Vietnam is a front-runner in Southeast Asian e-commerce and revolutionary delivery services could boost the market even further.
By Thomas Harris, Managing Director, DHL eCommerce Vietnam.
Read this article in Vietnamese (Tiếng Việt).
With e-commerce markets maturing around the world, businesses are keen to identify up-and-coming opportunities in new emerging markets. According to a report from Bain, there really is no place as exciting as Southeast Asia at the moment. Its e-commerce market was worth some US$50 billion in 2017 and is likely to reach US$200 billion by 2025, according to a report by Google and Temasek. The region’s online consumer base grew by 50 percent in 2017 and now totals 200 million digital consumers across the region’s top six economies.
Vietnam’s the star
Of the many e-commerce markets in the SEA region, Vietnam is turning out to be the rising star. With a booming, young, internet-savvy population and a growing middle class, shoppers in Vietnam are going crazy for e-commerce. Some 30 percent of the population will be buying goods and services via the internet by 2020, with each shopper spending an average of US$350 per year.
In fact, the e-commerce growth rate in Vietnam is likely to be about 32 percent, one of the highest in the region. Vietnam’s young population boasts some of the most enthusiastic mobile users too: a report by Nielsen estimated they spend nearly 25 hours online every week, only slightly less time than mobile users in Singapore and the Philippines.
We’re starting to wonder if the long-awaited showdown between western e-commerce giants like Amazon and China’s mammoth Alibaba could take place in Vietnam!
Not surprisingly, the big players are making a beeline for Vietnam. The country is witnessing unprecedented levels of investment in the e-commerce sector: JD.com recently made a large investment in Tiki.vn; Alibaba raised its stake in Lazada from 51percent to 83 percent with an investment of US$1 billion; and Amazon is taking its first tentative steps into the market, having signed a deal with the Vietnam E-Commerce Association (VECOM), a group of 140 local online businesses, that could be a precursor to them moving into the market for real. In fact, we’re starting to wonder if the long-awaited showdown between western e-commerce giants like Amazon and China’s mammoth Alibaba could take place in Vietnam!
From the high street to the virtual world
With the rise of e-commerce, more and more Vietnamese brick and mortar stores are also moving into the online space. Thegiodidong, Vietnam’s largest home appliance retail chain with around 1,000 stores across the country, now sells home appliances, groceries and other general consumer products online and is considering offering pharmaceuticals too.
The Vin Group, which owns some of the largest shopping malls in Hanoi and Ho Chi Minh City, has launched a B2C store called Adayroi.com with an investment of US$100 million. Another interesting online start-up is Foody.vn, which started as a restaurant booking site app but now offers food delivery and travel services. Last valued at around US$37 million, it’s about to extend into Indonesia and other ASEAN markets.
Overcoming delivery challenges
The market is thriving, but stumbling blocks remain. Logistics costs can present a huge investment hurdle for retailers and marketplaces. According to a recent article in Retail News Asia, Vietnam’s logistics costs accounted for 20.9 percent of GDP in 2016, higher than China, Thailand and Japan. The reason is the cost of transport by land, which accounts for 59 percent of all logistics costs. Operating and logistics costs can account for as much as 60-70 percent of an online retailer’s revenue which is a huge hurdle for online start-ups.
Infrastructure is another problem. Increasing urbanization means cities are ballooning in size as people move from the countryside to the cities, and the trend is set to not just continue but accelerate. The United Nations estimates urbanization rates for Southeast Asia will reach 64 percent in 2050, up from 47 percent in 2014. Ho Chi Minh City is forecast to be the second fastest-growing Asian economy by 2021, with predicted annual growth of 8 percent.
With consumers’ delivery expectations increasingly shifting from next day to same day, logistics companies need to be able to offer fast and flexible solutions.
Population growth means congestion in city centers, and that’s a big problem for e-commerce deliveries, with traffic delays leading to potential unhappy customers. The solution could be alternative delivery models that differ drastically from traditional last-mile logistics. With consumers’ delivery expectations increasingly shifting from next day to same day, logistics companies need to be able to offer fast and flexible solutions. Our Parcel Metro service is already revolutionizing deliveries in congested U.S. city centers. Now we’re bringing it to the busy streets of Hanoi and Ho Chi Minh City.
Delivering the smile
There are two aspects to Parcel Metro: retailers can offer their customers a fully-branded delivery experience, which means they can ensure a consistent customer experience with their brand from click to delivery. We can also bundle fulfillment and Parcel Metro delivery solutions for online retailers to provide an end-to-end solution for them from fulfillment to delivery.
For consumers, the service gives them control of their delivery experience. Once they place their order, they can select same day delivery and their preferred delivery destination. They can track their shipments in real-time, communicate special instructions to their courier, reschedule a delivery and rate their delivery experience.
The service perfectly combines technology with convenience – and offers delivery models tailored to fit Vietnam’s busy, growing cities. With its congested city centers, booming e-commerce market and increasingly sophisticated online shoppers, Vietnam certainly presents a challenge for deliveries. But our new solution will help customers overcome the challenge of increasing urbanization and allow us to deliver the smile in the last mile to Vietnam’s growing population of online shoppers.
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