Written by the Co-founder of Lazada – Christopher Brinkeborn Beselin, the original article states the characteristics of the Vietnam market that new e-commerce players might want to acknowledge.

There appear to be some recurring themes that would continue to make the Vietnamese e-commerce landscape a special place to compete.

Frugality

Conservation seems to be what sets a Vietnamese business owner apart. Vietnamese business owners have an instinct to save costs on everything, every time; examples from the author:

• traveling 2 hours in pouring monsoon rain to find the cheapest shoe repair shop,
• reusing a knock-off printer ink cartridge for the 250th time,
• evading taxes by keeping a double payroll, …

This is why competing against Vietnamese entrepreneurs is so tough; one needs to stay competitive or he would be beaten on cost and price.

Payments

There exists a notion that credit cards are needed for e-commerce to happen, but for low-trust consumer markets like Vietnam, a credit card is a high-trust payment method and most would not want/dare to use them for e-commerce.

Cash-on-delivery (COD), on the other hand, is a low-trust payment method – all levers of the transaction are put in the hands of the consumers. The author, therefore, claims that e-commerce in Vietnam would not have been possible if it wasn’t for COD. To this day, 85-90% of Vietnamese e-commerce transactions are still paid COD.

There are indeed drawbacks for COD:

• How are small recurring payments allowed, the way the SAAS-industry is depending on credit card transactions in developed markets?
• How are small transactions done for digital goods (e.g. tickets, vouchers, online educations)?

Spending power

Vietnam is still both a frontier market and a low-to-mid income country (proved by comparing the GDP/capita of Vietnam with SEA and some developed countries)

A frontier market is a term for a type of developing country’s market economy which is more developed than a least developed country’s, but too small, risky, or illiquid to be generally classified as an emerging market economy.

It is therefore important to sell products with a price point that fits a big enough part of the local population.

• During the early days of rolling out Lazada in Vietnam, the author and his team encountered this issue many times, most solutions to which were to systematically shift down the average price point of the slowing categories.

Alternative forms of competition

In Vietnam, even bigger than the “official competition” is the “gray market”, which encompasses a range of unofficial (and cheaper) products that are both distributed by small street vendors and by more prominent retail names. Companies, therefore, need a clear strategy on how to market their brand and products in a market where the gray market is always able to undercut the prices by 5-25% or more.

As local consumers are gradually becoming more aware of the issues and flaws surrounding gray market goods, the critical mission becomes how to build and position the e-commerce brand so that it can be trusted by the local consumer.

Content source: Christopher Brinkeborn Beselin. (2020) Why is Vietnamese ecommerce so different?. Available at: https://www.linkedin.com/pulse/why-vietnamese-ecommerce-so-different-christopher-brinkeborn-beselin/?trackingId=U9r9fMxRHpJLMZS%2FC1bxSw%3D%3D [Accessed on November 20, 2020]