Vietnam's Ecommerce Industry Begins Digital Ascent
When looking at current data trends of smartphones, Facebook, online user penetration and the expanding frontiers of an Internet-fueled middle class, it comes of no surprise that Vietnam’s ecommerce industry has been let out of its proverbial cage, and is certainly on the loose.
The Vietnam Ecommerce Association reported estimates of expected annual growth rates to reach 16.5% from 2017-2021, resulting in a market volume of USD $4.024 million. So, if you crush the numbers, that means an increase of 150% throughout the next five foreseeable years. The numbers are there and they are telling everyone the same thing, the ecommerce industry has arrived and it’s here to stay.
Ecommerce, Facebook & Smartphones
Much of the industries’ fruition appears to be directly correlated to a noteable swell in the amount of residents owning smartphones and who actively download apps, particularly ones like Facebook. As of 2017, Vietnam had recorded 31.66 million Facebook users and the figure is set to hit 40 million by 2022.
As the country boasts a population of nearly 90 million people, nearly ⅓ of its population is already actively engaged in numerous social media apps, many of which hold thousands of friends on their expansive networks. In regards to ecommerce, Facebook has gained sizeable momentum and has become a widespread medium for advertising and accumulating revenue for local businesses and e-tailers. In fact, 2016 marked the first time in history that digital marketing surpassed its printed counterpart on the global front.
As smartphones have become widely accessible, affordable and available to purchase via installment plans, reports show signs that usage could rise by as much as 40% by 2020, which means even more business will be conducted through Vietnam’s ecommerce driven markets and apps.
A Young, Budding Economic Front
It’s a known fact that Vietnam is currently one of the fastest growing economies in the world. The majority of its industries are currently under rapid development as the GDP rates have been above 5% annum over the last 15 years. This rate of growth is suggested to maintain similar, if not further upward patterns into the future, and we can be certain that with an average national age standing at only 30.8 years old, Vietnam’s young tech-savvy generation will not turn their back on the convenience of ecommerce.
The Expanding Middle Class
The growing middle class is another important factor to consider when trying to understand which trends are catapulting Vietnam’s ecommerce scene. Last year saw an unprecedented rise in consumer expenditure which skyrocketed to USD $153 billion. Personal disposable income also saw a spike of 11%, and retail sales in 2016 cashed out at a whopping USD $96.9 billion. To make a long story short, there’s an inflating amount of young people with money to burn, and let’s face it, the data is saying we love our technology.
Cash Vs. Digital Payment
One aspect of Vietnam’s digital commerce industry that faces mild concern is with online payment. Even though customers are inarguably buying more products online, cash is still king, accounting for 90% of all transactions made. Credit card issuance throws up an additional obstacle as only ⅓ of the population have bank accounts, which makes it impossible to get a debit or credit card for online payments.
We should make mention, however, that from 2005-2015 there was a 36,000% jump in credit issued. So, although most people don’t have a bank account or card, we must look at the data patterns over the past decade to understand the full potential for growth is truly there.
In total, only 15% of ecommerce shoppers reported making payment digitally in 2016 and large scale distrust of online security remains a dominant disposition. For the time being, most consumers are paying cash upon delivery for products bought online.
Tax Regulations for the Industry
Since the vast majority of revenue from most online businesses is acquired by cash transactions, it makes it difficult for regulatory government agencies to set up a suitable system to tax and track online purchases in Vietnam. In 2016, a staggering 97% of registered websites were used for ecommerce, and the amount of collected taxes was not proportional to the profits made by any means.
Drafting an effective solution to this problem is well underway, and authorities have already begun the process of implementing a fair regulatory system for digital companies. Recently, Japan has initiated a successful new framework for ecommerce taxation and Vietnam is implementing aspects of that plan that will complement their own.
Ecommerce Sites Worth Checking Out
If you’ve never done much shopping online before but are ready to give it a go, worry not because we’re going to give you some ideas on where to start.