Category: E-Tailing

Foreign investors have been pouring billions of dollars into the e-commerce market, seeking to change shopping habits in Vietnam and eventually profit from a likely online boom.

Since the pandemic began, Tran Thi Linh in Hanoi has picked up a new habit of lying on her couch for hours to browse through e-commerce apps, looking for promotions.

“With social distancing, I became reluctant to leave the house, and I realize it is more convenient to shop for certain items online,” the 47-year-old housewife said.

With the apps she no longer has to carry heavy bags of detergents and rice from the supermarket to her apartment, while the coffee her husband drinks is cheaper online.

“I read reviews and watch videos to make shopping decisions. I still go to the supermarket but less often.”

Linh is among many Vietnamese that have become more familiar with e-commerce platforms and saw their shopping habits changed during the pandemic, a goal that that Vietnamese and foreign companies have spent billions of dollars to achieve as they seek to claim a bigger share in a booming industry.

Vietnam’s digital economy is forecast to grow by 29 percent annually from 2020 to $52 billion by 2025, according to a study by Google, Temasek Holdings and Bain & Co.

But data from Euromonitor International estimates e-commerce accounted for only 3 percent of the nation’s retail market last year, the smallest amount in Southeast Asia.

This is why major global companies have been making moves to secure a place in the market. From 2016 to the first half of 2020, investors poured $1.9 billion into Vietnam’s online sector, the study by Google, Temasek and Bain showed.

The latest deals include a $400 investment by an Alibaba Group-led consortium into a unit of conglomerate Masan Group, which is set to team with Lazada as part of the deal to win Vietnam’s e-commerce market.

Equity firm Warburg Pincus in January poured more than $100 million into M-Service JSC, a Vietnamese startup that operates the MoMo payment app.

Domestic platform Tiki had earlier raised $192.5 million from Japan’s Sumitomo Corp and China’s JD.com.

“Vietnam is at the beginning of becoming a digitalized society with a young population that loves technology,” Bloomberg cited Ralf Matthaes, managing director of Ho Chi Minh City-based Infocus Mekong Research, as saying.

“So all these companies are tripping over themselves to offer these services.”

But changing Vietnamese people’s shopping habit while dominating the market in the process is easier said than done.

Linh, the Hanoi housewife, said that until now she only pays for online orders by cash, because she does not know how to link her shopping account with her debit card.

“Another reason is that I can refuse to accept orders if they do not meet the quality I expect. There are many online shopping frauds and I want to be careful.”

Cash remains the most popular payment method in Vietnam with around 80 percent of the population preferring it in daily transactions, according to the Ministry of Industry and Trade.

“Cashless payment remains unpopular in Vietnam because people prefer to see and touch products before paying for them,” said Le Xuan Vu, board member of Military Bank, adding that if local banks can guarantee to compensate customers for fraud and fake products, they will trust cashless payment and use them more regularly.

Dominating the market remains a challenging task for e-commerce firms with so many players seeking a piece of the pie. Among four major platforms, Shopee, Tiki, Lazada and Sendo, none has been able to secure a paramount position to become the go-to marketplace for every need.

Electronic companies like Mobile World, FPT and CellphoneS have also established their own platforms so not to be left behind in the race.

“I have apps of Tiki, Shopee and Lazada and use them all. I don’t feel the need to commit to only one platform,” said Nguyen Duc Anh, who works for an advertising agency in Hanoi.

Duc Anh often compares prices and reviews of a product on all three platforms to make the decision. Usually the platform with the highest number of purchases and offers the best price and delivery time wins.

“For now I’m having the best of several worlds.”

This is why e-commerce companies are trying different strategies to make its platform the best and the only.

Almost every month Shopee offers a period of major discount with a variety of items priced as low as VND1,000 (4.3 U.S. cents).

Tiki has been working to remove counterfeit products and increase the number of items eligible for a two-hour delivery. It also offers up-to-30-day return policy for certain electronics products to gain customers’ trust.

In the new partnership with Lazada, Masan seeks to blend offline and online shopping into one experience by making its 2,200 VinMart+ outlets the pickup points for purchases on the platform.

But while platforms race to win more customers, people like Linh are still reluctant to abandon the traditional shopping method.

The other day she used online platforms to check prices of an air purifier but ended up driving her motorbike to an electronics store to make the purchase even though it was priced slightly higher there.

“I still need to touch it. I want to see it with my own eyes.”