E-commerce remains a largely untapped opportunity in Vietnam
Our research suggests that Vietnam’s e-commerce market value (gross merchandised value) was approximately of $300 million in 2011 and is expected to grow at an average 75 per cent per annum during 2011-2015 to reach $2.8 billion by 2015. While this increase appears huge, there are several factors on the demand and supply side which make us optimistic about the market’s growth potential. How do you reach 87 million aspiring consumers with strongly growing incomes when the retail market is highly fragmented and quality retail space is rare and expensive? More people believe that e-commerce could be the answer. PwC has conducted extensive research to find out how big the Vietnamese e-commerce market will be, what the most popular business models are and which specific challenges and opportunities companies need to understand when they build their e-commerce strategy.
On the demand side the average disposable income is expected to grow from $570 to more than $820 per annum. While we are aware that a large part of the population will still have very limited funds for discretionary spending, it also entails that discretionary spending becomes possible for a growing number of people.
Moreover the projected growth of internet users from 30 million in 2011 to 37 million in 2016 (BMI) and the expansion of broadband services will increase consumers’ ability to shop online. Not only will there be more people online, but they will also spend more time on the internet. According to Cimigo’s recent study time spent on internet tripled from 43 to 130 minutes per day between 2008 and 2011.
On the supply side the right online shopping business models are crucial to create awareness and transform potential demand into sales. In late 2010, the introduction of group-buying websites radically changed the pace of e-commerce in Vietnam. Our consumer survey of 1,200 people shows that monetary benefits offered by group-buying websites have strongly encouraged customers to engage in e-commerce. We expect that the launch of more online businesses and the emergence of new business models will further stimulate online sales.
Vietnam’s e-commerce sector is very fragmented and there are no clear market leaders in both the Consumer-to- Consumer (C2C) and Business-to- Consumer (B2C) e-commerce markets.
The most popular business model in the Vietnamese e-commerce industry is e-marketplaces.
Notable players in this segment are local companies such as vatgia.com, enbac.vn, 5giay.vn, chodientu.vn. Prominent e-tailers include solo.vn, yes24.vn and zalada.vn. Thegioididong.com, dienmay.com and nguyenkim.com, the online channel of Vietnam’s leading specialist retailers are also very popular. However, none of the players appears to either reach or be close to the leading position that Amazon and Taobao currently have in the US and China respectively. Newcomers who act quickly thus still have a fair chance to establish themselves as strong players in a relatively untapped market.
To achieve lasting success, companies need to understand the specific opportunities and challenges of the Vietnamese e-commerce market. A low credit card penetration rate and the limited popularity of bank transfers for instance mean that cash-on-delivery is still by the preferred payment method.
This also raises challenges for organising an effective logistics infrastructure for e-commerce in Vietnam. To adapt to these and other market conditions companies must tailor their offering and infrastructure accordingly. Based on our recent project experience PwC can support you to successfully tap into Vietnam’s promising e-commerce market.
