E-commerce growing exponentially

Alibaba.com recently implemented its “Verified Supplier” membership program for high-quality suppliers, to create more trust among buyers in businesses exporting via the e-commerce platform. After recognizing the potential that e-commerce holds in Vietnam, Alibaba.com decided to introduce the program in the country.

“Vietnam has always been one of Alibaba’s strategic markets and Vietnamese suppliers mainly export to the US, Europe, Japan, South Korea, and Asia-Pacific countries,” said Mr. Roger Lou, Country Manager of Alibaba.com Vietnam. “We will continue to expand our investment in the country and establish a localized ecosystem, including local channel partners, local customer development and service teams, and market operations, to improve the organizational capabilities of localized teams.”

Positive outlook

Amazon also announced its 2023 strategy for the Vietnamese market, focusing on raising awareness and readiness for cross-border e-commerce. It will continue to invest, build global brands for Vietnamese products, support logistics for global expansion, enhance the sales experience, and contribute to the growth of Vietnam’s startup community. According to Mr. Gijae Seong, CEO of Amazon Global Selling Vietnam, though the global economy is yet to fully recover from Covid-19, global cross-border e-commerce in general and Vietnam’s e-commerce sector in particular still witnessed outstanding growth.

International e-commerce platforms such as Shopee, Lazada, and Tiki hold the lion’s share of Vietnam’s e-commerce market. There has also been an increasing number of newly-registered local e-commerce sites, especially in the form of e-marketplaces. Local brands Sendo and The Gioi Di Dong have emerged as the most popular e-commerce sites over recent years.

In the past, Vietnamese were not overly familiar with online shopping, but it has gained in popularity in recent times. Figures from Stastista put revenue in Vietnam’s e-commerce market at $12.81 billion in 2022. The compound annual growth rate (CAGR) in the 2022-2027 period will reach 16.29 per cent, resulting in a projected market volume of $27.24 billion by 2027. Most revenue is generated in China, and the number of users is expected to reach 78 million by 2027. User penetration will be 58.2 per cent in 2022 and is expected to hit 76.6 per cent by 2027.

2022 saw more Vietnamese digital consumers use digital platforms, with the dominance of the e-commerce market accounting for 51 per cent of online spending, according to Mr. Khoi Le, Country Director of Meta in Vietnam The average value of online orders from e-commerce platforms in Vietnam increased from $45 in 2021 to $50 in 2022.

Diverse promotions

The Vietnamese Government has been paying major attention to actively promoting the growth of the e-commerce market and aims to further boost its development. Significantly, the national plan for e-commerce development set a goal of 50 per cent of local small and medium-sized enterprises (SMEs) conducting digital business through both domestic and global e-commerce platforms in the 2021-2025 period.

Vietnamese businesses, as a result, are actively promoting business activities to contribute to the development of e-commerce. Mr. Lou said that 50 per cent of Vietnamese suppliers are high-star suppliers on Alibaba.com, with core industries covering Food & Beverages, Agriculture, House and Garden, Beauty and Personal Care, Furniture, Construction, Packaging, Plastics & Rubber, and Machinery.

More than 80,000 products have been released, and more than 70,000 inquiries from active buyers around the world are received each month. “Vietnam’s e-commerce market is rapidly expanding, allowing entrepreneurs to tap into new business opportunities,” said Mr. Lou. “More than 70 cent of the country’s population is expected to use e-commerce by 2025, so it has been receiving major attention.”

Similarly, e-commerce platforms such as Shopee, Lazada, Tiki, and Sendo have been introducing promotions or discounts to stimulate consumer demand. “Shopee will continue to introduce interesting programs, with the Tet Sales campaign to embrace the Lunar New Year in 2023,” said Mr. Tran Tuan Anh, Executive Director of Shopee Vietnam.

Stastista also noted that as one of the fastest-growing internet economies in Southeast Asia, Vietnam’s e-commerce market value is forecast to reach $39 billion by 2025, ranking it second behind only Indonesia. The country’s digital population and rising internet penetration rate provide the necessary conditions for e-commerce businesses to thrive. Consequently, the share of total retail sales held by e-commerce has been rapidly increasing, while online channels have surpassed modern retail channels in terms of growth within the fast-moving consumer goods (FMCG) market.

Issues to address

In addition to its positive outlook, analysts also believe that Vietnam’s e-commerce market is still grappling with certain difficulties. Mr. Nguyen Thanh Hung, Chairman of the Vietnam E-commerce Association (VECOM), noted that the growth in e-commerce in Vietnam has increased rapidly over recent years but there are still obstacles in online payments, order fulfillment, and foreign investment attraction. Many consumers are still in the habit of using cash and their level of trust in products sold online remains a concern.

The greatest obstacle facing e-commerce in Vietnam, however, remains the legal framework. “This is an issue not only for the e-commerce sector but also for many other sectors,” said Ms. Nguyen Minh Thao, Head of the Business Environment and Competitiveness Research Department at the Central Institute for Economic Management (CIEM). “Even if there is a supportive policy, the problem of implementation is not simple in practice.” Support policies for businesses operating in e-commerce remain quite limited.

In order to address tax issues facing businesses and to promote the development of the e-commerce market, the government issued Decree No. 91/2022/ND-CP on October 30, 2022, amending and supplementing articles in Decree No. 126/2020/ND-CP detailing a number of articles in the Law on Tax Administration.

Vietnam also has many appropriate policies to support businesses in e-commerce. “Vietnam offers a sound legal environment, especially in the ASEAN region,” Mr. Lou said. “After the pandemic, the country adopted fiscal and monetary policy to support economic recovery. This policy aimed to provide interest rate support, reduce VAT, support housing for skilled workers, and improve the country’s transport infrastructure.”

For Vietnam’s e-commerce to develop sustainably and effectively, analyst believe that the government needs to introduce favorable mechanisms for businesses and complete the legal framework. Mr. Seong said that with its available advantages such as a strong national policy supporting exports, abundant production capacity, and rapid development of e-commerce, Vietnam is in a golden age for boosting online exports.