Future still looks bleak for e-commerce in Vietnam

Official statistics of the Ministry of Industry and Trade indicated that total online e-commerce sales for 2015 jumped 22.5% on-year to US$4.9 billion thanks to wider Internet access and smartphone use.

Most of this increase was directly attributed to sales by international e-marketplace platforms Lazada and Zalora in addition to leading Vietnamese online sales websites Vathia, Sendo, Tiki and Hotdeal.

Another report by Vietnam E-commerce and Information Technology Agency has also optimistically predicted that the number of online shoppers and sales will substantially increase by 2020.

However, this rosy prediction conceals the fact that most local retailers and manufactures face significant challenges in technical competency, logistics and competitiveness in e-commerce.

Notably more than 90% of all e-commerce transactions are made in form of cash on delivery due to the fear of Vietnamese consumers to use credit cards to pay for online purchases, which in and of itself creates a major stumbling block for local businesses.

The hopeful prediction also glosses over the fact that in the fast moving consumer goods (FMCG) segment the value share in Vietnam is only .2% compared to a global percentage of 3.9%, according to Kantar Worldpanel, an international leader in consumer knowledge and insights.

Simply stated, Vietnamese consumers don’t purchase FMCGs online and prefer to shop at local physical stores or live markets and pay in cash.

If one considers that the major players in the FMCG segment – Vinmart+, Circle-K, and Family Mart – have been expanding physical brick and mortar stores throughout the country, it’s hard to see where there is much room for e-commerce growth in this segment, say many experts.

The upbeat prediction by the Vietnam E-Commerce Agency also ignores the fact that in major markets of developed nations around the globe—physical stores remain the foundation of retailing.

According to leading US marketing research company eMarketer, even in this era of the internet, 90% of retail sales around the globe still take place in physical stores.  Another global management consulting firm, A.T. Kearney puts the figure closer to 95% of all retail sales taking place in brick and mortar stores.

Nguyen Thi Hanh, chief representative of the Vietnam E-Commerce and Information Technology Agency, recently unveiled the results of a survey that found only 42% of Vietnamese businesses even have websites.

While only 19% of Vietnamese businesses are using websites to promote their products and services, about 70% of the websites are so poorly designed that smartphone users can’t even efficiently access their sites’ content.