E-commerce Driving Force for Growth

8:48:51 AM | 3/13/2023

Despite difficulties caused by the global economic recession, e-commerce is forecast to grow strongly in 2023. Given an annual growth of 20%, Vietnam is ranked among the Top 5 e-commerce markets in the world by eMarketer.

Data from the Ministry of Industry and Trade showed that Vietnam's e-commerce is growing rapidly and becoming an important distribution channel, with a market size of US$16.4 billion, accounting for 7.5% of consumer goods and services revenue. It was estimated that 57 - 60 million Vietnamese people shopped online, with an average shopping value of US$260 - 285 each in 2022.

The Vietnam E-commerce White Paper 2022 noted that Vietnam had up to 74.8% of internet users shopping online. The most purchased items online included clothes, footwear and cosmetics (69%), home appliances (64%), technology and electronics devices (51%).

Vietnam has about 100 cross-border e-commerce platforms and 139 operators of e-commerce floors. Among them, 41 e-commerce platforms sell goods, 98 provided services, and three partner companies represent foreign suppliers to pay money for organizations and individuals with transaction relations. The Big 4 e-commerce platforms are Shopee, Lazada, Tiki and Sendo. According to Metric, the total revenue of the Big 4 in Vietnam reached VND135 trillion (US$5.8 billion). Up to 566,000 booths on the four platforms had orders to sell more than 1.3 billion product units. Shopee is the largest e-commerce platform, accounting for nearly 73% of total sales, followed by Lazada with 21%, Tiki with 5%, and Sendo with 1% of the market share.

According to the Ministry of Industry and Trade, Vietnam's retail market is currently worth US$250 billion, thus creating a large growth space for e-commerce. The government aims to increase e-commerce to over 20% of total retail sales.

Ms. Stephanie, Vice President of Google Asia-Pacific in charge of Southeast Asia, Vietnam topped the rankings this year, with the fastest growing digital economy and the fastest growing e-commerce in Southeast Asia. In particular, of the total value of US$23 billion of Vietnam's digital economy in 2022, up to US$14 billion came from e-commerce. By 2025, when Vietnam's digital economy reaches US$49 billion, e-commerce will account for US$32 billion.

Vietnam's e-commerce is generating many driving forces to support growth, including the wave of digital transformation, technology infrastructure, universal Internet connection, online funding, online payment, logistics and human resources. Especially, Vietnam has many mechanisms and policies to encourage the development of the digital economy and e-commerce.

Besides growth momentum and positive aspects, e-commerce is facing complicated counterfeiting of goods, commercial fraud and difficult tax collection in this form of commerce.

According to the Vietnam E-commerce and Digital Economy Agency (IDEA) under the Ministry of Industry and Trade, methods and tricks are increasingly sophisticated. Many violators do not have any warehouse or store and only accept online orders. They place their goods in many different locations and only deliver a conspicuously limited quantity of goods, making it difficult for authorities to know where their warehouses are. Furthermore, they only sell goods through intermediary collaborators. Their websites promote a lot of products but they, in fact, only receive orders for others to take a margin. In particular, websites and social networking sites are easily opened and then closed in a short time, making it very hard for authorities to control.

Therefore, in 2022, IDEA coordinated with the ministry's Vietnam Directorate of Market Surveillance (DMS) to remove 1,663 booths with 6,437 reportedly violated products, block five websites with signs of using e-commerce to trade in counterfeit goods, knockoffs and goods of unknown origin. The total sanction for e-commerce fraud was VND222 million (US$10,000). At the same time, the agency strictly handled violations, intensified management of e-commerce with foreign elements and e-commerce on social networks; continued to review mechanisms and policies to make practical adjustments to better administer business activities in the e-commerce environment.

According to statistics, 14,875 domestic and eight foreign organizations registered to sell on e-commerce exchanges as of late 2022. The tax industry has information about more than 53,200 domestic individuals and four foreigners doing business on e-commerce platforms. More than 14.5 million transactions with a total value of VND4,500 billion were conducted through e-commerce exchanges. However, according to the General Department of Taxation, actual transactions were much higher than the official statistical data. The tax sector will continue to analyze and assess risks for more effective tax management solutions.

According to current regulations, e-commerce exchanges must provide seller information, including name, tax code/personal identification/citizen identification/passport, address and telephone number. Particularly, exchanges with online order-placing functions like Shopee, Lazada, Tiki and Sendo must also provide additional revenue from each seller. Based on this information, the tax authority will review to place many individuals and organizations under management and request appropriate declarations to state correct revenue or handle tax in arrears.

Huong Giang, Vietnam Business Forum