Online shopping has become familiar for Vietnamese consumers and businesses over the past time. The e-commerce industry is becoming a bridge between Vietnamese industry and the outside world in the integration period. E-commerce has turned from an “imaginary” trading form into a real utility for daily life. To summarize a year of the development of the e-commerce industry of Vietnam, Vietnam Business Forum has outlined five key events in the domestic e-commerce industry and the development trend of the industry in 2008.
2007 – An important year for e-commerce development
Although lagging behind the world, Vietnam has pinned high hopes on this trading form, because currently many Vietnamese young businesses are able to apply new advanced technology to develop this form. Although the country of Vietnam lacked the Internet only ten years ago, it now stands among the Top 20 countries in the world for internet use. The e-commerce industry has strongly developed in Vietnam in 2007 with five major events:
1. Completed legal foundation for e-commerce “The legal system for the e-commerce industry has been completed. The Law on Online Trading and Amended Law on Trade, along with the issuance of the E-commerce Decree have created a favourable environment for the development of the e-commerce system,” said Mr Vu Huu Linh, deputy head of the E-commerce Department under the Ministry of Industry and Trade. Especially, three important decrees on e-commerce were issued in the first three months this year, including the Decree on Digital Signature and Digital Signature Certification Service dated 15 February, 2007, the Decree on Electronic Trading in the Finance Sector dated 23 February, 2007, and the Decree on Electronic Trading in the Banking Sector dated 8 March, 2007. The issuance of these three decrees showed the strong influence of e-commerce in the finance and banking sectors. Mr Linh said, “In order to comment on the application of the Law on E-commerce in daily life, it can be said that Vietnam Law has officially recognised the equal value of electronic information and paper information. This is the biggest recognition, marking a turning point in the development of the e-commerce industry in Vietnam this year. It has helped turn virtual information on the internet into real data.”
2. Online payment has been developed: The e-commerceindustry in Vietnam has been founded since 2001, but it did not develop until 2005. In explaining the slow development of e-commerce services, experts have complained of the weakness of the online payment model. However, 2007 has marked strong development in this system. Many e-commerce activities have been developed, such as online purchasing of low-cost air tickets provided by Pacific Airlines via Visa cards, online purchasing of VietTravel tours, a series of web sites allowing online card payment and the expansion of the online payment network of most domestic banks. Vietnam trademarked tools for online payment such as VietPay and SmartLink card services, have taken shape.
3. Localities are keen on developing e-commerce. As manyas 30 out of 64 cities and provinces nationwide have set general plans for e-commerce development in 2006-2010, focusing on human resources training and business support. This activity has brought a positive response from the business community as they have received strong assistance from local authorities. This is also progress in improving the investment environment of Vietnam.
4. A series of world leading e-commerce giants have developed services in Vietnam. The potential of the e-commerce market in Vietnam is very big, with 17 million internet users and 30,000 businesses with their own websites, attracting the interest of foreign groups. In order to link Vietnam to the global network, eBay has introduced a trading website in Vietnamese language, Yahoo and Google have provided free-of-charge services for Vietnam such as online searching, email and Shopping Online. Mr Linh emphasised, “The fact that world leading e-commerce giants have arrived in Vietnam is good news for online consumers. However, it also means that the probability of annexation is threatening domestic businesses once foreign groups develop their services in Vietnam. They are experts in providing such models as Paypal and C2C, while the IT sector in Vietnam is still weak in setting up and developing these models.”
5. The foundation of Vietnam E-commerce Association. The association, which was set up by the Ministry of the Interior on 1 November this year, now has 200 members. The association will promote the business activities of Vietnam enterprises and cooperation between the state authorities and businesses.
The development trend of the e-commerce industry in 2008
Mr Linh said, “The year 2008 promises strong development in the e-commerce industry. And the service will boom in Vietnam in only 2 or 3 years.”
“Many big investors such as IDG and VinaCapital have expressed interest in investing in this sector with us. The initial success institutional investors have seen is the good operation of the web site Baamboo.com”
The model B2C will strongly develop in the next year with online payment tools. Some other models such as B2Bi (B2B Integration), ERP, SCM, CRM and EDI will also debut in Vietnam in the coming year.
Digital Signature and Digital Signature Certification Service and an e-commerce trading exchange-marketplace will be set up, creating a bridge for organisations via internet.
E-commerce has a great influence on the economy. Following are opinions of some experts on the importance of the industry to Vietnam
”E-commerce will affect the development of industries in the coming time,”
Mr Luong Van Tu, Chairman of E-commerce Association
The benefit of e-commerce is much bigger than that of traditional commerce. I will give an example in the banking sector. Currently, we are using mainly cash in trading activities, which creates difficulty for managing bodies to manage income and expenditure. At the same time, if trading activities depend on cash, the state will lose a big sum of money in tax.
Another example, currently, all airlines in the world sell e-tickets, while only one airline in Vietnam, Pacific Airlines, does this, and Vietnam Airlines is piloting the service. This has had great impact on the "money pocket" of both customers and airlines, as the cost for a normal ticket is up to US$10 while an e-ticket costs only US$1. If the figure is multiplied by the millions of arrivals each year, the difference is very big. This benefit does not include the utility and time saving of selling e-tickets.
“A new export promotion tool of the garment sector,”
Mr Do Nam Hai - Vice Chairman of Vietnam Garment Association
Vietnam's apparel products are mainly for export, so e-commerce will be a new export promotion tool benefiting garment businesses. Domestic apparel companies sometimes find it difficult to locate buyers for their products; order seeking depends on traditional trade channels. Some enterprises have been operating online sales systems, but the application of e-commerce activities stops with information searching, trademark and product popularisation and information delivery. So far, only 10 per cent of businesses in the garment sector have applied e-commerce and ERP integrated management systems in business administration. Vietnam now has about 2,000 businesses, with 2.1 million workers. If e-commerce becomes more popular among businesses in the sector, apparel export value is likely to far surpass the figure of US$7.2 billion in 2007.
”Online payment services should be popularised in Vietnam,”
Mr Nguyen Dang Hung – Deputy General Director of Smartlink Card Company
I realise that it is necessary to widely apply online payment services. It plays an important role in the e-government system and enhances the transparency of financial trading activities. Currently, enterprises are fully aware of the efficiency of online payment services via internet.
The registration demand for using international payment cards has increased 30 per cent and customers have shown their trust in this payment form. In 2008, online payment services will flourish when the system of ATMs and POS of banks in the Vietcombank card alliance is linked to other systems such as banknet and VNCB nationwide. Some international payment card providers are also very interested in the Vietnamese market, such as JCB, DinnerClub and AmericanEpress (two other companies, Visa and MasterCard, have been very successful in Vietnam). Smartlink alone has about three million clients, 2,000 ATMs and 6,000 POS nationwide. SmartLink has also teamed up with some telecom groups, such as Viettel, Vinaphone and S-phone, to provide postal fee payment services.
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