The on-demand economy is built on the concept of instant gratification, where consumers desire immediate fulfillment of needs, as well as convenience and simplicity. The businesses in this emerging economy represent the manifestation of years of technology innovation and an evolution in consumer behaviors.
In 2020, out of 97.58 million people in Vietnam, 54.6 million of them are of working ages. Vietnam is also a country with the fastest-growing middle-class rate. About 70% of the population has access to the Internet and uses it to join social media as well as to buy products.
With strong development in ICT in various sectors, accompanied by a growing economy, especially in e-commerce, the prospect of an on-demand economy in Vietnam now looks brighter than ever.
Nowadays, customers prioritize convenience and simplicity, hence, many companies are trying to optimize user experience, simplify the order processes and speed-up delivery services. Digital and contactless payments have also become the latest trend in customer behaviors with transactions jumping by 344.4% in number in 2020. In addition, online education in Vietnam is on the rise, expected to reach $3 billion in 2023.
In a panel discussion held on April 14, Trung HOANG D., Partner VinaCapital Ventures; NGUYEN Huy Hoang, Chief Business Officer OnPoint E-commerce; Cris D. TRAN, Co-founder at FAM Central and Managing Director at VNSIF; and NGUYEN Tuan Hong Phuc Partner KPMG in Vietnam sat with host Hao TRAN (Vietcetera) to discuss the opportunities and challenges of the on-demand economy.
The pandemic has pushed on-demand economy forward
Through technology, customer behaviors have changed: they want instant and simple services whenever and wherever they need it. NGUYEN Tuan Hong Phuc, Partner at KPMG in Vietnam, emphasized that technology is key enabler for the on-demand economy to prosper.
Trung HOANG from VinaCapital Ventures said there are two sides to the equation when it comes to the on-demand economy: “For service receivers, they want to get it simply, conveniently, and instantly. For service providers, they can use leverage on technology in order to expand the service, improve user experience and business performance.”
The size of the e-commerce in Vietnam is currently worth $12 million. According to the latest report from Google, in 2025, Vietnam is expected to have a market size of about $30 million and become the second biggest e-commerce market in Southeast Asia, just behind Indonesia. That is why many companies are investing in these two countries for on-demand economy.
The pandemic also impacted the e-commerce industry, even making Vietnam’s “e-commerce future” happen 2-3 years earlier. NGUYEN Huy Hoang, Chief Business Officer at OnPoint E-commerce, said: “All of the ecosystems of e-commerce have to go fast to catch up with trends in Vietnam. A key thing about consumers in Vietnam is that convenience not only comes from online businesses but also from offline businesses. Therefore, offline ones can digitalize their services to online faster.”
Trung HOANG D. also added that besides the pandemic, digital transformation, which is happening across Vietnam, is a driving force to accelerate the shift to on-demand economy. He shared: “In banking during the pandemic, they have a lot of biometric or self-serving kiosks that have no human interactions. Banks have changed drastically, pulling others to come along.”
Multiple challenges lie ahead
Despite various opportunities in store, companies may face lots of challenges while trying to adapt to the on-demand economy. Phuc NGUYEN pointed out that on-demand requires companies to have different capabilities: “On-demand not only uses technology but there are operating models behind, data and insights. There are new capabilities that need to acquire to do it well. All the processes behind are important to how you deliver a good experience.”
From the brand side, Trung HOANG from VinaCapital Vietnam mentioned lots of companies in Vietnam still have old ways of thinking. When things change fast, they are not ready to change the mindset of the company.
According to Hoang NGUYEN, a digital transformation mindset is necessary at the moment. “Infrastructure, mindset, and turning data into actions are key challenges for businesses to run and capture the on-demand trends.”
On-demand economy, in one aspect, means fast delivery. This leads to the assumption that companies need to stock their inventory sufficiently to deliver on-demand. However, the pandemic brought about a Great Pause, which unfortunately worsened the stress on the global supply chain. In order to avoid this problem, Phuc NGUYEN advised companies to be more diversified in their strategies for the supply chain.
“A lot of materials for production come from China. However, due to the pandemic, companies are looking for other places to source them. They are looking at localization, diversification, and strategies to minimize supply chain risks.”
Besides B2C companies, B2B also plays an important role in the on-demand economy. Digital transformation has businesses integrated with each other, giving a bigger picture of the economy. According to Trung HOANG, the government can use B2B to harmonize supply chain and balance out export/import: “On-demand will only be implemented efficiently with all of these digital transformations and harmony works between all of the large corporations.”
Assessing how ready Vietnam companies are to enter on-demand economy, Cris D. TRAN, Co-founder at FAM Central and Managing Director at VNSIF, thinks that there are two components that on-demand start-ups need to look for: robust business models and practical scalability.
As many brands in Vietnam typically don’t have the in-house capability to manage e-commerce platforms or supply chain networks effectively yet, the speakers noted the importance of partnership with external experts to create robust operations.
The event is available for rewatching on Facebook page of KPMG OnDemand Vietnam.