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Fulfilling its promise

Released at: 22:56, 29/04/2015

Fulfilling its promise

The involvement of many major enterprises and increased spending power among consumers are evidence of the potential e-commerce holds in Vietnam if the challenges can be overcome.

by Hoang Thu

Mr. Phan Kim Don, former co-founder and managing director of Zalora Vietnam and former director of foodpanda in Vietnam, also founded taembe.com, an online baby products store and a Vietnamese adaptation of diapers.com, after shopping for groceries one time with his wife. “We noticed a young mother struggling to drive a motorbike while holding her baby and large packs of diapers,” he told VET. “The idea for a diaper delivery service was born.”

Their startup has been growing rapidly and was one of the first Vietnamese startups to be accepted to the JFDI - the most prestigious startup accelerator program in Asia. A majority of JFDI companies raise $500,000 upon completion.

Mr. Don clearly believes baby products will do well given Vietnam’s demographics and increasing interconnectedness. Vietnamese people are not as used to buying online as those in more developed countries. “This will change though,” he said. “Vietnam’s population is very young and tech savvy. Most people in the cities have smartphones.” 

Prospective market 

Vietnam’s Business-to-Customer (B2C) e-commerce turnover hit $2.97 billion in 2014, an increase of 35 per cent compared with 2013 and accounting for 2.12 per cent of the country’s total retail sales, according to a recent report from the Vietnam E-commerce and Information Technology Agency (VECITA) under the Ministry of Industry and Trade (MoIT). In 2014 each customer shopping online spent $145 on average. The best-selling products were electronics and tech gadgets (60 per cent), fashion and cosmetics (60 per cent), home appliances (34 per cent) and books and stationery (31 per cent). Among e-commerce providers, lazada.vn ranked first in terms of revenue, followed by sendo.vn, zalora.vn, tiki.vn, and ebay.vn. 

The country’s e-commerce sector is become more dynamic and vibrant, with the entrance of many major players and increasing spending power among consumers. “Investment and resources from various major players will help speed up the progress of educating the market and changing the habits of consumers about online transactions,” said Mr. Bryan Teo, General Director of Chotot.vn under the 701Search Group.

As at September 2014, Lazada - backed by the German-based Rocket Internet, which operates Southeast Asia’s Number 1 online shopping mall, including in Vietnam - had secured 200 million euros ($213.5 million) in funding, led by Temasek, the Singapore-based investment company. “This investment provides us with the strategic flexibility to further anchor our leadership position and enhance the shopping experience for our customers,” said Mr. Maximilian Bittner, CEO of the Lazada Group. “The e-commerce market in Southeast Asia is still in its early days and we will continue to invest in our operations to enhance our customer experience.” 

Zalora, another well-supported e-commerce service owned by Rocket Internet focusing on fashion for men and women, has secured $112 million in funding. The fresh capital comes from the privately-held investor group Access Industries, with funds managed by the US-based asset management company Scopia. 

These foreign players continue to pay substantial sums on marketing, covering all channels, from digital marketing to traditional marketing, combined with offline activities; expressing their determination to conquer Vietnam’s market. “In the next few months we will be rolling out exciting product features to provide a better experience to users,” said Mr. Teo. “We also plan to double our human resources by the end of the year.” 

Meanwhile, local enterprises are also enthusiastically joining in the race. FPT has conducted many projects on e-commerce but failed, yet it remains determined to pursue the sector, according to Mr. Nguyen Phuong Hoang, Senior Vice President of the Sen Do Technology JSC under the FPT Corporation. “E-commerce is a clear trend in modern society and we see great potential for the development of Vietnam’s e-commerce sector,” Mr. Phuong told VET. The corporation has invested heavily in the field, including merger and acquisition (M&A) activities.

In September last year Sen Do announced it would cooperate with three leading Japanese internet companies - SBI Holdings, Econtext ASIA and BEENOS - with the three holding 33 per cent of shares in Sen Do. After becoming strategic partners, they will help the company reach their own customer networks and partners worldwide. At the same time, they will also support Sen Do in enhancing its management capacity via sales network training policies, developing human resources, and expanding the categories of goods available. 

The deal took place just two months after Sen Do completed its acquisition