Making news

Bloomberg: Vietnam’s e-commerce growth potential alluring

Though Euromonitor International estimates e-commerce accounted for just 3 percent of Vietnam’s retail market last year, the smallest among Southeast Asia’s major economies, the potential for growth is alluring, the newswire said on June 2.

According to a study by Google, Vietnam’s digital economy is forecast to grow to 52 billion USD by 2025, an annual 29 percent increase from 2020, it said.

Startups backed by Warburg Pincus LLC and Inc., and regional players including Singapore’s Sea Ltd.’s Shopee and even Inc. are also targeting the country’s growing middle class. Between 2016 and the first half of 2020, investors funneled 1.9 billion USD into Vietnam’s online sector, a study by Google, Temasek and Bain showed.

“Vietnam is at the beginning of becoming a digitalised society with a young population that loves technology,” said Ralf Matthaes, Managing Director of Ho Chi Minh City-based Infocus Mekong Research. “So all these companies are tripping over themselves to offer these services.”

The Vietnamese government targeted that online shopping will account for 10 percent of Vietnam’s retail sales, and as much as 50 percent in Hanoi and Ho Chi Minh City by 2025. To create a more transparent modern economy, authorities want to increase cashless payment for public services and improve the regulatory framework for e-payment.

A consortium led by Alibaba Group Holding Ltd. and Baring Private Equity Asia is investing 400 million USD for a 5.5 percent stake in Vietnamese conglomerate Masan Group Corp.’s retail arm. As part of the deal announced May 18, Masan will team up with Lazada, Alibaba’s Southeast Asia e-commerce unit. “The combination of Alibaba’s online retail expertise, Lazada’s e-commerce platform in Vietnam, and Masan’s leading offline network will be a strong catalyst to modernise Vietnam’s retail landscape,” Kenny Ho, Alibaba’s head of investment for Southeast Asia, said in a statement.

M-Service JSC, a Vietnamese startup that operates the MoMo payment app, in January raised more than 100 million USD from a group of investors including Warburg Pincus.

For the first time in their shopping lives, Vietnamese are being wooed with customer-first retail common in developed economies as dozens of e-commerce companies build loyalty among the nation’s growing middle class.

Matthaes said the pandemic gave digital retail a boost with 30 percent more Vietnamese buying everything from food to electronics online last year.

Meanwhile, Managing Director of Warburg Pincus in Singapore Jeffrey Perlman said Vietnam’s retail landscape is shifting faster than mature markets did.  Its move to modern retail skipped catalog shopping and stand-alone department stores as malls began sprouting largely over the past decade.

Tiki is the nation’s largest homegrown e-commerce site among dozens of local online shopping platforms, including some operated by retailers that have set up their own websites.

According to Crunchbase, investors including Sumitomo Corp. and have backed the startup with 192.5 million USD.

Henry Low, a former Amazon and Coupang Corp. executive, expressed his hope that there will be more funding rounds and plan for an eventual initial public offering.

With about two million orders a month, Tiki is deploying artificial intelligence and robots capable of moving 800kg of products to speed things along./.