Potential for e-commerce development

Tran Huu Linh, Head of the Department for E-Commerce and Information Technology (IT) under the Ministry of Industry and Trade (MoIT), says over the past years, e-commerce has developed steadily in Vietnam and the IT sector has improved remarkably, attracting a large number of internet users who access online networks regularly. This provides plenty of opportunity for developing online transactions as well as e-commerce services. 

According to the Department, around 1.5 million online transactions worth more than VND4,130 billion were conducted on 30 trading floors in 2011.

Experts say that in the context of the on-going global economic downturn, the limitations of traditional retail infrastructure offer many opportunities for e-commerce to develop.

Doing business via the websites is now very popular. A 2011 survey showed that more than 30 percent of businesses have set up their own e-commerce websites.

Many businesses have created websites to develop goods distribution networks while others have chosen another way to promote sales by using websites available from third parties.

Those websites that function as cyber-markets or an e-commerce transaction floors are based on diverse forms such as group buying, online markets, classified advertisements, forums, social network shopping channels and real estate trading floors.

In fact, most businesses have benefited greatly from e-commerce and increased their revenues. More than 60 percent say their e-commerce sales rose significantly between 2006 and 2011. 

The Department for E-commerce and Science and Technology says by the end of 2011, nearly 130 businesses had registered to use e-commerce floors and 35 online transaction websites were established.

E-commerce service providers have earned considerable profits from their operations, with 30 businesses surveyed boasting total revenues of VND111 billion in 2011.  

Nguyen Hoa Binh, General Director of the e-commerce service provider Peacesoft,says his company’s annual profits grow by 100 percent on average.

Along with the e-commerce transaction floors, many other support services such as non-cash payments, website certification, digital signatures and email have also developed

Of the total revenue earned by e-commerce service providers, 84 percent comes from businesses directly involved in online transaction floors, 10 percent from advertising and six percent from other activities such as sales and training fees. 

Based on revenue, five leading e-commerce transaction floors, namely vatgia.com, enbac.com, muachung.vn, chodientu.vn and 123mua.vn, have the lion's share of the market, accounting for 94 percent of all successful transactions and 86 percent of total earnings by 30 operational floors. 

A representative from the Vietnam E-Commerce Association (VECOM) predicts that the Vietnamese e-commerce market will continue to grow at an annual rate 40 percent in the coming years. 

While developing e-commerce transaction floors, Vietnam has focused on improving e-customs procedures, automatic import licensing and online payments.

Experts say the e-commerce industry in Vietnam, though promising as it looks, will face challenges arising from legal procedures, different payment methods, social complexity, and poor pubic awareness of trade fraud.