The current state of E-commerce in Vietnam
Despite sluggish improvement and business infancy, e-commerce market in Vietnam is growing rapidly, driven by an increasing internet penetration, growing purchasing power, and smartphone popularity.
Statistics from the Ministry of Industry and Trade indicated that e-commerce revenue (total sales made online in Vietnam) hit 4.9 billion USD in 2015, up 22.5% from 2014. Since then, e-commerce market in Vietnam has boomed with a steam of 10,000 more websites that offer online sales. International e-marketplace platforms such as Lazada and Zalora, as well Vietnam-made Vathia, Sendo, Tiki or Hotdeal are leading the online sales race. Another report by Vietnam E-commerce and Information Technology Agency also estimated that by 2020, the number of online shoppers will grow by 52% compared to 2015, with a significant number of them using smartphones to purchase online.
This growth forecast is a good news concealing that most of the e-commerce players are still facing challenges in (1) logistics, (2) competition, and (3) technological competency. In term of (1) logistics, more than 90% of transactions are made in form of cash on delivery (COD). High COD rate contains risk for enterprises that are inexperienced in managing and monitoring this payment method, while it also restrains foreign e-commerce investors from pouring money in Vietnam.
Beside fierce intra-industry (2) competition, traditional and modern retailers also jeopardize e-commerce market. Big retailers such as Big C and FPT shop are deploying omni-channel retail model which involves both physical stores and e-commerce platform. Finally, the e-commerce competition is getting increasingly intense with big acquisitions of Lazada and Zalora by Chinese and Thai corporates, respectively.
Although e-commerce sees staggering growth, Vietnamese enterprises are still lacking (3) technological capability to leverage on this opportunity. While only 20% of Vietnamese SMEs are using websites to promote their products and services, about 70% of the websites are so poorly built that smartphone users are hardly access to their sites’ content.
In general, Vietnam e-commerce market is emerging, although still facing numerous issues. Nevertheless, the shortcomings are being gradually corrected through rising living standards and upgrading infrastructure. Besides, several industry leaders, even manufactures, are well attuned to the far-reaching impacts and promises of e-commerce, deeming it as a prospective business channel. In that sense, this impulse is a factor to sharpen e-commerce in Vietnam. Thus, the majority of today’s enterprises are forced to adapt their business models and join the e-commerce race to sustain their position in the market.
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