Vietnam’s Rising Ecommerce Industry

shopping - Saigon/HCMC: Sept. 28, 2016

Vietnam’s ecommerce industry is increasing at the second highest rate in the Asia-Pacific region, and growth is clearly expected to continue throughout the next five years, raking in an estimated $10 billion by the year 2020.

What does this mean for the retail market, and how will it affect local and international shops in the future, if at all? According to the Vietnam E-commerce Association, the online shopping industry is expected to rise around 30% or more each year throughout the next decade. As of now, a huge portion of the revenue made from online shopping has been highly concentrated in Hanoi and HCMC. However, once ecommerce hits the outer provinces and countryside areas, this could mean unprecedented growth in the online shopping sector.

The Ministry of Industry and Trade claimed that there are currently around 220 fully functional online shopping websites, all of which have combined to generate about VND1.66 trillion to date. One of Vietnam’s most prominent online retailers for clothing and accessories is Leflair.vn. I sat down with their CEO, Loic Gautier, to get some insight on the current state of the ecommerce market, the struggles of start-up, branding and the direction ecommerce is headed.

leflair.vn founders Loic Gautier and Pierre Antoine Brun

Who is Shopping Online the Most and What are They Buying?

Most might light heartedly joke that, yes, women do the most online shopping and the statistics show that this is in fact true. Overall, females aged 35-44 make the most online purchases and Leflair.com states that about 80% of their purchases are made by women as well.

MasterCard surveys have stated that the top three shopping categories for Vietnam are airline tickets, home appliances and electronic products. It is estimated that more than 50% of consumers are shopping from their mobile devices like iPhones and tablets, and, as expected, the peak time of day for purchases made in Vietnam is in the morning (before work) and the evening (after work).

Branding/Foreign Investment

There are a limited number of international brands available for sale in Vietnam due to the fact that foreign investment is a tricky subject. Obstacles like high taxes and inadequate information result in less foreign interest in the market. As a new online shopping company, big name brands can be hesitant to trust your website due to a lack of established online shopping sources in the past. Since ecommerce just kicked off five years ago, there is still a lot of work to be done in order to establish a trusted industry model. As long as online shopping continues to offer a sound alternative to retail shopping in regards to products, brand options and convenience, ecommerce will certainly continue its upward ascent as it gains the trust of even bigger brand names.

Competitive Market

Although there are a lot of online websites currently functioning in Vietnam, the competition for sites that sell globally recognised brands is limited. Despite the fact that there are many regulations currently in place, the Ministry of Industry and Trade has realised the economic potential and has decided to spend more time promoting ecommerce. They have initiated numerous training programmes, as well as launched several of their own enterprises geared at vamping up the market. Currently, some of the most widely used websites are Leflair, Hotdeal, Lazada, Muachung and Chotot. However, as entrepreneurs become more educated, and more expats integrate into Vietnamese markets, we can expect an increase in competition as well. Those who survive will be the ones that keep one step ahead of the game. Ecommerce requires a depth of technological insight and a marketing savvy both online and off. Social media is clearly another key component to success and it will, in my opinion, make or break future ecommerce sites.

What’s Next?

There is no debate that this is a booming industry. However, it is difficult to predict the direct effect it will have upon the retail market scene. Will they evolve together, or will online shopping steal the crown? Perhaps ecommerce will be a way for local independent designers to platform their designs and avoid the ridiculous rental prices in prime shopping areas. Whatever the outcome, it certainly rings true that everything digital is advancing, and taking place of more antiquated industrial avenues.

Sources: Thanh Nien News, AmCham Vietnam, The Saigon Times, Vietnam News
Header photo by: Robbert Noordzij