The world’s leading e-commerce company, Amazon, is planning to enter Vietnam, one of the fastest growing e-commerce market in Asia. Initially, Amazon will only focus on providing support to domestic small and medium-sized firms for export of their products across borders and importation of goods into Vietnam through their ecosystem.
Driven by its young population, growing smartphone usage, and rising internet penetration, Vietnam continues to be an attractive investment destination for e-commerce companies. Vietnam has nearly 50 million smartphone users and has consistently ranked within the top 20 countries with the highest number of internet users. As per a recent study by Kantar Worldpanel, the share of e-commerce shoppers grew from 5.4 percent to 8.8 percent in the four largest cities in Vietnam in 2017.
According to Vietnam E-commerce Association (VECOM), the industry grew by 25 percent in 2017, much higher than other Southeast Asian countries. Total revenue generated from B2C e-commerce in 2016 reached US$5 billion, 3 percent of the total retail industry revenue and is estimated to reach US$10 billion by 2020, making Vietnam one of the most profitable markets for e-commerce firms.
Vietnam’s e-commerce market has already attracted other major e-commerce retailers such as JD.com, Alibaba, and Shopee in the last few years. Amazon, being a late entrant will face intense competition from the existing players in the market, especially from Chinese e-commerce giants that have already invested billions to expand their presence in Vietnam.
Alibaba recently paid US$1 billion to increase its stake to 83 percent in Lazada, a major player that accounts for almost a third of the online shopping market in Vietnam. Another Chinese e-commerce firm JD.com became a strategic shareholder by investing US$44 million in Tiki, one of the largest online retailing platforms.
Other firms such as Shopee and Lotte are planning to expand their presence in Vietnam’s e-commerce market in the next few years as well.
Major challenges facing e-commerce firms in Vietnam include customer trust and logistics costs. As more foreign capital enters the market, the e-commerce industry will continue to evolve and benefit from their expertise, marketing strategies, capital, and experience in developing supporting industries.
On the other hand, retail firms will also try to expand their presence and prioritize the online markets in addition to their offline sales channels. As more and more customers shift towards online shopping for better deals and ease of shopping, offline retailers will try to adopt a multichannel approach to sales for a sustainable growth.
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