The Vietnamese e-commerce market is still in an early stage of development, so big players are racking up losses as they compete for market share. (Photo: uwlcd.com) Hanoi (VNS/VNA) - Many foreigngiants have invested in Vietnam’s leading e-commerce platforms even as theyincur big losses, as they continue to see the long-term potential of thecountry’s rapidly expanding online shopping sector.
With all the ingredients for a thrivinge-commerce economy – a young population, rising disposable incomes and growinginternet and mobile adoption – the Vietnamese e-commerce market is expected tomaintain an annual growth rate of 25 percent to reach 10 billion USD in thenext four years, according to the Vietnam E-commerce and Information TechnologyAgency (Vecita) under the Ministry of Industry and Trade.
However, the Vietnamese e-commerce marketis still in an early stage of development, so it poses major challenges toplayers.
According to industry insiders, companiesneed to pump significant funds into their e-commerce business to carry outtasks from sales and marketing to warehousing and logistics, so profits areeasily eaten up. Also, many platforms suffered losses from special discountoffers and promotion campaigns to snag new customers.
E-commerce companies have spentaggressively to gain market share, intensifying the competition and theshort-term losses, cafef.vn reported.
Despite a loss of 164 billion VND (7.1million VNS) in 2016 and more than 600 billion VND last year, Shopee has continuouslyreceived more than 1.2 trillion VND in investment from its parent company,Singapore’s Sea Limited (Sea), in the first half of this year.
Shopee has pumped money into promoting itsplatform with plenty of discounts, free nationwide shipping service, trainingfor sellers and other promotions.
After suffering a loss of some 600 billion VNDin 2017, Tiki got additional investment of some 50 million USD from China’ssecond largest e-commerce group JD.com and some other investors early thisyear.
Tiki has also planned to call for moreinvestment worth some 50-100 million USD next year, which JD.com will continueto take part in. The JD.com investment can be considered a move to race withAlibaba in Vietnam’s e-commerce market after Alibaba acquired Lazada severalyears ago.
To gain large market share in Vietnam,Alibaba’s Lazada ran up accumulated losses of more than 2.7 trillion VND in2015 and 2016. With the fiercer competition in the market last year, Lazada’saccumulated loss could reach nearly 4 trillion VND when all the accounting for2017 is complete, cafef.vn reported.
According to trade expert Vu Vinh Phu,foreign investors are continuing to increase their presence in Vietnam’se-commerce market despite losses, as their current goal is to attractcustomers, stretching their influence in the market.
Nguyen Manh Dung, head of the Vietnam andThailand Office under CyberAgent Ventures, told local media that e-commercerequires a long-term investment, and investors could start to earn profitsafter five to 10 years of operation.
Even Amazon in some markets has onlystarted making a profit after 10 years of investment, according to Dung.
With fierce competition in Vietnam, it islikely to take e-commerce firms some time before they start reaping therewards, he added.
Online retail makes up only 1 percent ofthe total retail market in Vietnam, compared with the 14 percent in the US andChina. There is still a long way to go for the Vietnamese e-commerce market toreach its peak, so foreign companies like Alibaba, JD.com and Sea have investedin the country early to get ahead of the curve, experts concluded.-VNS/VNA
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