15:42 (GMT +7) - Wednesday 03/03/2021


Online retail taking off

Released at: 20:19, 01/04/2018

Online retail taking off

Photo: Viet Tuan

Vietnam is attracting more major online retailers given the growth seen in its e-commerce sector.

by Nghi Do

One need only glance at the business results of leading e-commerce retailers to see that buying online is well and truly taking off in Vietnam. The Lazada Online Revolution Campaign in 2017 saw a phenomenal level of sales that exceeded expectations, with 16 million searches on Lazada.vn in just three days resulting in nearly 1.5 million products sold. Cho Tot also grew strongly during the year, with an 11 per cent increase in the number of ads for second-hand goods compared to 2016 and a 34 per cent increase in successful transactions. Tiki, meanwhile, had 3 million users by the end of the year and customer spending was at record levels.

New players, new growth

The value of the e-commerce market in Southeast Asia in 2017 stood at $11 billion, a 41 per cent increase compared to 2015, according to the latest report from Google and Temasek. Vietnam is proving to be one of the fastest-growing e-commerce markets in the region, at 33 per cent annually. The country’s e-commerce revenue will hit $10 billion in 2020 and account for 5 per cent of all retail sales, according to the Ministry of Industry and Trade. The figures lie behind the greater investment going to e-commerce sites, especially from business-to-customer (B2C) players, according to a representative from Cho Tot. “Their presence will help the market accelerate to reach its full potential and push companies in the industry to continually grow to become world-class,” Mr. Tran Ngoc Thai Son, Founder and CEO of Tiki, told VET.

In January, JD.com, a Chinese e-commerce giant, poured tens of millions of dollars into the Tiki JSC and became the largest shareholder in Tiki.vn. One of its major rivals, Alibaba, is investing an additional $1 billion in Southeast Asian online retailer Lazada, which is currently operating in Singapore, Malaysia, Thailand, the Philippines, Indonesia, and Vietnam. Alibaba’s main rival, Tencent, is seeking to penetrate into Vietnam through its e-commerce channel, Shopee, which receives around 2.7-3.6 million orders a month and is on the way to catching up with Lazada Vietnam. 

Basket Size per Country          |           GDP per Capita

Source: iPrice, State of eCommerce in Southeast Asia 2017

In the context of Vietnam increasingly attracting the attention of and investment from domestic and foreign businesses, this not only promotes the development of e-commerce companies but also promotes the growth of the market and ecosystems and benefits shareholders, according to Mr. Boris Gbahoue, E-commerce Director at Lazada Vietnam. The level of urbanization is expected to reach 40 per cent by 2020, contributing to the spread of e-commerce not only in Ho Chi Minh City and Hanoi but also elsewhere.

Online retail accounts for just 1 per cent of total retail in Vietnam, making its potential significant, with growth of 40 per cent in the B2C online retail market. Similarly, logistics infrastructure and services are still in their early stages of development. What JD sees in the market is very similar to China perhaps ten years ago, and the company is very optimistic.

Smoothing sales

The ongoing challenge for e-commerce providers in Vietnam is encouraging online purchasing among customers and bolstering their trust in the industry. “Faith” is an issue Tiki has been addressing for the last eight years. “We have been dedicated to providing a superior and reliable online shopping experience for every customer since our inception,” said Mr. Son. “We are committed to our policy of providing genuine goods, fast delivery, and after-sales service.” With JD’s extensive experience in e-commerce, logistics, and finance gained in China, and Tiki’s deep understanding of Vietnam and its reputation for outstanding customer services, JD believes it’s well positioned to further tackle the challenges.

Meanwhile, Cho Tot, the customer-to-customer (C2C) online channel, is doing its part to gain customer trust and encouraging online shopping in Vietnam. Since its launch in 2012, it has invested in building a rigorous ad review process and growing a team of more than 100 ad reviewers to study every single ad before it’s posted on the site. “We are also witnessing solid growth in online transactions, with successful transactions increasing by 34 per cent last year compared to 2016, confirming that demand for buying second-hand goods online continues to grow,” CEO Mr. Bryan Teo told VET. “We will continue to invest in its human resources as well as its ad review system to ensure quality.” 

Payment solutions offered by merchants

Source: iPrice, State of eCommerce in Southeast Asia 2017

Online payments and delivery are another key challenge for e-commerce players in the country. E-commerce may still be in its early stages, but Mr. Gbahoue told VET that “with investments by Lazada and other domestic and foreign businesses, I believe Vietnam will soon become one of the largest markets in Southeast Asia.” Lazada now has four order processing centers in 2017 and plans to open a processing center in central Da Nang city shortly. Demand among customers in the central region is rising, so opening the new center became a necessity. It will also promote the use of technology in goods classification with the launch of a second automated goods classification center in Hanoi sometime during the first quarter.

According to JD, cash on delivery (COD) remains the dominant payment method in Vietnam, accounting for 85 per cent of sales. This is actually an area JD has a lot of experience in managing, as electronic payments have taken off in China over the last five years thanks to higher numbers of consumers with bank accounts, the lower cost, and the convenience for both merchants and customers. 

Profitability in the industry is still an issue for investors, as players need substantial capital to maintain operations and increase their presence. Mr. Teo confirmed that e-commerce requires long-term financial and resource investments to help users understand the benefits of selling and buying online, thereby changing their shopping habits. Amazon is now the biggest e-commerce company in the world, but it took nine years of operations before success came in 2003. 

Lazada, meanwhile, has a long-term strategy for rapid but sustainable development. Turning a profit is, of course, the goal of all businesses and the foundation of them to grow, and Lazada is committed to investing in Vietnam and developing its e-commerce industry. “With online penetration at 1 per cent in Vietnam, there is a lot of space for any player to boost its market share,” a JD spokesman said. “We know how to leverage technology and scale to create tremendous efficiencies, even in markets that are thought of as low margin.”

Long-term growth

Online shopping has become popular worldwide and Vietnam has stayed abreast of the trend thanks to rising internet and smartphone use. In order to build a transparent and effective trading platform for both buyers and sellers, Cho Tot prioritizes optimizing the user experience while also investing in vertical channels (vehicles/property) to meet the increasing demand for buying and selling high-value items. It will continue to focus on C2C this year via providing the best quality services to buyers and sellers and will also invest in building effective platforms to buy and sell vehicles, property and electronics. “Vietnam is a standout emerging market for the online trade of second-hand items and potential is significant in the years to come,” said Mr. Teo.

Lazada remains the pioneer in introducing new trends and services in Vietnam, bringing e-commerce closer to people all around the country. “We are planning many new campaigns to attract more customers and create a relaxed shopping experience,” Mr. Gbahoue said. 

Meanwhile, Tiki will have a significant new service bringing more utility to customers this year. “Our top priority is to invest in developing new projects to serve customers, in order to enhance online shopping habits,” Mr. Son said. JD believes Vietnam will continue to be one of the world’s fastest-growing e-commerce countries, with support from local government, rising incomes, and improved infrastructure.

User comment (0)

Send comment