Vietnam is one of Southeast Asia’s most attractive internet economies. The country’s digital economy is set to grow 175% by 2025 to become the second largest in the region behind Indonesia with a gross merchandise value of USD 57 million, according to the sixth edition of the “e-Conomy Southeast Asia (SEA) Report – Roaring 20s: The SEA Digital Decade,” by Google, Temasek, and Bain & Company.
Vietnam’s internet economy is primarily underpinned by its e-commerce sector, which saw a 53% rise in gross merchandise value (GMV) last year, from USD 8 billion in 2020 to USD 13 billion in 2021, according to the report. A reason behind this growth might be the country’s continuous addition of new internet users. In the first half of 2021, Vietnam welcomed over 8 million new digital consumers, defined as individuals who have paid for any type of online service.
However, the Vietnamese e-commerce market is currently dominated by two foreign companies—Sea’s Shopee and Alibaba-backed Lazada. The two firms lead in terms of website traffic, followed by local platforms Tiki and Sendo in third and fourth place, according to iPrice Insights. The success of international players in Vietnam prompts broader questions about what it takes for homegrown peers to compete and stand out in the Vietnamese e-commerce space.
“Players like Shopee and Lazada have been able to re-run their regional and even global e-commerce playbooks in Vietnam and have gained traction. They follow their best practices in product sourcing, brand partnerships, logistics, seller onboarding, sales and marketing, customer service, and so on,” Roshan Raj Behera, a partner at research and consulting firm RedSeer, told KrASIA.
Behera attributed Shopee’s growth to the vast range of products and delivery discounts offered on the platform. “This becomes a strong value proposition for customers to try, transact, and repeat on Shopee’s platform,” he said. Shopee has also been able to establish a business model that combines both consumer-to-consumer (C2C) and business-to-consumer (B2C) models.
To deal with larger rivals, Tiki and Sendo had made an important capital mobilization round in 2020: They proposed merger plan. Nevertheless, it finally fell through canceled after failing to satisfy all shareholders with the terms as COVID-19 had pushed investors to adopt a more risk-averse stance.
Now, Tiki and Sendo are pursuing their own growth strategies to raise competition ability. For instance, Tiki landed a USD 258 million investment from insurance firm AIA. Sendo has been raising funds for its Series D as part of Vietnam’s largest IT services company, FPT Corporation.The local players will have to invest in improving their ecosystem and strengthening partnerships with payment solutions provider to fight against foreign giants.
“In the near future, I foresee that Vietnamese e-commerce platforms will invest heavily in infrastructure to create a lean and more cost-effective supply chain to shorten the delivery time, especially with the rise of the fourth-party logistics service provider model and the micro-fulfillment logistic system,” said Valerie Vu, country head of Vietnam at early-stage VC company Venture Capital, told KrASIA. She added that local players should also expand into different verticals, from fresh-grocery delivery to pharmaceutical distribution.
There is also a small advice for local e-commerce companies to not lose market share right at home from a trader named Thanh Vu, who sold cosmetics on Shopee, believed that Tiki or Sendo did not attract enough attention to merchants like him.
“To run a successful online platform, you have to pay attention to both buyers and sellers. ”
Can Vietnam’s homegrown e-commerce players compete against Shopee and Lazada? – KrASIA, by Stephanie Pearl Li
Are Vietnam’s e-commerce platforms inferior to foreign competitors? – Vietnam.net
Tiki, Sendo merge: Exhausted, 2 ‘poor’ men merge with the hope of finally fighting ‘rich’ Shopee, Lazada? – itZone, by Tram Ho
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