

Vietnamese e-commerce companies are becoming increasingly aware that only a simple discount is not enough to compete and retain customers in the long term but they need to meet their entertaining demands. This trend is expected to stage in 2019 and the e-commerce battle is promised to be very dramatic in Vietnam in 2019.

Huong Giang