Vietnam E-commerce Market: Abundant Potential Untapped

11:33:35 AM | 8/16/2016

Vietnam’s e-commerce market is currently fledgling and fragmented. This market is expected to grow rapidly over the next five years, driven by the growth of the middle class, spending capacity, increasing internet coverage and smartphone popularity.
This information was read in a recent report released by CEL Consulting, a consulting company of supply chain and production management in Southeast Asia.
According to the report, e-commerce revenue reached US$4.9 billion in 2015, up 22.5 per cent over 2014 and equal to 4 per cent of total domestic retail revenues. But, consumers tend to use e-commerce more because of its convenience and suitability to the faster and busier pace of modern life.
 
A survey conducted by the Vietnam E-Commerce and Information Technology Agency (VECITA) showed that e-commerce basket value of a consumer averaged US$150 in Vietnam in 2015, compared with US$30 in 2012 and is projected to reach US$600 in 2020. Online shoppers are estimated to number 38.5 million in 2020, or 65 per cent of internet users and increase B2C and C2C e-commerce revenue to US$23.1 billion, a seven-fold rise over 2015.
 
Vietnam’s e-commerce market is fiercely competitive in every segment and also quite fragmented by the service of small and medium-sized enterprises (SMEs), business households and individuals.
 
According to VECITA, in 2014, the largest e-commerce business accounted for only 50 per cent of the sector’s revenue. The war on prices and logistics in the e-commerce market is intense since 85 - 95 per cent of e-commerce deals are paid in the form of cash on delivery (COD). This will raise risks against e-commerce businesses with weak competences or without capable and experienced e-commerce logistics partners. The very high rate of COD has also inhibited a lot of foreign e-commerce retailers from investing in Vietnam.
 
In addition to face-to-face competition, e-commerce businesses also compete indirectly with modern and traditional retailers. Many big retailers have developed their omni-channel (multichannel approach) retail model which combines physical stores and e-commerce systems to enable consumers to have easy access and purchase in the most comfortable way. This model typically maximises the service to customers’ demands, especially those tight on time. Big C, C-Discount, Thegioididong and FPT Shop are typical examples for this model in Vietnam.
 
A representative from CEL Consulting shared drivers to e-commerce in Vietnam, including the projected internet penetration rate of 7 per cent a year and 41.8 - 59 million internet users in Vietnam by 2020.
 
In addition, smartphone users are expected to increase from 20.7 to 39.2 million people or even more by 2020. Smartphone is considered an important factor to leverage e-commerce development because of the convenience, speed and flexibility. Currently, all e-commerce businesses have developed mobile e-commerce applications to enable their customers to make transactions easier.
 
In general, the e-commerce market in Vietnam has huge potential for development and online transactions can be regarded as an inevitable trend. Vietnam businesses in general, even manufacturers, are also becoming interested in deploying e-commerce, seeing this as a business channel of the future. This will be a critical factor for developing e-commerce in Vietnam quickly when businesses are compelled to continuously improve.
 
Ha Vu