Thursday, August 30, 2012

A sleeping e-commerce giant




Vietnam is one of Asia’s sleeping giants in terms of e-commerce with a young population eager to buy more online. But low trust in online shopping and e-payment remains the main challenge e-commerce can really take off in the country.





Other payment systems besides credit cards are important in developing economies. Thai Smart Card offers a Smart Purse Online for transactions with many local business allies.


The Vietnamese government’s efforts to promote internet use and e-commerce over the last decade have helped popularise the business. Buying and selling through e-commerce websites has become popular for goods and services such as airline tickets, tours, hotel rooms, electronics, mobile phones, computers, books, perfume and flowers.


Payment and shipping methods are also flexible to meet the requirements of buyers, many of whom still do not have credit cards, from online payments to bank transfers or cash-on-delivery.


In Vietnam, one-third of population now uses the internet, and some 60% go online to research information on products before making a purchase. Internet penetration in the country has recorded the most rapid growth in Asia, with an average annual rate of 20% from 2000 to 2010.


According to a survey of 3,400 businesses operating in different fields nationwide by the Ministry of Industry and Trade, 60% of companies have applied B2B (business-to-business)


e-commerce, 95% of which received orders online. One-third of the companies said e-commerce accounted for 15% or more of their total revenues.


E-commerce transactions in Vietnam now account for 2.5% of it's GDP, or nearly US$2 billion. It's predicted to reach $6 billion by 2015.


Despite its huge potential, e-commerce growth in Vietnam is held back by a low-trust environment.





The other factors that constrained e-commerce a few years ago, including ICT infrastructure and the legal framework, have almost all been tackled, according to Nguyen Thanh Hung, deputy chairman of the Vietnam E-commerce Association.


“Current barriers now are buyers’ low trust in online shopping, customer protection and information security, and dispute settlement in online transactions,” Hung said.


Though payments can now be made easily online through cooperation between e-commerce websites and banks, they still account for a very small proportion of payments in Vietnam.


Though improvements are needed in some areas, many foreign companies are looking at business opportunities in the emerging industry, given Vietnam’s population of nearly 90 million and growing middle class. Big global players including Google, Alibaba, Rakuten, eBay and Amazon are rapidly building their presence.


In June 2012, Google became a member of Vietnam E-commerce Association, expecting to build online business with other members. Google has expressed its desire to earn $30 million a year from the Vietnamese market, targeting small and medium-sized companies.


Alibaba and eBay have also chosen official representatives in the country. While eBay bought 20% of Peacesoft Solution, the owner of the local site chodientu.com, Alibaba chose Investment and Technology JSC as its agent in Vietnam. Amazon and Rakuten have also approached local e-commerce providers for potential stake purchases or partnerships.


Foreign investors are free to form their own companies or they can buy into domestic firms to enter the market, said Tran Huu Linh, director of the Department of E-commerce and Information Technology at the Ministry of Industry and Trade.


Most Vietnamese e-commerce providers have been leaning on foreign investment, including the country’s two leading e-commerce sites, vatgia.com and chodientu.com. Heavy demand for venture capital also has led to the active participation of international financial players including IDG Ventures, DFJ Vina Capital, Softbank China and India, and CyberAgent.


Nguyen Hong Truong, director of business and technology development with IDG Venture Vietnam, said the country was an attractive target, having been ranked among the five most attractive online retail markets in the world in recent years.


“Therefore, even though the infrastructure, conditions of payment, delivery, quality of goods and transaction security are still underdeveloped, investment in this untapped market is a bold step for ambitious organisations,” Truong said.


Nguyen Ngoc Diep, director of Vat Gia Vietnam JSC, said that at the entry-level stage, development of an e-commerce website must attract foreign backers for financial support.


“Each site would need around $2-3 million to successfully pass the startup stage. Without funding from a foreign partner, Vatgia would not have been able to weather that stage,” Mr Diep admitted.


Vat Gia invested around $3 million from 2007-10, with most of this funding from IDG Ventures. Now the site is the top player in Vietnam with more than 1 million hits per day and transactions valued at $15 million a month, making up 40% of the market share.


Mr Diep said that if his companies could not raise more capital from domestic market, they might think about cooperation with foreign partners to keep the business strong and growing.


http://www.bangkokpost.com/business/telecom/306226/a-sleeping-e-commerce-giant

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