E-commerce pie in Vietnam: too large for minority, too small for majority

Vietnam e-commerce market was valued at USD 10.08 billion in 2019 with the average yearly growth rate 25%.

Early August this year, Grab launched a new on-demand everyday goods delivery service, Grabmart, extending the long list of business in this ride hailing service firm. Grab is in the top 20 of Vietnam e-commerce sites in July 2020, according to the Vietnam E-commerce White book (VE-CWB) issued by the Vietnam e-Commerce and Digital Economy Agency, Ministry of Industry and Trade.

These “top 20” sites also include Tiki, Sendo and Viettel are accounting for 72,1% of e-commerce market share. Other smaller e-commerce players are competing for the remaining narrow land, 27,9%.

Vietnam e-commerce market was valued at USD 10.08 billion in 2019 with the average yearly growth rate 25%. The market is dominated by the retail industry, accounting for 26%. The key industries such as finance, health care and real estate account for only 4%, according to VE-CWB.

Although there is more room for many players to enter this huge e-commerce market in Vietnam, many had to leave this battlefield. Leflair’s surprise closure with the accusation of owing USD 2million in liabilities was among those startups believed in the potential of the market.

Facing the fierce competition in the market, other closures were aimed to restructure the operations and return to the traditional business model,  according to Dr. Doan Bao Huy, RMIT Vietnam University. Many are investing to upgrade the infrastructure to improve performance. This rivalry environment has not been a favorable place to smaller competitors as well as startups when multiple choices are available in the market.

March 2019 marked the closure of e-commerce platform Robins.vn, owned by Thai group Central Group (also owns BigC and Nguyen Kim) and introduced two shopping stores at Hanoi and HCMC. It should be mentioned that Central Group acquired BigC closed the e-commerce platform Cdiscount.vn in 2016, though the platform was well invested.

Vingroup, also announced the merger of Adayroi.com into VinID before the termination of this e-commerce platform. This is a part of Vingroup’s plan to target the industrial technology industry and upgrade the e-commerce segment by combining traditional and online retail models.

At the end of November 2018, The Gioi Di Dong closed vuivui.com to focus resourcing on Bach Hoa Xanh stores around the country.

Now that companies have stopped sprinting business growth, they look to increase their identity and brand unique to win the market. Some other leading companies look to improve infrastructure for delivery speed.

Lozi, a C2C e-commerce portal, received an investment of millions of USD to implement a one-stop transaction solution for their one-hour delivery service. Fado.vn signed a contract with Alibaba to propose Vietnamese businesses and address barriers in international markets. CellphoneS, which applied social networks to e-commerce and won a high number of subscribers to YouTube channels (2.5 million). CellphoneS was also in the top 10 of e-commerce platform which had the largest traffic in 2019.

Some exploited the Covid-19 pandemic successfully. In March this year, when people stayed at home to avoid the virus transmission, the online stores took the throne, making the traffic in Bach Hoa Xanh’s websites increased 49% in the first quarter of 2020, compared to the previous quarter.

Tiki, in the beginning of August 2020, offered fast delivery service in one day besides the 2-hour delivery service. TikiNOW Smart Logistics has just started a green operation chain “Go Green” to cut down the plastic packaging materials and replace with environmentally friendly biodegradable plastic. – (Reporter).

This is the period when small companies and startups that lack financial resources will be quickly eliminated, concluded by Dr. Doan Bao Huy.

Meanwhile Lazada, Shopee, TIKI and Sendo have been leading the Vietnam e-commerce market, according to Dr Pham Nguyen Anh Huy, RMIT Vietnam. In recent years, these top players are still competing for market share.

Despite successive losses, they  are still receiving funds from foreign investment. Mr. Pham Nguyen Anh Huy predicted that it is unlikely to develop monopolistic practices by these giants in the next 3-5 years. However, if other digital platforms in Vietnam do not have an appropriate competition strategy, it is possible for Shopee to dominate the local e-commerce market, according to Shopee’s growing power in the e-commerce market in Vietnam and Southeast Asia recently.

Also, those top players could devour smaller competitors who left the market to expand their massive market share. If this scenario is true, the rest of smaller competitors will struggle even more to protect their market share.

Startups that want to survive in the current e-commerce market must perform a breakthrough business model to solve the real issues, linking with their own competitive advantage, according to Dr. Nguyen Vu Hong Thai, Acting Head of Department – Economics and Finance, RMIT Vietnam. Startup ideas will drive the economy in the long term not the current supply-demand problem. The lessons from successful startups proved that the idea of a startup goes beyond current needs and even creates demand in the future. The question is how to incubate the ‘big ideas’?

By My Huyen for Vietnam Insider

My Huyen (myhuyenpv@gmail.com), a freelance business reporter in Vietnam, covering business of SMEs, startup as well as technology industry.

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Source: Vietnam Insider