Lan Anh, a 27-year old working for an insurance company, prefers to shop online than going to store. She orders at least five times a month for clothes, home stuff, and pet needs.
“Even before the pandemic happened, I’ve always favored online shopping for convenience. With the safety protocols being implemented everywhere, ordering online has spared me from crowded shops,” she said. “One little but important detail is, online prices are usually lower than in-store, so I can save a significant amount of money especially when I buy in bulk.” Lan Anh uses both cash and cards as payment methods to Shopee, Tiki, Taoboa, and Coupang.
Vietnam is rising as a fast-growing e-commerce market, marked by strong mobile commerce, increasing foreign investments, a favorable regulatory environment, and enhanced internet access. The country may be less developed than many other e-commerce markets, but it is expanding rapidly, supported by a generation of digital natives starting to earn and spend money.
According to the 2020 E-commerce Payments Trends Report: Vietnam by JPMorgan Chase & Co., the value of Vietnam’s e-commerce market has increased by at least a quarter every year since 2017. Looking ahead, this growth is expected to continue at a compound annual growth rate (CAGR) of 15.1 percent to 2023.
In the same report, Shopee, Lazada, and Tiki were named as top shopping apps by monthly active users. Both Shopee and Lazada are competing for market share across Southeast Asia. In contrast, Western giant Amazon does not have a significant market share.
E-Commerce Ready
In the latest B2C E-commerce Index report released by the United Nations Conference on Trade and Development, Vietnam has jumped three places to 63rd in global e-commerce readiness ranking.
It means with a score of 61.6 points on a scale of 100, Vietnam surpassed Indonesia (83rd), the Philippines (96th), Laos (101st), Cambodia (117th), and Myanmar (130th). The ranking was based on four indicators with a high correlation to online shopping: internet server access; postal service reliability; share of population who use the internet; and share of population aged above 15 who have an account with a financial institution or mobile-money-service provider.
“The COVID-19 pandemic has made it more urgent to ensure the countries trailing behind are able to catch up and strengthen their e-trade readiness,” Shamika N. Sirimanne, director of UNCTAD’s division that prepares the annual index. The index, she said, underscores the need for governments to do more to ensure more people can avail of e-commerce opportunities.
Nearly 70% of Vietnamese people use the internet and 31% of individuals aged 15 and above have bank accounts or mobile bank accounts. In terms of internet server access and postal reliability, Vietnam scored 64 and 83%, respectively.
“Coming from my experience in handling our offices in the Philippines, Malaysia, and Singapore, I can say that the Vietnam market is more open to new opportunities and challenges. With all the young brands now in the e-commerce game, it just keeps getting better and better each year,” Kristine Nguyen, CEO for AAD Awake Asia.
Leading the e-commerce agency focused on enabling brands online, Kristine sees Vietnam in the number 1 or 2 spot in 5 years time. “Last year was tough but most of my clients managed to double or triple their revenues plus considering the advantages that this country has, there’s no way to go but up.”
Manufacturing Recovery
In a year when the rest of the world was in deep recessions, Vietnam has delivered one of the highest growth rates. Thanks to the recovery of manufacturing, Vietnam is likely the top-performing Asian economy in 2020, according to a CNBC report.
Vietnam’s manufacturing sector was widely credited for the economy’s outperformance last year, with production growing on the back of steady export demand. According to economists, that’s a trend that will persist in the coming years.
“Considering that Vietnam has been a major beneficiary of the supply chain diversification trend out of China over the past several years, we see large scope for growth in Vietnamese exports in the years to come,” Fitch Solutions said in a December report.
Vietnam has become the most attractive market due to its geographical proximity to China, fast-growing economy, and investment incentives from the government. In addition, the country offers lower production prices because of modest labor costs and is less prone to import tariffs, and has fewer environmental regulations that are increasing manufacturing costs.
Meanwhile, the US independent management consultancy Asia Perspective recently published a report on the Vietnamese economy, also highlighting the country’s rapid growth because of the recovery of manufacturing. The merchandise export turnover in Q4 increased by 13.3% year on year and amounted to 78.9 billion USD. Imports expanded by 15.7% year on year to 76.4 billion USD. For the full year, exports grew 6.5% and imports gained 3.6% with a trade surplus of 19.1 billion USD – the highest value recorded since 2016.
As the spread of COVID-19 was effectively controlled in Vietnam, and the Free Trade Agreement with the European Union came into effect, the nation’s manufacturing expanded by 5.82% in 2020 which led the way for the country’s economic growth. Overall, the industrial sector’s added value grew 4.8% from the previous year, contributing to the country’s GDP growth of 2.91% in the year.
The study concluded that the investment environment in Vietnam seems promising with few environmental regulations and a fast-growing domestic market, that will continue to attract more foreign companies.