Vietnamese online retailers are crowded out by foreign company

By Mai Phuong, Thanh Nien News

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Vietnam’s e-commerce revenues reached US$2.97 billion or 2.12 percent of total retail sales in the country in 2014. The figure is expected to double this year. Vietnam’s e-commerce revenues reached US$2.97 billion or 2.12 percent of total retail sales in the country in 2014. The figure is expected to double this year.

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The e-commerce market in Vietnam is expanding rapidly but local investors are losing their share to foreign competitors with deeper pockets for expensive marketing campaigns.
Figures from Vietnam E-commerce Association, which cited data from major delivery companies in the first nine months this year, showed that the number of online shopping orders has increased fivefold from the same period in 2014.
Nguyen Dung, representative of the association in Ho Chi Minh City, said the market has a lot of growth opportunities as nearly half of the 90-million population is using the Internet.
Major investors said online retail sales has expanded 10 to 15 times compared to five years ago.
Reports from the trade and information ministries showed that e-commerce revenues reached US$2.97 billion or 2.12 percent of total retail sales in the country in 2014. The figure is expected to double this year.
But surveys also suggested that investors need to spend a lot of money to promote their shopping websites. 
A survey by the e-commerce department at the trade ministry showed that many consumers are not confident about the products’ quality or comfortable with the online payment procedure. More than 80 percent of online shopping transactions still use cash to pay on delivery, it found.
To win consumer confidence, online retailers need to be able to promote their platforms with big marketing campaigns and invest heavily in warehouse facilities. This is where foreign companies may have the upper hand. 
Market potential
The biggest among 217 shopping sites in Vietnam in 2014 is Lazada, which had a 36 percent market share, according to the survey.
Sendo of the Hanoi-based Internet firm FPT came second with 14.4 percent, while the third biggest company is Zalora of Rocket Internet, also the German owner of Lazada. Zalora is focused on apparel, compared to the Amazon-like model of its sister site. 
Nguyen Ngoc Diep, general director of Vietnam Price JSC, an e-commerce investor in Vietnam, said: "Foreign investors have seen the potential and they are pouring in money to take over the market."
Diep said Vietnamese investors have lost in the competition as few of them could be able to raise $10 or $20 million.
Nguyen Hoa Binh, board chairman of Peacesoft Group which manages various shopping sites in Vietnam, said the combined investment made by Vietnamese online retailers in the past decade was less than $50 million, just half of what Rocket Internet has poured into Lazada in Vietnam the past three years.
But Binh said local investors can survive if they manage to use their domestic strength, such as their ability to cooperate with each other or connect with local delivery services.
“The competition will get tougher and without proper changes, local investors may have to scale back or shut down,” Binh said.

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