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Economic Sector

Last updated: Thursday, April 18, 2019

 

Fierce Competition in Vietnam E-commerce Industry

Posted: Thursday, March 21, 2019


The huge disparity in e-commerce growth raises concerns about the stability and unsustainability of this sector in Vietnam. How could we solve this problem?

According to statistics in 2018, e-commerce achieved a growth rate of over 30%, earning US$7.8 billion, with Hanoi and Ho Chi Minh City accounting for 70% of the total revenue.

Bright prospect of Vietnamese e-commerce

According to Mr. Tran Van Trong from Vietnam E-commerce Association (VECOM), the country's e-commerce growth rate reached over 30% in 2018, and 25% in 2017.

Especially in 2018, the investment in this sector was very vibrant, attracting many businesses.

According to experts, in addition to the high rate of internet users, most of whom are young people, the infrastructure advantage for e-commerce such as payment services is also a premise for electric commerce. In particular, in 2018, a boom in technology platforms supporting e-commerce such as AI (Artificial Intelligence) laid a foundation for further growth in 2019.

According to Mr. Nguyen Ky Minh, Director of Ecomviet Center, Department of E-commerce and Digital Economy, in 2015, the scale of the e-commerce market was only about US$4 billion but in 2018, this figure was US$7.8 billion.

According to Mr. Minh's hypothesis, in the period of 2019-2020, e-commerce growth is to reach 30%, generating a revenue of US$13 billion. Vietnam has set the target market size by 2020 at US$10 billion. Thus, if we can achieve a 30% growth rate, US$13 billion is a very positive figure.

"If US$13 billion is achieved in 2020, then Vietnam can likely increase the figure to US$33 billion by 2025. Thus, Vietnam's e-commerce market will rank third in Southeast Asia only to Indonesia (US$100 billion) and Thailand (US$37 billion),” said Mr. Minh.

In more detailed analysis, Mr. Do Huu Hung, CEO of Access Trade, said that since the end of 2018, e-commerce has become heated. If a business just sits and waits, it will lose opportunities and slow down. In 2018, the growth of Vietnam's e-commerce in B2B (business with business) increased 30%, while C2C (customers with customers) doubled.

Especially, compared to 2017, the whole market was about US$1.7 billion but in 2018 this figure was 7% higher. Five largest online retailers are Lazada, Shopee, Tiki, Adayroi and Sendo, all reporting growth of 3-4 times. In 2019, their growth is estimated to increase 4-5 times. In particular, the Apps accounts for 50-80% of the total amount of transactions and holds users in the longest period.

How to solve the problem?

However, digital technology experts are concerned that consumer rights are not protected. For example, when a customer buys a small cost item, but the cost of a complaints is high. This makes consumers lack faith in buying online.

Besides, according to Mr. Minh, there is a difference between Hanoi, Ho Chi Minh City and the other 61 provinces.

According to Vecom's survey, Hanoi and Ho Chi Minh City account for a huge amount of revenue up to 70%; some other neighboring provinces, central cities account for only 20%. The rest only account for 10%. If such a gap is maintained, by 2025 it will grow extremely wide among provinces and cities.

Mr. Trong said that Vietnam's electronic payment has grown quite well; in the past two years, the fintech companies have updated technology quickly; however, the current rate of online payment has not changed much in recent years. Only about 20% of orders are paid online, the rest are paid directly to the delivers. Therefore, it is necessary to improve and enhance the quality of payment services such as payment skills, payment benefits, phishing awareness skills in shopping, and gradually to eliminate obstacles still existing in the field.
According to Mr. Minh, if Vietnam wants to develop e-commerce firmly in the following years, it needs a favorable environment and ecosystem, including advanced telecommunications infrastructure and information technology so that most people have easy access to the internet via mobile devices. In addition, the government needs to create a platform to help logistics services and online business startups easily access public services as well as flexible capital mobilization.

Mr. Hung said that the e-commerce businesses need to build ecosystems to retain users if they want to succeed in this area. Mobile e-commerce will decide the game in the future. Enterprises need to use every possible channel to sell to and reach a larger number of users. If they ignore certain channels, they will lose customers and be "eaten" by their opponents. To gain user's experience, businesses should focus on customer services that take care of their customers. This will build the next revolution that businesses need to actively grasp.

KL








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