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Poised for growth

Released at: 23:47, 05/12/2014

Poised for growth

Online shopping appears to have a bright future in Vietnam but obstacles remain.

by Linh San

Friday November 28 is known as “Black Friday” in the US and is also a day Ms Linh Mai, an office worker, may wish to forget, as she spent nearly $1,000 on a small bag and some clothes via online shopping. Shopping online, she said, helps her save time and find discounts, and she did indeed get some bargains on that day but clearly got carried away. Most of her purchasing is now done online, but only on foreign websites, not Vietnamese websites.

Online shopping “addicts” like Ms Mai are increasing in number in Vietnam. She is among the 56 per cent of Vietnamese internet users who shop online, as a report from Google released in November stated that 44 per cent of Vietnamese people have never shopped online. “This shows that Vietnam has huge potential to develop e-commerce,” said Ms. Truong Thanh Ha from Google Asia-Pacific.

Major prospects

The Google report revealed that clothing is the most popular category for online purchases in Vietnam, with 48 per cent over the last month. Consumer electronics and books followed, with 24 per cent and 22 per cent, respectively. Cash on delivery is the most preferred payment method for online shoppers, with 71 per cent, while 47 per cent use ATM transfers, 32 per cent use direct transfers via internet banking, 26 per cent use their credit card and 17 per cent their debit card. 

According to Mr. Tran Huu Linh, Head of the Vietnam E-commerce and Information Technology Agency (VECITA) under the Ministry of Industry and Trade, online shopping has developed strongly in Vietnam in recent times and will continue to do so into the future. “Vietnam is one of the Top 3 countries with the highest rate of growth in internet and mobile phone subscribers and more than 4 million people use the internet every day, which signifies major potential for the development of online shopping,” Mr. Linh said.

To promote online shopping, the department, together with the Vietnam E-commerce Association, has launched “Online Shopping Day 2014”, which will take place on December 5 at www.onlinefriday.vn or www.ngaymuasamtructuyen.vn. “On this day consumers will enjoy special discounts and free shipping and other incentives from participating businesses when they purchase items online,” Mr. Linh said. This is the first time such an event has been organized in Vietnam, with about 500 businesses expected to be involved.

VECITA reported that Vietnamese e-commerce sales are expected to hit more than $4 billion in 2015 due to the growing number of internet users. In 2013 the value of e-commerce sales was estimated at $2.2 billion, with average spending of $120 per capita. There are now more than 30 million internet users in Vietnam and economic development will bring the internet to even more people in the future. VECITA has forecast that 40-45 per cent of the population will use the internet by 2015 and every Vietnamese person will spend at least $150 on e-commerce purchases each year. In an even more optimistic scenario, with a population of 93 million projected for Vietnam in 2015, if 65 to 70 per cent of the population has an internet connection they will generate $4.08 billion to $4.3 billion in online shopping revenue.

Furthermore, a study by market specialist Cimigo concluded that the average internet user in Vietnam spends about 130 minutes online each day; a number that has tripled from 43 minutes in 2008. “These rising numbers indicate that the e-commerce sector is poised for growth, as an increasing number of consumers have begun to spend a longer time online, which has undoubtedly exposed them to a growing number of online consumer-to-consumer (C2C) and business-to-consumer (B2C) portals,” a report from Dezen Shira & Associates stated. “The most popular business model in Vietnam’s e-commerce industry is the online marketplace - a portal that features C2C and B2C shops.”

On the supply side, more foreign-run online shops have been opened. In 2013 Germany’s Rocket Internet invested $250 million in lazada.vn and Japan’s Rakuten Ichiba also entered Vietnam via vatgia.com.

According to a report prepared by comScore, a research agency, the retail websites vatgia.com, lazada.vn, 5giay.vn, Enbac.com, and thegioididong.com see the highest traffic in Vietnam. Only in Vietnam did retail websites owned by domestic firms take dominant positions in the Top 5. In other countries such as Indonesia, Thailand, the Philippines or Singapore, the Top 5 spots were held by foreign-owned companies. It can be argued, therefore, that Vietnam’s e-commerce enterprises are more than able to compete with their foreign counterparts.

Barriers to overcome

Though it can’t be denied that online shopping has huge potential in Vietnam, the sector faces its share of difficulties. When asked why she didn’t shop on Vietnamese websites, Ms. Mai said it was because she had found product and service quality to always be worse than advertised. “One time a friend introduced me to a website to buy a dress, but when it was delivered it looked nothing like it did online,” she recalled. “That was the first and last time I bought anything on a Vietnamese shopping website.”

VECITA reported that 77 per cent of respondents said product and service quality was worse than advertised, which is one of the biggest problems of shopping online. Forty per cent thought that prices are not lower than at traditional retail outlets, and 38 per cent had experienced unprofessional delivery, 31 per cent were afraid of personal privacy disclosures, and 29 per cent found the online ordering process to be overly complex.

Along with these obstacles, other factors were revealed: difficulty in examining product quality and product features not being as advertised (59 per cent), shopping in retail outlets being easier (45 per cent), a lack of trust in sellers (41 per cent), an absence of sufficient information to make purchasing decisions (38 per cent), and an inability to payment by credit other payment cards (37 per cent). However, of the 781 respondents, 88 per cent said they would continue to purchase items online in the future while the 12 remaining per cent would go back to conventional shopping methods.

The Google report also revealed barriers to online shopping. Wanting to try products in person and concerns about quality were the most common, as was the desire to actually touch goods. Potential shoppers are also concerned about counterfeits and want quick delivery on their purchases. According to Ms Ha from Google, it takes time to change mindsets among consumers and online shopping suppliers need to focus on product quality and minimize shipping times to win over more customers. 

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