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E-commerce sees rapid growth

Saturday, August 16, 2014
The Ministry of Industry and Trade's Viet Nam E-Commerce and Information Technology Agency (VECITA), has said that total sales for the e-commerce sector have soared to US$2.2 billion in 2013, a growth rate of 300 per cent compared to that in 2012.

In its E-commerce Report 2013, VECITA pointed out that 36 per cent of the country's population were internet users, with the number expected to reach up to 45 per cent by 2015.

VECITA forecasts that sales could reach $4 billion by 2015, an equivalent increase of $30 per person above the current spend of $120.

A screen shot of an e-commerce website. Total sales of the e-commerce sector has been growing rapidly

The report also shed light on the preferences of online consumers in expediting payments. Results showed that 74 per cent of survey respondents said they would pay using cash, while 41 per cent said they would use wire transfers. About 8 per cent said they would pay via e-commerce websites.

Those who preferred expediting payments on e-commerce websites accounted for 61 per cent of online transactions made via the seller's sites. Group-purchase sites followed as the next most trustworthy mode of payment, with 51 per cent of deals completed via this method.

Social networks and e-commerce trading floors followed, accounting for 45 and 19 per cent of payments made by respondents.

In relation to the usage patterns of internet users, a majority of 87 per cent said they used the internet for information updates, while 20 per cent used it for personal shopping.

But while the report showed that only 6 per cent of transactions were conducted using mobile phones, VECITA highlighted that the market is believed to have significant potential, according to e-commerce companies.

Findings showed significant opportunities for the development of e-commerce in future, with 92 per cent of those surveyed saying they were internet users. Mobile phones and laptops also remained the primary means of internet access in major cities.

Chief executive officer of M-Pay Corporation, Nguyen Quang Minh said that Viet Nam's population of 90 million would be an attractive market for e-commerce businesses.

Minh also said that e-commerce was an option for the businesses to expand their market shares and reduce costs.

Convenience

There have been a number of factors driving the success of mobile e-commerce, according to the report.

Deputy director of Ngan Luong Company, Do Thanh Ha said that a secure online port offered customers convenience in allowing them to use any type of card to carry out payments.

Internet and mobile infrastructure were also strong enough to perform the transactions, making it easier for customers to complete their transactions online, said Ha.

Online transactions also helped customers take advantage of online promotions, added director of Sendo Online Trading Company, Tran Hai Linh.

Linh said that e-commerce would continue to develop and expand in Viet Nam within the next three to five years.

But while the sector has seen significant growth, consumers aren't completely convinced of the benefits of using mobile e-commerce sites, with the platform presenting a number of risks and problems for users.

Only a small number of payment ports and e-carts have been granted official operation licences, according to Ngan Luong Company.

Most Vietnamese businesses had also developed their websites as online markets, to connect buyers and sellers, with the site acting as a middle man, said CEO of Lazada Vietnam, Christopher Beselin on VECITA website.

This meant that the business was less accountable in resolving complaints or disputes over product quality, he said.

This was the main reason why online sellers had not gained credibility from consumers and customers, according to the CEO.

About 59 per cent of those surveyed thought it was difficult to assess the quality of online products, while 41 per cent considered sellers untrustworthy.

Meanwhile, 38 per cent of those surveyed considered information about the products insufficient, while 37 per cent had not used any credit cards or other payment cards.

Additionally, VECITA's report showed that only 5 per cent of online buyers were satisfied with the overall quality of e-commerce sites.

Insufficient network coverage was also believed to have left the market significantly untapped in both major cities and rural areas, while local e-commerce operators are expected to encounter significant obstacles in attracting investment.

New trends

In spite of these challenges, growth in mobile e-commerce is expected to continue and lead to new trends in the business sector.

Mergers and Acquisitions (M&A) are one measure in which VECITA expects e-commerce operators to develop their brands, improve market shares and avoid long-term losses.

Mergers could also address disadvantages faced by local firms in attracting long-term capital to fund leases and staff hiring to make their sites more professional, transparent and reliable to consumers.

It would also help companies speed up growth and utilize customer databases owned by the merged company, Tran Hai Linh said about the purchase of 123mua.vn.

Companies could either leave the market or cooperate with others to improve market competitiveness against the bigger players, said CEO of Peacesoft Group, Nguyen Hoa Binh.

"A small company that has advantages in technology, products and services but lacks capital resources will be capable of approaching the market and supported by the parent company to have a better position in the market," M-Pay Company said.

Others believe that the inevitable shift in Vietnamese consumption towards e-commerce will generate improvements to electronic payment platforms. This is also expected with the development of online-payable cards, including credit cards, or debit cards that can be used online.

In the meantime, industry experts have said that the Government has a role to play in ensuring the integrity of mobile e-commerce providers.

"The Government needs to tighten up the management of operation licences and only grant them to the companies that are competent, accountable and experienced in the field," said Ngan Luong Company's Do Thanh Ha
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