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Pumping money into e-commerce: golden opportunity or fierce battle?

10:22 | 14/06/2018

VCN- E-commerce is always considered as an area with great potentiality for development in Vietnam. Therefore, "big enterprises" do not hesitate to pour money into investment, but this will be the opportunity or challenge to develop, which depends on the perception and efforts of each enterprise.

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E-commerce in Vietnam is receiving great investment from external sources. Photo: ST.

Adding multiple brands

With the advantage of young population, high percentage of people using the Internet and increasing online shopping rate, e-commerce businesses in Vietnam have many opportunities to develop in terms of quantity, form and service. According to statistics, the size of the online retail market in the last five years has seen a steady growth rate, an upward trend of more than 20% per year at a value of $US 5 billion by 2020. Therefore, besides the self-development of domestic enterprises, large capital sources at home and abroad which have poured into this field in Vietnam also increased.

This field is currently attracting a large amount of foreign capital from many countries, especially in Asia such as China, Thailand, Japan and Singapore. In 2017, there were more than 20 e-commerce deals with a total value of $US 83 million. The most notable recent deal was that the two Chinese e-commerce corporations JD.com and STC Investment poured money into Tiki. Under the agreement, the cooperation will open a wide range of cross-border trade, not just online sales but also transportation, logistics, technology and finance.

Earlier, in mid-2016, the busiest deal was that Alibaba Group spent about $US 1 billion to acquire Lazada - the largest online retailer in Southeast Asia, standing in top leading e-commerce companies in Vietnam. By the beginning of 2018, Alibaba continued to add about $US 2 billion to Lazada. In addition, the market also included the cooperation between electronic market (chodientu.vn) with Saeronnet and CJ Korea Express (under CJ Korea).

Moreover, in the leading e-commerce companies in Vietnam, except for some strong brand names belonging to big corporations like Adayroi.com of Vingroup, Mobile World, Green electronics, the remaining brands have sold shares to foreign investors. For example, Nguyen Kim sold shares to Central Group (Thailand), Nhommua.com sold shares to Scroll (Japan) and Japanese enterprises owned 33% of the shares of Sendo. With domestic capital, Mekong Capital has just announced the Mekong Enterprise Fund III (MEF III) to complete its investment in King-Mattress Joint Stock Company in the area of cushioning and sleep solutions through direct sales and online sales.

Pressure on changes

These transactions show that investment funds as well as foreign companies have chosen to buy shares of Vietnamese enterprises to quickly consolidate their position without having to undergo brand building in the market.

Sharing the opportunity of businesses when receiving large capital, Mr. Hoang Tuan Anh, Director General of King-Mattress Joint Stock Company, Mekong Capital is an unlisted equity investor with long-term investment experience in retail chains such as Thegioididong and Phu Nhuan Jewelry. Therefore, with this strategic cooperation, enterprises have been approaching the investment value model as well as practical activities in the retail industry. Accordingly, this investment will help businesses merge the two brands Dem.vn and Vuanem.vn into a single brand as King Mattress, building a completely new e-commerce system, expanding to 300 stores across the country in 2022.

However, it is clear that the opportunities will be accompanied by challenges, when the market goes up, the competitive pressure will be clearer, forcing businesses to invest or not to innovate. Accordingly, domestic companies such as Thegioididong or FPT Shop are seeking to increase the market shares of online sales by improving the quality of delivery services, installation and warranty thanks to the advantage of high-volume shop system. Meanwhile, the investment companies such as Lazada, Tiki or Shopee have chosen to compete for price as well as large investment for marketing. Therefore, the most beneficiaries are consumers when receiving better service with cheaper cost. As a result, modern technology should make shopping become easier, boosting the growth of e-commerce.

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In general, Vietnam's e-commerce market has many opportunities to develop, but the level of competition will be increasingly fierce. Therefore, besides the development efforts of enterprises, it is necessary to take the initiative to remove the remaining barriers of this field such as consumer habits, low technology, lack of legal basis to completely constitute the development of e-commerce business.

By Huong Diu/ Hoang Anh