If you want to compete with e-commerce giants Shopee and Lazada, do Vietnamese local e-commerce still have opportunities?

2022-11-21
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Author:Shi Yi
Source: 36kr

Editor's note: This article is selected from KrASIA, the original titleCan Vietnam’s homegrown e-commerce players compete against Shopee and Lazada? Author: Stephanie Pearl Li

Vietnam has one of the most attractive Internet economies in Southeast Asia. According to the Southeast Asia Digital Economy Report in 2021 by Google, Temasek and Bain, Vietnam's GMV digital economy is expected to reach US $57 billion by 2025, second only to Indonesia among the major countries in Southeast Asia.

Vietnam's Internet economy is mainly supported by e-commerce. According to the report data, the e-commerce GMV in Vietnam will grow from $8 billion last year to $13 billion in 2021. One of the reasons for the growth is the increasing number of Internet users. In the first half of 2021, Vietnam will add 8 million digital consumers (individuals who pay for various online services).

However, Vietnam's e-commerce market is currently occupied by two foreign companies: Shopee of Donghai Group and Lazada held by Alibaba. According toiPrice Insights Data shows that the website traffic of these two companies takes the lead, and the local e-commerce platforms Tiki and Sendo rank third and fourth. After the success of international players in Vietnam, how will the local platforms of the same kind compete in Vietnam's e-commerce track?

"Giants like Shopee and Lazada can copy their e-commerce playing methods in Vietnam and get traffic. They have excellent experience in product selection, brand cooperation, logistics, seller introduction, sales and marketing, customer service, etc." Roshan Raj Behera, research consulting partner of management consulting firm RedSeer, told KrASIA.

Shopee, an e-commerce giant

Market research firm Decision Lab'sConsumer Preference ResearchIt shows that about 51% of Vietnamese said Shopee was their preferred platform for online shopping, up 7% from the previous quarter. Lazada was the favorite of 18% of Vietnamese users, followed by Facebook (8%), Tiki (7%) and Sendo (3%).

Looking at the users outside the big cities, 73% chose Shopee as their preferred shopping platform, Lazada accounted for 38%, and Facebook, Tiki and Sendo were next. The report also shows that 70% of Generation Z young users also regard Shopee as the best e-commerce platform.

Behera believes that the growth of Shopee is due to the large number of products and freight discounts offered by the platform. "It has a strong price advantage in attracting consumers to try, trade and repurchase." Behera said that Shopee has established a business model combining C2C and B2C.

"It is convenient to order a variety of products online at a preferential price, which fosters buyers' stickiness to the Shopee platform." Behera added: "Shopee's C2C model gives them the flexibility to contact multiple sellers and helps them expand rapidly."

Local players join the competition

Although the e-commerce track seems to have been dominated by foreign platforms, experts predict that market competition will intensify. "There are still many players who want to compete for market share, and many investments have also entered the market." Olivier Raussin, co-founder and managing partner of investment agency FEBE Ventures, told KrASIA.

For example, Tiki, the largest e-commerce platform in Vietnam, received US $258 million financing led by insurance company AIA in November. Sendo, an e-commerce company established in 2012, is a subsidiary of FPT Corporation, Vietnam's largest IT service company, and has sought round D financing since July 2020. Another local player, Society Pass, became the first Vietnamese e-commerce company listed in the United States on November 9, and received a total of 26 million dollars through the IPO of NASDAQ.

Valerie Vu, the Vietnamese head of an early venture capital institution, told KrASIA that in order to compete with foreign giants, local e-commerce companies should invest in improving ecology and strengthen cooperation with payment solution providers.

Vu said, "I think Vietnam's e-commerce platform will invest heavily in infrastructure in the future to create a more efficient and cost-effective supply chain and shorten delivery time, especially with the rise of the fourth party logistics service provider model and micro logistics performance system."

She added that the local platform should also expand to different vertical categories, such as fresh food distribution and drug distribution.

Tiki is working in this direction. "Tiki has embedded several mini applications in its platform, such as Infini for investment and savings, Ezin for purchasing customized insurance, and plans to become a super application." Vu commented. Infini, launched in January, is a retail investment application that sells mutual funds and fixed income investment products. Ezin, founded in 2020, is an insurance platform through which consumers can choose insurance products from various suppliers.

Tiki also operates the fresh food distribution service TikiNgon, with a year-on-year growth of 2000% according to the company. All of these services have led to double-digit growth for Tiki in the past two years.

Reported by DealStreetAsiaTiki and Sendo discussed the merger in 2020, but failed to reach an agreement in July. Some sources said that "there is inequality in terms, which is more biased towards Tiki".

Behera said that local e-commerce needs to better seize the opportunities brought by social e-commerce. "For consumers who are new to online shopping, the one-to-one interaction (on the social platform) has reduced a lot of mistrust. Accordingly, Facebook and other social media platforms have also done very well in helping e-commerce transactions."

According to Bloomberg, social e-commerce accounts for more than 65% of Vietnam's $22 billion online retail economy. Behera believes that compared with social media such as Facebook, e-commerce platforms can provide a better shopping ecology. "The platform has more advantages in ensuring the quality of goods, logistics, payment network and customer service."

She added that it was "a matter of time" for local e-commerce companies to adjust and improve themselves to increase market opportunities.

Translation | Shi Yi

Editor | Zhao Xiaochun

Fig. | Unsplash

Cross border information wants to compete with e-commerce giants Shopee and Lazada. Do Vietnamese local e-commerce still have opportunities?

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