Exporters would be well served by paying greater attention to the benefits of using e-commerce channels. Nguyen Quynh reports.
After a number of years promoting its export activities via the e-commerce channel Alibaba.com, the Hoa Lu Fine Arts and Handicrafts Company has found success in exporting its bamboo chopsticks to foreign markets. A representative from the company said it created an attractive profile for its quality products, encouraging partners to look more closely at what they had to offer on Alibaba.com. A food company in northern Hai Duong province, meanwhile, increased its revenue by 20 per cent and significantly expanded its production and business scale after three years of exporting via e-commerce channels.
Many of Vietnam’s enterprises have recently stepped up their e-commerce exports. Sending Vietnamese goods to foreign countries has long presented myriad problems for domestic enterprises, especially small and medium-sized enterprises (SMEs), who lack financial resources and experience in exporting. With online export channels, however, which have become an important trade channel with high market shares in the US and more than 40 other countries, online exports are now an option for all businesses in Vietnam.
According to figures from the Vietnam E-commerce and Information Technology Agency (VECITA) at the Ministry of Industry and Trade (MoIT), 73 per cent of 4,000 surveyed enterprises said that using e-commerce is an effective means of exporting their products and 55 per cent said their revenue from online Business-to-Business (B2B) channels has increased 10 per cent or more in recent years. Consumers in Vietnam’s main import markets, such as the US, the EU, Japan and South Korea all have very high internet use rates.
Ms. Lai Viet Anh, Deputy Director of VECITA, said that in countries where e-commerce has developed the rate of B2B transactions has accounted for the bulk of e-commerce transactions. In South Korea, for example, B2B transactions account for 91 per cent of all e-commerce transactions while in Thailand the rate is 50 per cent. “This represents a major opportunity for Vietnamese enterprises to boost their exports,” she said.
In days gone by most businesses promoted their export activities by attending international fairs, at a cost of VND100 million ($4,500) or so for leasing a booth. But doing so on an e-commerce platform costs approximately VND70 million ($3,150) annually, or just VND6 million ($270) per month. Many enterprises have realized the advantages of such methods. The Gepimex 404 Co., a State-owned enterprise specializing in seafood processing and trading, has seized the opportunities available from exporting via e-commerce channels. Potential customers have been identified in China, the Middle East and the EU. A representative from the company said that every day it receives about ten inquiries via Alibaba.com and its export revenue through this particular online channel accounts for 60 per cent of its total.
According to many economic experts, from 2016 Vietnam’s exports are expected to grow faster than ever given the important free trade agreements (FTA) to come, such as the EU - Vietnam FTA and the Vietnam - South Korea FTA, and especially the TPP. Signs that it won’t be all smooth sailing have emerged, however. Vietnam’s exports in the first three months fell nearly 15 per cent over the same period of 2015. International importers are gradually shifting from traditional environments to the online environment to optimize their operations, and Vietnam’s exporters must adjust accordingly.
According to figures from MoIT the value of e-commerce exports remains limited compared to potential, estimated at only $2 billion in 2015 and primarily agricultural products and consumer goods. “Vietnam has many opportunities to export to major markets but online trade overall is only in the early stages of development,” said Mr. Tran Xuan Thuy, Director of Alibaba Vietnam.
Barriers in payment methods, language, culture, and experience in accessing global markets create difficulties for many Vietnamese enterprises. Not all are sufficiently skilled and knowledgeable to take advantage of the power of online trade. While many understand the advantages of the internet in business, they fail to use it to the greatest effect. Vietnam still lacks large-scale trading floors. Only a small number of websites support SMEs, such as Alibaba.com and eBay.vn, by allowing them to showcase their products.
Experts say that with the development and perfection of the e-commerce market in Vietnam, online exports are certain to become an effective channel for local goods to reach out to the work. VECITA has forecast the market size of online retail in Vietnam at $10 billion by 2020, or about 5 per cent of the total retail market.
Handicrafts and agriculture products are export strengths of Vietnam, bringing in high added value. Handmade products, craft products, and souvenirs are popular in the US, France, and Japan. Traditional means of pushing exports, such as attendance at international trade fairs or through trade promotion activities, come at some cost and can be beyond the reach of many SMEs. Online exports, therefore, are an attractive channel that all enterprises should pursue.
“The strong growth of the internet and global commerce has stimulated the development of online exports, bringing suppliers and importers closer together. The use of online exports, especially by SMEs in Vietnam, is even more necessary given that Vietnam is accelerating its global integration through FTAs and the TPP.”
Mr. Tran Huu Linh, Director of the Vietnam E-commerce and Information Technology Agency (VECITA)