E-commerce in a new game

Monday, 2016-02-29 12:44:39
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Online retail channels currently account for only 3% of Vietnam’s retail market.
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NDO - According to experts on e-commerce, Southeast Asia will become the world’s largest online retail market in 2020 after China and the United States. But the question still remains as to whether Vietnamese enterprises be able to capitalise rapid growth or whether they will lose a large market to foreign competitors.

A lively market with many comings and goings

Research shows that the internet can make a significant contribution to the national economy, 75% of which is made up of traditional, non-IT sectors. As such Vietnamese enterprises can utilise the internet to save money, reach new markets and enhance productivity. E-commerce is particularly suitable for small and medium enterprises (SMEs) and is the shortcut for Vietnamese enterprises to benefit most from economic integration. This view is shared by Alex Long, Google's Country Lead for Public Policy & Government Affairs in emerging markets in South and Southeast Asia. This observation is reinforced by statistics showing that SMEs (accounting for around 90% of Vietnam’s total enterprises) which use the internet grow 40% faster than those not using the internet. What is more convincing is the lively activity of the e-commerce market; last year saw both new comers and the bitter departure of numerous investors.

The most notable example is Rocket Internet, the investor behind e-commerce platforms Lazada and Zalora. It was forced to sell Foodpanda, an online food delivery service, to the Vietnamese company Vietnammm following weaker-than-expected business results.

Earlier, childcare product retailer Beyeu.com left a disheartening message on its website “e-commerce requires lots of money. Many companies will decide to stop burning. Good luck to the rest who are still trying.”

On the other side, Vietnam’s e-commerce market continues to see the appearance of new players. Most notably, property developer Vingroup launched its own platform Adayroi.com, which made a mark with its capacity to process up to 1,500 orders daily and rapid delivery time, although it is still under testing. Offering a wide range of products, from food to cars and technology items and with a great financial strength, Adayroi is expected to make other competitors such as The Gioi Di Dong and Lazada be more careful in their new strategies.

More and more retailers are building their own e-commerce channels in addition to traditional shop outlets. It is forecast that online models such as business-to-business, business-to-customer and even customer-to-customer will be increasingly popular over the coming years and competition will become more intense.

An ecosystem needed to foster e-commerce

In late August 2015, the Chinese giant e-commerce company Alibaba set foot in the Vietnamese market via its authorised partner CleverAds. Recently, Vietnam has hosted visits made by representatives of global technology giants Google and Facebook. Such groups are targeting the market of 90 million where 40% of the population have access to the internet in addition to 120 million mobile subscribers. More importantly, there is still a lot of room for growth when online retail channels currently account for only 3% of Vietnam’s retail market, much lower than regional economies.

It should be noted that e-commerce is a game of digital marketing, big data, online payments, user experiences and so on. Domestic enterprises, which cannot compare with global giants in terms of financial strength and technology, will have to rely on their own strength and prepare financial resources to join the game. But on the macrolevel, the government should also take action.

Once the Trans-Pacific Partnership (TPP) comes into effect, its member economies will have to further fine-tune domestic legal frameworks for e-commerce in order to have a healthy development environment towards transnational e-commerce within the TPP. The Pacific trade pact will also open the door for foreign enterprises to directly enter Vietnam’s e-commerce market. Thus only when a conducive environment is created to foster e-commerce, from technological platforms and transport infrastructure to electronic payment systems, will Vietnam’s e-commerce be capable of capitalising on the opportunity of deepening economic integration, particularly amongst the TPP. Participating in a new playground ultimately requires action from both the government and business community as well as the people themselves.