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E-commerce battle for share

Released at: 12:55, 17/02/2019

E-commerce battle for share

Photo: Viet Tuan

2019 promises to be an exciting year for e-commerce in Vietnam as players continue to fight for dominance.

by Nghi Do

Like most of the world, shopping habits in Vietnam have been changing over the last few years. Whereas shopping previously involved heading out to bricks and mortar shops, purchases are now increasingly made online with just a click. “Consumers have become familiar with buying things online,” said Mr. Kengo Kurokawa, Founder and CEO of Asia Plus Inc, a market researcher based in Ho Chi Minh City. 

Bustling landscape

2018 was yet another amazing year for leading e-commerce players in Vietnam. Five out of the top 10 most successful e-commerce platforms (based on average monthly web traffic) in Southeast Asia have a presence in the country, including Lazada, Shopee, Tiki, Thegioididong, and Sendo, according to the E-commerce Rewind Vietnam 2018 report released in December by price comparison website the iPrice Group. 

While Lazada and Shopee are international companies with operations in multiple markets, which makes their position on the list less of a surprise, the remaining three’s inclusion is concrete evidence of the size and potential of the e-commerce business in Vietnam, the report noted. Even though Sendo, Tiki, and Thegioididong are only available for consumers within Vietnam, their traffic numbers are still impressive enough to put them within the regional top 10, surpassing even China’s JD Group, which currently operates in both Thailand and Indonesia. 

The most remarkable, however, is Thegioididong, which is the only merchant in the top 10 to focus on one product category - electronic devices. Even with such a narrow business scope, it still managed to gain an average of 29 million visits per month. These figures show that online shopping is now popular among Vietnamese consumers and the size of the country’s e-commerce market will head ever-upwards in the future, iPrice concluded. 

“Last year was a golden time for the e-commerce industry and players, as Vietnamese consumers become increasingly familiar with online shopping,” Mr. Nguyen Dac Viet Dung, Chairman of the Management Board at Sendo.vn, told VET. Sendo recorded outstanding achievements in 2018, with growth rising three-fold against 2017. 

Cho Tot also experienced steady growth in online transactions in 2018, with total monthly visitors up 17 per cent compared to 2017 and total successful transactions reaching 3.5 million, according to Ms. Nguyen Ngoc Hai Duong, CEO of Cho Tot. “The e-commerce landscape in Vietnam has taken off thanks to the combination of B2C and B2B models,” she said. “The market size of B2C in Vietnam is five times bigger than B2B, according to the E-commerce Industry in Vietnam Report 2018, supported by the appearance of improved logistics. The C2C model is gaining popularity among Vietnamese online users as the border between B2C and C2C has blurred in recent years.”

E-commerce witnessed fierce competition among the major players last year, according to the Vietnam E-commerce Association (VECOM). Players kept funneling money into promotional campaigns to quickly acquire and then retain market share. They had great success with their marketing campaigns on November 11 and Black Friday (December 12), according to Mr. Kurokawa, which pushed them to be prepared for large purchases. As Vietnamese consumers are very price-conscious, he emphasized, the major players have introduced a host of promotional opportunities.

iPrice noted that Shopee and Lazada constantly broke their sales records during promotion campaigns. In the industry for only four years, Shopee saw a record-breaking 2018 with more than 12 million orders on its December 12 Birday Sale around the region. Partnering with more than 450,000 brands and merchants, it recorded 48 million visits as users made 60 million deals across all categories. In Vietnam, it has scaled up its partnerships with more than 700 leading brands and retailers to offer users an extensive product assortment. “2018 proved to be an exciting year for Shopee Vietnam,” said Mr. Tran Tuan Anh, Managing Director of Shopee Vietnam. 

Lazada also achieved significant results in 2018, with 1.3 billion visits in Southeast Asia and 90 million in Vietnam, during its November 11 and December 12 shopping festivals. For the first time, Lazada’s last-mile delivery in the region was able to deliver more than 1 million parcels in a day. The total number of orders, products (SKUs, or stock keeping units), and vendors increased 1.6 times, 2.2 times, and 3 times, respectively, against 2017. “2018 was a unique year for the Lazada Group in Southeast Asia, as we went through a leadership transition,” said Mr. Max Zhang, CEO of Lazada Vietnam. 

According to Mr. Kurokawa, the market more than doubled the growth in overall retail, at 11.7 per cent in 2018. Key drivers were the greater penetration of mobile apps and more loyal customers, together with marketing campaigns by major players. 

Fighting for dominance

The e-commerce industry in 2018 also saw the closing of an e-commerce platform, www.vuivui.com, owned by Mobile World Investment (MWG), two years after being launched. A huge retailer in Vietnam, MWG expected vuivui.com to earn more revenue than its remaining chains - thegiodidong.com and dienmayxanh.com - by 2023. Looking at the failure, Mr. Kurokawa said that e-commerce has become a race to invest in picking up new customers and those that don’t will disappear. “The middle players, who don’t have clear differentiation in products and services, will be short of cash and find it difficult to continue,” he believes. 

Other players have said that success in the e-commerce industry is a long journey, where all businesses need to be cautious and have a clear vision. “Tiki has faced some tough challenges on its journey, but we still have staked out a solid position in the market thanks to our customer and employee-centric vision,” Mr. Tran Ngoc Thai Son, Founder and CEO of Tiki, told VET. “This means that we do not exchange our core values for overheating the market.”

E-commerce is extremely competitive and requires huge investment in many fields, like technology and logistics, to ensure the best customer experience is provided, according to Mr. Zhang. “This is even harder in a developing market like Vietnam,” he said. 

In order to gain market share, major players have had to burn through massive amounts of money on sales and promotion campaigns to stimulate shopping and this largely lies behind huge losses for some. Lazada recorded the largest loss, followed by Tiki and Shopee, of VND1 trillion ($43.39 million) in 2015-2016, contributing to its accumulated losses of VND4 trillion ($173.56 million) by the end of 2017. 

After seven years in business, Tiki has accumulated nearly VND600 billion ($26.43 million) in losses, including VND308 billion ($13.56 million) in 2016 and VND284 billion ($12.5 billion) in 2017. Shopee, at the end of 2016, reported a loss of VND164 billion ($7.1 million), which rose to VND600 billion ($26.03 million) in 2017.

To retain a leading position in the market, many industry players are backed by foreign e-commerce companies, as are those with great financial potential. Lazada, Shopee, Tiki and Sendo received substantial investment in 2018 from large financial and retail giants around the world to rapidly seize a large market share.      

Vietnam ranked sixth in e-commerce revenue globally in 2018, according to figures from online statistics portal Statista published on January 21. With 49.8 million customers shopping online, the country’s online sales revenue stood at $2.26 billion last year, up 29.4 per cent against 2017. 

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