The e-commerce market in Vietnam has experienced significant growth in recent years. With a population of over 97 million and an increasing number of internet users, Vietnam offers a promising market for e-commerce businesses.
The Vietnam market has been witnessing a steady rise in online shopping activities, driven by factors such as increasing smartphone penetration, improving internet infrastructure, and changing consumer preferences.
Cross-border shopping plays a crucial role, accounting for 37 percent of the total e-commerce market in Vietnam. As Vietnamese consumers increasingly engage in cross-border transactions, there is a growing demand for a wide range of products from international sources – a trend that opens doors for new players to address the needs of Vietnamese consumers.
On the other hand, integrating Vietnam's cross-border e-commerce with China further enhances such opportunities. Indeed, China's dominant position in the global e-commerce market, its advanced technological capabilities, and extensive logistics networks provide valuable synergies for cross-border trade. By leveraging China’s expertise in these areas, foreign investors can tap into the immense market potential of both Vietnam and China.
In this article, we explore the thriving e-commerce market in Vietnam and the potential for cross-border business opportunities with China, offering valuable insights for foreign businesses and investors.
Vietnam's e-commerce market at a glance
In 2022, Vietnam's e-commerce market achieved a significant milestone, generating a revenue of US$14 billion. Projections suggest that this figure could soar even higher, potentially reaching US$32 billion by 2025.
Moreover, the Ministry of Industry and Trade (MoIT) forecasts that the value of online shopping per user will continue to rise steadily. The report estimates that this year, the online shopping expenditure per person is projected to range between US$260 and US$285. This positive trend is driven by several factors, including Vietnam's young population, high internet penetration rates, and increasing incomes among consumers.
The projected growth in the number of users in Vietnam's e-commerce market indicates a continuous upward trend from 2023 to 2027, with an anticipated increase of 15.5 million individuals – a 24.61 percent compound annual growth rate (CAGR). The estimated user count is expected to reach a new peak in 2027, with 78.44 million individuals.
Key e-commerce players and popularity of social commerce
In 2022, thegioididong.com was the leading player in Vietnam's e-commerce sector with a total revenue of US$598.3 million. Following closely were fptshop.com.vn and hoanghamobile.com, ranking as the second and third largest online stores with earnings of US$298.8 million and US$293.4 million, respectively. Collectively, these top three stores contribute to 32.7 percent of the total sales among the top 100 online stores in Vietnam.
According to a recent survey, social e-commerce platforms in Vietnam have also gained momentum.
Social commerce is a segment within the e-commerce industry that integrates social media and online platforms to facilitate social interactions, as well as the buying and selling of products and services. In 2021, this sector accounted for 65 percent of Vietnam’s US$22 billion online retail economy.
Key players in this segment include:
- Shopee: One of the leading social e-commerce platforms in Vietnam, Shopee offers a seamless shopping experience by integrating social features and online marketplace functionalities.
- Tiki: Another prominent Vietnamese social e-commerce platform, Tiki offers a wide range of products, including electronics, fashion, beauty, and home goods. Tiki leverages social media integration and user reviews to enhance the shopping experience and build trust among customers.
- Sendo: A popular social e-commerce site that connects sellers and buyers in Vietnam, Sendo focuses on creating a social shopping experience. It does this by incorporating user-generated content, social sharing features, and interactive engagement.
- Lazada: Although it is a traditional e-commerce platform, Lazada has also integrated social features to enhance the shopping experience in Vietnam. It now allows users to interact, share, and review products, creating a social community within its platform.
- Leflair: This platform specializes in offering discounted branded products through a curated selection of premium brands at competitive prices, attracting customers who seek quality products at affordable rates. Leflair leverages social media and user referrals to foster its community of shoppers looking for exclusive deals.
E-commerce spends: Consumer behavior and preferences in Vietnam
Electronic devices, including smartphones and laptops, were among the top products sought by Vietnamese consumers. The increasing demand for these types of products can be attributed to the growing reliance on technology for communication, work, and entertainment purposes.
Food and cosmetic products also held a significant share of the e-commerce market in Vietnam. Vietnamese consumers appreciate the convenience of shopping for groceries and personal care items online, saving them time and offering a wide selection of products. This trend is driven by the desire for convenience, especially among busy urban dwellers, who prefer the ease of online ordering and home delivery.
Home and lifestyle products are another popular category among Vietnamese consumers. This includes furniture, home decor, kitchen appliances, and fashion accessories. The convenience of browsing and comparing products online, along with competitive pricing and a wide range of options, has made e-commerce platforms an attractive destination for consumers seeking to improve their homes and enhance their lifestyles.
Webinar - Future-Proof Your Business: De-Risking Your Supply Chain in Asia
August 23, 2023 | 9:00 AM PDT / 12:00 PM EDT
In this webinar, a panel of Business Intelligence Leaders will help you understand key differences between the main markets in South / Southeast Asia and discuss their evolving supply chain ecosystems, enabling you to make informed decisions to de-risk your supply chain.
Join us in this free webinar: Register Now
China's dominance in e-commerce
China's e-commerce market stands as the largest in the world, primarily due to its vast population. Its expansion has been fueled by several key factors, including widespread internet and smartphone usage, increasing consumer confidence in online shopping, the rise of e-commerce platforms, and a wide array of alternative online payment options.
Between 2022 and 2027, the country’s e-commerce market is projected to expand at a CAGR of 12.32 percent from 2022 to 2027.
Established e-commerce platforms in China
China boasts a plethora of established e-commerce platforms that have solidified its positions as key players in the global market. Alibaba Group, a dominant force in China's e-commerce industry, operates the following platforms – Taobao, Tmall, and AliExpress.
Taobao, a consumer-to-consumer (C2C) platform, offers a vast array of products and services, enabling individual sellers to reach millions of customers. Tmall, on the other hand, is a business-to-consumer (B2C) platform known for hosting official brand stores, providing a reliable platform for foreign brands to enter the Chinese market. As of 2021, Alibaba's Tmall held a market share of 63 percent in China's B2C e-commerce sector, with a revenue of US$1.2 trillion.
JD.com, another fierce competitor in China’s e-commerce market, follows a B2C business model, offering a wide range of products, including electronics, fashion, and household goods. With its extensive logistics network, the platform provides efficient delivery services, often achieving same-day or next-day deliveries across China.
Pinduoduo, a relatively newer player in the Chinese e-commerce scene, has rapidly gained traction in recent years. Positioned as a social commerce platform, Pinduoduo leverages social networks and group buying to offer users discounted products. In the first quarter of 2022, the app had approximately 751.3 million monthly active users.
It is precisely because of the presence of these key players that the Chinese e-commerce market is robust and thriving.
Cross-border e-commerce opportunities between Vietnam and China
Leveraging China's e-commerce platforms for market entry and expansion
China's dominant e-commerce platforms, such as Alibaba's Tmall Global and JD Worldwide, offer foreign investors an established infrastructure for market entry and expansion. These platforms provide access to a vast customer base in China, enabling foreign investors to showcase their products and reach a broader audience. Leveraging the popularity and extensive reach of these platforms facilitates efficient market entry into both China and Vietnam.
A clear example of this is offered by the high concentration of international brands on Alibaba's Tmall Global, which has first enabled them to tap into the Chinese market and gain visibility among Chinese consumers and then further expand their reach into Vietnam through cross-border e-commerce.
Utilizing China's logistics and supply chain networks for seamless operations
The advanced logistics and supply chain networks in China provide foreign businesses engaging in cross-border e-commerce operations between China and Vietnam with significant advantages. These well-established networks offer seamless connectivity, efficient processes, and reliable infrastructure that enhance the overall cross-border trade experience.
China's well-developed shipping routes, for example, play a vital role in facilitating smooth cross-border operations between the two countries. With a vast network of ports and efficient shipping services, products can be transported swiftly and reliably between the two countries. This enables foreign businesses to effectively manage their supply chains and ensure the timely delivery of goods to Vietnamese customers. The accessibility of these shipping routes streamlines the logistics process, minimizing transit times and optimizing the overall efficiency of cross-border e-commerce operations.
Moreover, efficient customs clearance processes in China further benefit foreign businesses engaged in cross-border e-commerce with Vietnam. China has implemented measures to simplify customs procedures, reducing bureaucratic hurdles and paperwork. This results in faster customs clearance, ensuring that cross-border shipments are not delayed. This can help expedite the movement of goods, minimize potential disruptions, and maintain a smooth flow of products between the two countries.
Lastly, China's extensive network of warehouses and distribution centers also provides a competitive edge to foreign businesses operating in cross-border e-commerce. These facilities are strategically located, facilitating efficient inventory management, order processing, and fulfillment operations. By leveraging China's warehousing capabilities, foreign businesses can reduce delivery times, maintain optimal stock levels, and enhance the overall customer experience in Vietnam.
Taking advantage of China’s pilot zones for cross-border e-commerce
Recognizing that cross-border e-commerce has gained momentum in China, the Chinese government has approved five batches of 105 comprehensive pilot zones for cross-border e-commerce (CBEC pilot zones), covering almost all provinces except for Tibet.
The purpose of the CBEC pilot zones is to stimulate the growth of the country's import and export businesses, with a particular focus on boosting exports. China has been diligently enhancing its manufacturing infrastructure and now aims to capitalize on opportunities to export higher-value products with better profit margins. Moreover, Chinese policymakers believe that CBEC trade will enable China to diversify its trade connections, especially in the context of the One Belt and One Road Initiative (OBOR / BRI).
Foreign investors can leverage this policy support to navigate regulatory frameworks, streamline customs procedures, and benefit from preferential trade policies. This support enhances the ease of doing business and reduces barriers to entering the Vietnamese e-commerce market.
In summary, the e-commerce market in Vietnam presents a promising opportunity for foreign businesses and investors. With the rise of cross-border shopping and greater integration with China’s e-commerce landscape, there is great potential to tap into a larger consumer base, access high-quality products, and leverage advanced logistics networks for seamless operations. By capitalizing on these opportunities, businesses can establish a strong market presence and thrive in the dynamic e-commerce landscape of Vietnam and China.
In particular, businesses and investors can consider the following:
- Cross-border shopping accounts for 37 percent of Vietnam’s e-commerce market.
- The integration of Vietnam’s cross-border e-commerce with China’s presents exciting opportunities for foreign businesses and investors, as the country’s dominance in the global e-commerce market, advanced technology, and extensive logistics networks provide potentially lucrative synergies.
- Leveraging China’s e-commerce platforms, such as Alibaba’s Taobao and Tmall, provides foreign businesses access to a vast customer base in both countries. Integration with China’s logistics networks streamlines operations, minimizes delivery times, and enhances the overall customer experience.
- China’s pilot zones for cross-border e-commerce further facilitate these exchanges while also adding substantial policy support to those businesses that would benefit from cooperation between the two countries.