Now are indeed flourishing times for Vietnam’s e-commerce sector. The market is certainly on the up in a big way and has full potential for exponential growth, but not without some key obstacles ahead. And in this light, there arises a local player who has unparalleled possibilities to dominate the market anytime soon – Loship.
Although e-commerce in Vietnam significantly lags behind that in Singapore, Indonesia, Malaysia, and Thailand, the country has proven to be a rising force in the region, receiving huge attention from both domestic and foreign investors – seemingly a “dragon being unleashed”.
The e-Conomy SEA 2019 report by Google and Temasek indicated that the value of Vietnam’s e-commerce market has reached US$5 billion in 2019, surging on accelerating growth of 81% compared to 2015, and is expected to hit US$23 billion in 2025. According to Statista, revenue from the country’s e-commerce market amounts to US$3,385 million in 2020, showing an annual growth rate (CAGR 2020-2024) of 7.1%, resulting in a market volume of US$4,452 million by 2024. User penetration is 59.5% in 2020 and is expected to hit 65.6% by 2024.
The Vietnam E-commerce Association (VECOM) also revealed that the e-commerce growth rate of Vietnam is 30% year-on-year, and that Vietnamese customers spend on average US$210 per year on online shopping. This means the market size currently ranks second in Southeast Asia with approximately 40 million online shoppers. This growth trajectory has been propelled by increased internet penetration, rising consumer confidence in online shopping and the growing number of smartphone users in Vietnam.
Remaining challenges and setbacks
Despite favourable prospects, Vietnam’s e-commerce players are still facing a plethora of logistics, price and product perception challenges. Surprisingly enough, dissatisfaction in terms of delivery experiences is often found in major e-commerce companies operating in Vietnam. A survey by iPrice and Parcel Perform reveals that it normally takes 5.6 days for a parcel to reach its Vietnamese buyers. Data from Q&Me 2019 Research in Vietnam shows fast delivery is still firmly among top 5 reasons for online shopping coming into 2020. Noticing the high demand for instant delivery, several Vietnamese e-commerce players are eagerly stepping up the game to improve delivery speed.
What’s more, Vietnamese e-commerce market has also suffered from cases of counterfeit goods, infringe intellectual property rights and even banned goods. Customers are increasingly concerned about the poor quality of products, with a huge disparity between what is advertised and delivered. Other barriers to growth include fear of leaked personal information and high shipping costs, which have made Vietnamese consumers wary of making online purchases.
Rising E-commerce tiger
While the Vietnam’s e-commerce scene has witnessed intense competition between “big four” players including Shopee, Lazada, Tiki and Sendo, it also marks the emergence of other aspiring yet more effective e-commerce businesses coming to town.
One notable start-up among them is aspiring unicorn-to-be Loship – the Vietnamese hyperlocal e-commerce platform operating its own fleet of one-hour delivery. Loship started off as an online food review platform named Lozi in 2015 before venturing into e-commerce and expanding to different verticals, including food delivery, ride-hailing, laundry services pickup, medicine, to name a few. The startup has recently announced the closing of a funding round led by South Korea’s Smilegate Investment, and is geared towards the next Series C round in June 2020. Its long-term goal is to create an ecosystem of services that can provide everything customers need, bringing ultimate convenience to customers.
Amid the bruising competition, Loship has hit a homerun with its one-hour delivery feature. The startup has built an unmatched delivery network with over 50,000 driver-partners. Unlike other players in the scene, Loship operates the entire logistics operation itself, not handing off packages to third parties for last-mile delivery. That enables Loship to improve delivery speed at a lower cost, shipping all intra-city orders to customers within just an hour.
Mr. Trung Hoang Nguyen, CEO of Loship stated: “The biggest problem for e-commerce in developing countries always comes down to an effective logistics network, that is, how to move an item from A to B. If we can create enough density for our distribution network, we can put any items on the platform and deliver them in the fastest way possible. That’s how we differentiate ourselves from the competition.”
Loship is now setting its eyes on becoming a top-of-mind solution for Vietnamese consumers’ one-hour delivery needs, enjoying a growth rate of 20% and on average 4,500,000 transactions per month. It also aims to bring 1 million brick-and-mortar stores in Vietnam online so that customers can search and see what is being sold locally by retailers, big or small.
“Even though there are many e-commerce businesses present, the desirable products are missing from the market, and the speed of delivery seems to be the biggest pain point, especially in those lower-tier cities. We have in place several competitive advantages that enable us to jump onboard and level the playing field. Our technology platform is solid and easily adapted to new verticals. We also have a self-built delivery network which is ready to solve the last-mile delivery problems. We don’t just talk the talk about e-commerce, we walk the walk,” Trung Hoang Nguyen emphasized.
It has become clear that for pure-play e-commerce companies, profits are hard to come by. Loship, though, is the exception to the rule here as it has an ample opportunity to attain profitability from its B2B e-commerce called Lo-supply. The evidence clearly speaks about the fact that Lo-supply is the first-mover profitable B2B platform in the country, a niche market that has the benefit of low competition from any major player. Lo-supply provides raw materials and ingredients at affordable wholesale prices for Loship’s merchant partners, taking advantage of its extensive network of more than 90,000 merchants. In 2019, Lo-supply accounted for 30% of net profit for Loship, and the segment is growing even faster than its main business.
COVID-19: E-commerce up its game
Now that the COVID-19 pandemic is gaining pace around the world with no sign of slowing down. There is no doubt that its sustained impact will cause a fundamental change in consumer behavior, further fueling the growth of e-commerce.
The Southeast Asian startup Loship is witnessing a growth in the number of orders, especially in its Lomart grocery delivery service, helping customers to buy grocery and essential goods while maintaining social distancing. The number of merchants on Lomart is abundant with more than 1,000 stores and supermarkets across 4 big cities in which it operates, and Loship will continue to quickly expand grocery pickup stores in the coming weeks to further help everyone in need, especially in times of quarantine.
“Not only food delivery, we also see strong demand in grocery shopping, laundry, and medicines delivery,” said Trung. “However, we do not think there is anyone who would consider benefitting from a serious threat of the world like the coronavirus. We also find it unsuitable to talk about revenue and profits in times of crisis. At this moment, our main focus is customers, and we’re doing everything we can to ease the burden on customers and provide them with safer choices. Earning profits is another story.”
All in all, the e-commerce sector in Vietnam has matured, and is here to stay. There are a lot of challenges, but with that, there lies tremendous opportunity. Vietnam is a country of entrepreneurs, and those with the great vision and ambition could certainly make a resurgence, compete and succeed in the e-commerce arena. “Aspiring unicorn-to-be” Loship, as an example.
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Author: Tech Collective
