VietNamNet Bridge – As shopping websites keep expanding, with new shops popping up, competition is getting more exciting, but there is still plenty of room for growth in online retail in Vietnam.

Vietnam’s revenue from business-to-consumer ecommerce reached $2.97 billion in 2014 - Photo: VIR

Bustling market

With the launching of adayroi.com in August, Vietnam’s leading property developer Vingroup is the latest big company to jump into online retail, putting itself in line with names such as lazada.vn, sendo.vn and tiki.vn.

Online retail has been bustling for quite a while now in Vietnam. According to statistics by the Vietnam E-commerce and Information Technology Agency (VECITA), Vietnam’s revenue from business-to-consumer (B2C) ecommerce has been on a steady track of increase, from $661 in 2012, to $2.2 billion in 2013, then to $2.97 billion in 2014.

Companies are increasing their online presence, with 45 per cent of 3,500 companies surveyed by the VECITA in 2014 having a website, up from 43 per cent in 2013. More companies are selling products on social networks, with 24 per cent of surveyed companies saying they’re currently doing so and 8 per cent expecting to start in 2015. The percentage of those selling products through online marketplaces is now 15 per cent, up from 12 per cent in 2013.

Online marketplaces, through which sellers and buyers interact using the site’s infrastructure, and transactions are processed through the sites, have been reporting increases in revenues as well as in the number of brands and sellers and the expansion of their catalogues.

Lazada.vn, which ranks first in terms of revenue in 2014 according to the Ministry of Industry and Trade (MoIT), with a market share of 21 per cent, reported an increase of 150 per cent in revenues on year in 2014. The website, on which consumers can find goods of many types from consumer electronics to household appliances, toys, fashion, and sports equipment, curently has 2,000 sellers selling 270,000 products.

FPT Corporation’s ecommerce arm sendo.vn, which ranks second, currently has 10,000 sellers and an average of 120,000 transactions per month. Though not disclosing details, sendo.vn reported an increase in both traffic and sales in the year to date. In July last year, the firm bought 123mua.vn, which at the point was the fifth most popular among marketplace websites in Vietnam, in order to make use of the latter’s user base.

Optimism is shown among investors who poured money into ecommerce sites too. Lazada Group, which is now present in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, has raised approximately €520 million ($584 million) in funding from investors, including Temasek, Tesco, JP Morgan, Kinnevik, and Rocket Internet.

Meanwhile, last year Sendo entered into a strategic investment partnership with three Japanese internet service companies, namely SBI Holdings, Econtext ASIA, and BEENOS.

Overcoming challenges

Vietnam has all the conditions for ecommerce to grow.

“The potential of e-commerce in Vietnam is limitless. Vietnam’s GDP is going to continue seeing growth, with the expectation for 2015 at 6 per cent,” said CEO of Lazada.vn Alexandre Dardy.

Vietnam also has a high rate of internet use. As of March 2015, 45 per cent of the population was using the internet, according to data by London-based social media agency We Are Social. All the while, the infrastructure for shipping is growing fast.

Yet according to the statistics by the VECITA, Vietnam’s revenue from B2C e-commerce of $2.97 billion in 2014 averaged to a mere $145 per person, compared to $691 in India. The size and frequency of orders are still low.

The main reason ecommerce has not realised its full potential is the lack of trust between buyers and sellers.

A phenomenon very common in Vietnam, but rarely seen in other countries, is cash-on-delivery (COD) payment. According to the MoIT’s statistics, COD makes up 64 per cent of all transactions in 2014. Most websites, besides having the option to pay by cards, allow customers to pay at the point of receiving the goods.

According to Dardy, Vietnamese consumers are still not used to paying with a card yet. Another cause, according to Sendo’s chairman Nguyen Dac Viet Dung, is that consumers are worried about having their information stolen if they give it out online, which is why Sendo tries to give them peace of mind when they shop by ensuring the safety of their information.

In order to switch Vietnamese customers’ preferences gradually from offline shopping to online shopping, both Lazada and Sendo try to make the experience as convenient as possible, as well as give discounts, while Lazada introduces customers to consumer finance companies such as Homecredit.

But most importantly, the companies said they appreciated the government’s support.

“There have been many legal documents issued to govern ecommerce and programmes to support the

development of the field. Because ecommerce is a new field, it’s necessary to have a legal framework in order for companies to operate, in order for customers to distinguish between serious companies and fraudulent ones,” said Dung.

Government support

The prime ministerial Decision No.689/QD-TTg to ratify the 2014-2020 national ecommerce development programme stipulated that Vietnam plans to “make ecommerce popular to contribute to raising the competitiveness of companies and the nation.”

According to Tran Huu Linh, head of the VECITA, in the fourth quarter of this year, the government will issue a comprehensive plan for developing ecommerce in the 2016-2020 period.

The plan, according to Linh, covers everything that is needed for the development of ecommerce, from legal documents to infrastructure in payment, banking, logistics, to punishments for frauds and other violations in the field, and most importantly, specifying the responsibility of each government agency in these aspects.

Though not going into detail, he said the plan would also contain special incentives for small and medium entreprises, which make up 95 per cent of Vietnam’s companies, and which often don’t have resources to develop their own sites, as well as activities to raise the awareness on the benefits of ecommerce.

Looking ahead

Ecommerce is expected to grow even more this year, according to Sendo’s chairman Dung.

“The prestige of some companies has contributed to increasing customers’ trust in online shopping,” he said. “The quality of related services, namely payment and shipping, has increased, which makes online shopping more convenient.”

He expected more companies to have an online presence, new ecommerce companies to appear, and the investments in existing ecommerce companies to increase. An ecosystem of companies supporting ecommerce, such as ad network, affiliate, social marketing, and shipping, are expected to be on a fast track of growth this year.

Companies are also increasing mobile ecommerce, as more and more people in Vietnam are using smart phones in order to read the news and shop. For the first time, smart phone sales have oustripped that of other feature phones in Vietnam in the second quarter of this year, according to market research firm IDC.

“More than 60 per cent of traffic to sendo.vn is from smart phones and tablets, not computers, and the number of orders make up 5 per cent on average. In July, when Sendo launched its mobile app, orders from mobile made up 30 per cent,” said Dung, adding that Sendo expected the percentages to be 75 per cent and 50 per cent respectively in 2016.

Lazada, on the other hand, reported a 40 per cent increase in the transaction value through mobile in the second quarter of 2015. On Lazada’s Big App Sale, between May 20 and 24 of this year, the company reported downloads of its app were twice as much as those on other days. The company said it would continue improving its app to make mobile shopping more convenient.

US-based market survey firm eMarketer forecast that the total online goods turnover in Vietnam would be roughly $4 billion in 2015.

VIR