Online businesses experiencing intense competition in Vietnam

In the digital era, e-commerce has become increasingly popular and powerful. That is the reason why several companies, both domestic and international, are heavily investing into their online sector. Yet in Vietnam, the playground is not at all simple for even experienced participants.

An Internet user is choosing a scooter on an online website. (Photo: SGGP)

An Internet user is choosing a scooter on an online website. (Photo: SGGP)

With a population of more than 96 million, the majority of whom are using smart devices on a daily basis, Vietnam has been considered a highly potential market for e-commerce.

At present, the Vietnamese can perform several tasks online, including money transfer, tourism booking, entertainment, and shopping. Statistics from the Vietnam E-commerce Association (VECOM) reveal that in 2018, the online market earned around US$7.8 billion. With a stable growth of 30 percent, in 2020, this market will yield an estimated $13 billion.

Despite that promising signal, the competition here is never an easy one. Many businesses like Robins Online (of Central Group) or (of The Gioi Di Dong) eagerly entered the market with their formal investment scenario to earn fame as well as customer loyalty, but then soon had to say goodbye due to their power limit. Take Adayroi as an example. Having an impressive entrance of 6-7 million per quarter, which is nearly the same as giant names like Shopee, Tiki, Lazada, or Sendo, it still faced the result of being merged into VinID when its owner – Vingroup – announced to withdraw from the retailing segment.

Facing the similar situation, the online fashion platform Robins Online, formerly known as Zalora, unexpectedly announced its closure in March 2019 and transferred the balance in all client accounts to their bank accounts. Only a few months before, statistics from iPrice displayed that it had achieved the highest entrance quantity in Vietnam, with more than 956,000 turns per month.

A few years ago, after the blooming of online shopping websites in Vietnam, many businesses had to launch promotion campaigns after campaigns to attract potential customers. However, as most domestic enterprises normally want to earn profit as soon as possible without sufficient preparation for long-term competitions, it was the financial shortage that blew these companies away. 

Seeing such a lucrative opportunity, international giants of the field have jumped into the game via Mergers & Acquisitions transactions, making the market even fiercer. Shopping websites begin to run more attractive promotion programs, trying to dominate the market although that means they have negative profit at first. The domino effect happens and kills more minor enterprises of the field.

After gaining more market share, even leading corporations need to call for capital from other investors. One example of the case is Tiki, which has gained thousands of billions of VND from VNG Corporation. Another instance is Shopee, which has received US$50 million from its foreign parent company, in order to maintain the capital stability and client quantity while avoiding bankruptcy.

By HAN NI – Translated by Huong Vuong

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