Markets & Prices

Last updated: Tuesday, April 23, 2019


Retail Industry Under E-commerce Pressure

Posted: Thursday, September 13, 2018

In the wave of the Technological Revolution 4.0, e-commerce and high-tech applications may give a strong boost to many retailers, but also carry many challenges that force them to change.

Over the past years, many multinational retailers have landed in Vietnam, including Lotte (South Korea) and Aeon (Japan). Domestic giant retailers such as Vingroup and Saigon Co-op have strived to expand their business operation by acquiring smaller ones.

In 2008, A.T Kearney said that Vietnam's retail market was most attractive globally but it has continuously dropped in rankings since then. Many upmarket shopping malls such as Hang Da Galleria and Trang Tien Plaza have gone through a slump or even shut their business like Parkson.

There are many reasons for the closure of upscale shopping centres, possibly improper operating model, low turnover and insufficient tenants. But, the most important reason is the strong competition from e-commerce businesses.

Big e-commerce companies have arrived in Vietnam. Three leading Internet service providers in Japan - SBI Holdings, Econtext ASIA and Beenos - announced a strategic investment cooperation deal with Sen Do Joint Stock Company affiliated to FPT Corporation. This deal has boosted the brand name of both Sendo and 123Mua.

In addition, Lazada received a big investment of US$250 million from giant corporations, including Temasek (Singapore). Lazada has also expanded rapidly to six countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam in addition to the supply hub in Hong Kong where commodities are distributed across countries.

Previously, the race among e-commerce brands such as, Lazada, Tiki, Vat Gia, Zalora, CungMua, was already much needed. However, with their limited e-commerce scale, they face a lot of difficulty in competing with professional competitors from abroad.

While there is no official statistical data from statistics agencies, the Vietnam E-commerce Association (VECOM) surveyed enterprises in various industries to estimate the e-commerce growth in 2017. The survey result showed that e-commerce in 2017 expanded 25 per cent from the previous year. Many respondents estimated a similar growth in 2018.

Growth in some areas was spectacular. Data from thousands of e-commerce websites revealed that online retail revenue climbed 35 per cent in 2017. Indirect surveys into some leading delivery companies told revenue growth from delivery services ranged from 62 per cent to 200 per cent.

With respect to payment, according to National Payment Corporation of Vietnam (NAPAS), in 2017, online card payment deals increased by about 50 per cent from a year earlier while the value surged up to 75 per cent.

In online marketing, some affiliate marketing companies posted a growth rate of between 100 per cent and 200 per cent in 2017.

In tourism, according to a Grant Thornton’s survey, in 2016, booking through online travel agents (OTA) accounted for 20 per cent of booking revenue. A survey by VECOM in 2017 found that the growth was over 30 per cent. Given this pace, online tourism revenue may exceed 50 per cent soon.

As many as 39 per cent of businesses surveyed spoke highly of online sales performances via social networks, the highest among online tools. The runner-up is sales from enterprises’ websites (35 per cent).

With an annual growth of 35 per cent, online retailing is a lucrative ground still not fully tapped. This growth was much higher than the overall e-commerce growth of 25 per cent, which is considered already very attractive in the eyes of investors.

In the coming time, the online retail market in Vietnam will be tighter since domestic and foreign-run supermarket systems such as Co.op Mart, Aeon and Lotte Mart start to launch e-retailing. Supermarkets cannot make light of this e-commerce race. According to many experts, e-commerce service is the hardest challenge for all supermarkets to solve to gain online retail market shares.

Foreign retailers are taking the lead in e-commerce race. According to industry experts, retail networks run by businesses are just a necessary condition and their service is a sufficient condition. Retail service has been a weakness of domestic enterprises so far. Therefore, they need to improve their service, ensure punctual delivery and show better attitude and service to customers.

Huong Giang

Other news

Yen sao Khanh Hoa
My Le
Vietnam Export Gateway
Tong cu DL