Vietnam is witnessing an ecommerce boom, but the logistics industry needs to gear up for delivery on-demand
Vietnam can be truly called a land of opportunity for domestic and foreign e-commerce companies. There are currently 35.4 million e-commerce users in Vietnam, with an additional 6.6 million users to be shopping online by 2021. These 42 million e-commerce users will represent 58 per cent of the total population. That’s why there is no wonder that throughout the last 5 years Vietnam has been showing a constant rise in percentage of online shopping transactions. The most popular products sold online included clothing, footwear and domestic (59 per cent), electronic devices (47 per cent), and household appliances (47 per cent), among others, while payment and delivery methods have been used flexibly by enterprises.
Moreover, the government has stepped in to try and usher in a new era of commerce. Vietnam’s legal framework and policies, especially Decree No.52 on e-commerce, have played a key role in creating favourable conditions for high growth rate of the retail e-commerce market. The decree aims to ensure fairness between e-commerce and traditional commerce, of which enterprises operating in e-commerce must comply with laws and regulations in equal to that of traditional one.
With an explosive 33 per cent compounded annual growth rate over the past two years, Vietnam ranks high among the fastest-growing e-commerce markets in the Southeast Asia region.
Frost & Sullivan has forecast the Vietnam E-Commerce market to reach a value of $3.7 billion by 2030.
The rise in volume of goods traded through online channels increases demand for swift transport and logistics, especially delivery services. The scale of the e-commerce market in 2017 had reached $6.2 billion, up 24 per cent, the number of orders through fast-delivery companies is expected to grow by an average of 45 per cent in 2015 – 2020 and could reach 530 million orders by 2020.
Notably, many retail businesses such as Vincommerce, Mobile World, FPT, Lotte, and Aeon are aiming to develop e-commerce, or the fact that the huge e-commerce companies such as Alibaba and Amazon joined Vietnam has made the logistics market more vibrant, accompanied by the need for technological investment and thoroughness in transport and logistics services.
But the logistics industry in Vietnam needs to catch-up drastically. Most of Vietnam’s logistics enterprises are small and medium in terms of capital, labour and technology. Notably, the financial potential of Vietnamese logistics enterprises is modest (80 per cent of established enterprises have a legal capital of VND1.5- 2 billion). Besides capital problems, they are inexperienced and have limited competitiveness, so they have not had the opportunity to reach the market with great demand; and they lack the comprehensive links between businesses, and between different stages of logistics activities.
Human resources are also a hindrance, because most of the current logistics personnel in Vietnam have been trained informally and unmethodically from different sources. Therefore, the capacity of Vietnamese logistics enterprises is limited because the quality of their staff does not meet the demand. Among domestic businesses, up to 93-95 per cent of workers are not properly trained; they are mainly doing services in small supply chains such as forwarding, warehousing, and bill of lading processing.
Technology is a key competitive advantage in the potential and competitive logistics market. In Vietnam, one of the causes of the unprofessional logistics services provided by many enterprises is the poor application of information technology. There are not many businesses that can meet the technology application in the fourth industrial revolution with large quantities of goods in a short time to ensure the safety and quality of goods.
