Vietnam’s E-Commerce industry is expected to grow significantly in 2022, thanks to increasing foreign investment, a favourable regulatory environment, and enhanced internet connectivity. Moreover, online sales are anticipated to account for about a tenth of all products and services purchases in Vietnam by 2025.
Savills Industrial will share with you the answer to how E-Commerce is changing logistics, how Vietnam’s burgeoning digital economy, and how the digital commerce industry is making it an attractive place for tapping into new business opportunities or the industrial real estate sector.
An Outlook for Vietnam’s E-Commerce Growth
Vietnam’s demand for online commerce and leisure has increased significantly in 2021 as a result of the country’s digital revolution. Throughout 2020, online shopping has gained penetration and transaction volumes, culminating in a staggering 54% growth in e-commerce sales in Vietnam, which is expected to surpass the current trade share of sales in 2028.
Moreover, working from home has hastened delivery and ride-sharing. It has also minimized the desire to interact with stores, food and beverage outlets. Along with the meteoric development of digital commerce, homeworking has also fueled demand for logistics and warehousing activities for expansions of current firms and entries of new ones.
E-wallets have profited as the use of cash-on-delivery has been reduced somewhat, allowing mobile payments to take their place. While still in their beginnings, online education platforms have also been provided with a boost in their quest to enter consumer homes.
Tiki, Lazada, and Grab have their own logistics service, which includes warehousing, packing, and shipping. Shopee and Sendo, on the other hand, are unable to handle logistics themselves and must rely on third-party logistics (3PLs). As a result, there are several possibilities and markets for e-commerce logistics.
Investing in Vietnam’s E-Commerce Industry
E-commerce in Vietnam is on the increase, rising from about 28% in 2017 to almost half of the population by 2020. By 2025, it is expected that more than 70% of Vietnam’s 100 million people will use digital commerce transactions. According to Statista, the country’s digital commerce earnings will be close to $9 billion by 2025.
Vietnam’s commerce is approaching that of its ASEAN counterparts, with the country ranking 86th in the United Nations E-Government Survey for 2020. Its 40 million online customers spend an average of US $210 each year, making it the area’s second-largest e-commerce market.
With expanded internet access, smartphone use, and improved trust in online purchasing, Vietnam’s digital commerce sector is expected to continue growing with no signs of slowing down soon.
Vietnam’s ability to encourage e-commerce is demonstrated by the success of Vietnamese-founded digital commerce platforms such as Tiki, Sendo, and Thegioididong. Additionally, Sendo secured a US $51 million investment from Japan’s SBI Holdings.
Grab and Gojek, the region’s two most valued companies, are also weighing the advantages and disadvantages of a possible merger. This combination could shape market dynamics in Southeast Asia’s digital commerce sector.
Vietnam has one of the most favourable regulatory environments in the ASEAN region for launching digital commerce. Vietnam is a party to thirteen free trade agreements (FTAs) as of 2021, which allow for the import and export of commodities with reduced or zero customs duties.
Vietnam’s digital economy might reach $52 billion by 2025, attracting the attention of large corporations such as Goldman Sachs and JD.com. By 2025, eCommerce may account for 10% of all retail sales in Vietnam. Online purchases in Ho Chi Minh City and Hanoi might exceed 50%.
The Vietnamese government’s commitment to economic digitalization has actively fostered the country’s digital commerce growth. Foreign investment in this industry is a profitable opportunity with the potential to help the sector expand.
Vietnam Commerce Industry’s Difficulties
Since Vietnam is still a developing industry, its logistics sector is not without problems. Firms with their delivery network, such as Lazada, have their constraints. Even with its own logistics network in place, it has relied on 3PL partners to fulfill orders, highlighting the rising e-commerce sector’s expectations.
Aside from that, Vietnam is mainly a cash-based economy, with most transactions performed in cash. Online commerce companies are obliged to rely on cash for delivery, resulting in higher operational expenses.
Firms must also deal with items that have been returned, exchanged, or damaged. Furthermore, the legal structure and rules governing the logistics industry continue to be challenging and complicated. Last-mile concerns must be handled, and transporting to rural regions is arduous. These difficulties become more evident when businesses strive to expand beyond Vietnam’s first-tier cities, such as Hanoi, Ho Chi Minh City, and Da Nang.
As with every market, e-commerce logistics in Vietnam has unique obstacles. They include increased operating expenses caused by Vietnam’s cash-based economy and excessive traffic in places like Hanoi and Ho Chi Minh City. Additionally, final-mile distribution is more difficult in rural parts of Vietnam.
Regardless of the obstacles, the future of digital e-commerce logistics in Vietnam is unquestionably bright. This opportunity happened because the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union Free Trade Agreement (EVFTA) would increase foreign investment in the country’s information and infrastructure systems.
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