FUTURE BUSINESS ANALYST 2023

ROUND 1

ANALYSIS OF
VIETNAM’S E-COMMERCE INDUSTRY

Number of pages: 10
Word count: 1293
Chosen industry: E-commerce

Just Chill
Pham Ngoc Hieu | Nguyen Minh Anh | Dang Le Anh Son | Cong Minh Tu
TABLE OF CONTENTS

1. EXECUTIVE SUMMARY..................................................................................................2

2. COMPREHENSION............................................................................................................3

3. ANALYSIS & APPLICATION..........................................................................................4

3.1. PESTEL analysis...........................................................................................................4

3.2. Key trends......................................................................................................................4

3.3. Emerging drivers for businesses..................................................................................6

3.4. Opportunities and challenges for businesses..............................................................7

4. REFERENCES.....................................................................................................................9

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1. EXECUTIVE SUMMARY

Introduction:

This research provides an overview of the comprehensive analysis of the e-commerce

industry in Vietnam, highlighting key insights and trends observed in the market.

Approach:

This analysis is based on a combination of reliable data sources, including reports from
reputable organizations, government statistics, and industry research. Analysis is carried out
to find out 4 key factors:

 Vietnam’s macro-environment for e-commerce

 Key trends
 Drivers for businesses
 Opportunities and challenges for businesses

Conclusion:

The Vietnamese e-commerce industry is poised for continued growth and presents substantial
opportunities for businesses. By embracing digital payments, diversifying sales channels,
prioritizing mobile commerce, and ensuring product quality and trustworthiness, enterprises
can position themselves for success in this dynamic market.

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2. COMPREHENSION
 Growth: By 2023, the e-commerce industry in Vietnam is expected to maintain a
growth rate exceeding 25%, with a total market size surpassing 20 billion USD.
Moreover, it is anticipated that Vietnam will emerge as the fastest-growing e-
commerce market in Southeast Asia, with a projected Gross Merchandise Value
(GMV) of 56 billion USD by 2026.
 Retail E-commerce: E-commerce retail transactions made up 8.5% of total retail
sales in 2022, with online retail sales revenue rising from 6.7% in 2021 to 7.2%.
However, when compared to global averages these percentages are relatively low, but
they also show significant growth potential.
 B2B E-commerce: B2B e-commerce, particularly for FMCG products through apps
like Vinshop, Kilo, Loship, and Telio, is on the rise in Vietnam. Despite its 2020
valuation at under $150 million, it's transforming urban distribution networks,
especially in non-organized retail areas.
 Sales Channels: Around 44% of businesses have websites, but social media
platforms and e-commerce marketplaces are considered more effective for most
businesses due to limited website resources and reach.
 Payment Methods: Cash payments and Internet banking transfers remain the most
common payment methods in e-commerce, with 89% of businesses using both in
2022, while other payment methods have lower adoption rates.

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3. ANALYSIS & APPLICATION
3.1. PESTEL analysis
Political:
 E-commerce takes advantage of the sustainable political situation.
 Vietnam has signed many international trade agreements, which benefits the growth
of e-commerce between Vietnam and other countries.
Economic:
 Average monthly income per capita increased from 3.1 to 4.67 million during 2016-
2022 period. It leads to a higher demand for purchasing and consumption.
Social:
 3 main social factors in e-commerce are: Transparency; Credibility; Privacy &
Security.
 Social culture in Vietnam: Some traditional customers prefer offline buying because
they want to check the product’s quality before purchasing.
Environment:
 Environmental factor is not a big concern for e-commerce because almost trading
activities occur online.
 However, some activities may have an impact on the environment such as logistics
and packaging.
Technology:
 68.17 million Vietnamese people are using the Internet, spending nearly 7 hours on
average.
 Moreover, the technology advancements also lead to the improvement in both buyers
and sellers’ experience.
Legal:
 E-commerce laws & regulations in Vietnam have limitations, especially related to tax.
 Some businesses take advantage of the loophole in the legislation to avoid taxes.

3.2. Key trends

3.2.1. Rise of Digital Payments Across Vietnam

The growth of Vietnam's digital payments sector is fueled by the expansion of e-

commerce as an alternative to traditional brick-and-mortar sales. Increased desire for contact-

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free and cashless transactions has been facilitated by improved acceptance of digital financial
technology (fintech) and the COVID-19 pandemic. Cash payments account for a significant
share of all e-commerce transactions in Vietnam. Still, this figure is anticipated to decline by
2025 with increasing interest in digital payment modes.

The rapid expansion of Vietnam's 4G infrastructure has reduced mobile internet costs.
The country's mobile phone base has grown to over 100 million registered subscriptions
because of affordable mobile internet access. One of the pillars for the quick adoption of e-
commerce and digital payments in Vietnam has been many internet users and cheap internet
connections.

According to a report on e-commerce done by VECOM in 2022, 89% of respondents

in Vietnam paid for their online purchases with cash on delivery or bank transfer. As reported
by 32% of the respondents, mobile wallets were the second most popular payment option for
online shopping.

Source: EBI Report 2023

3.2.2. Rise in Regional E-commerce Platforms

Vietnam's ability to foster e-commerce is demonstrated by the success of various

Vietnamese-origin e-commerce platforms, such as Tiki, Sendo, and Thegioididong. These
platforms have grown into big e-commerce powerhouses due to foreign investments.

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 Post is a crucial piece of infrastructure that is strongly related to e-commerce. Postal
services for e-commerce are gradually replacing traditional delivery services due to the
phenomenal growth of e-commerce. Foreign exchanges dominate the industry, placing
significant risks and challenges on domestic postal and delivery enterprises.

The volume of visitors demonstrates the dominance of foreign e-commerce platforms

in the market. According to February 2022, the Ministry of Information and Communication
data shows 78.5 million users on Shopee, 14.8 million on Lazada, 14.1 million on Tiki, and
12.7 users on Good Market (Vietnam).

Source: EBI Report 2023

3.3. Emerging drivers for businesses

We notice 3 emerging growth drivers for businesses in the context of Vietnam e-
commerce industry:
● UGC (User-Generated Content)
UGC is one of the dominant trends in Vietnam as well as the Asia region, linked
directly with the pivot of social media. This trend embraces the fact that customers trust real
shoppers’ reviews rather than brands’ content, which fits perfectly in the context of Vietnam
since 66% of Vietnamese customers want brand’s transparency.
● Shoppertainment

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 This reflects the way brands entertain consumers while promoting their products. In
addition, the prevalence of short-form videos ‘reels’ on social media platforms like TikTok,
Instagram reels is a strong catalyst for this trend. Shoppertainment section value of e-
commerce in Vietnam is projected to reach $8bn in 2025.
● Social Commerce
Social commerce refers to the method through which companies advertise and sell
goods and services online using social networking sites. Vietnam led Southeast Asian
countries with social commerce accounting for most of its online retail economy in 2020.

3.4. Opportunities and challenges for businesses

Starting to accelerate from the mid-2010s, it was not until the COVID-19 pandemic that
Vietnam's e-commerce industry hit the milestone. E-commerce has created many
opportunities but also created challenges for enterprises.

3.4.1. Opportunities
● Expanding market

Enterprises are able to expand markets easier and simpler than before thanks to e-
commerce. With smaller investment costs than traditional trade, companies can expand their
markets, search for and reach customers and partners both locally and internationally.
Expanding the network of suppliers and customers will enable organizations or businesses to
buy at a more affordable price and sell more products.

● Logistics infrastructure has been improved, facilitating e-commerce transactions

nationwide

The quality of logistics services has a significant impact on the cost of e-commerce
transactions, transaction speed and the safety of goods. Customers' expectations about
delivery activities have pushed businesses to improve technology in the logistics field,
thereby ensuring that goods are delivered quickly and economically.

3.4.2. Challenges
● Barriers to entry

With market share mainly in the hands of the big 4 Shopee, Lazada, Tiki, and Sendo
and customers' shopping habits predominating on these channels, it is very difficult for
startups to penetrate the B2C market with the traditional e-commerce model. This forces
startups to look for opportunities in niche markets where customer needs are still unmet. At

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the same time, these companies must have innovative business models and adapt quickly to
survive in the market.

● Lack of infrastructure

Currently, the logistics infrastructure is not complete, the legal framework is still
lacking, which has not created conditions for some types of startups to develop. According to
Nextrans, the closure of newly established businesses not only shows that their business
models are not suitable, but is also a signal for the State to focus on improving infrastructure
and other growth drivers.

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4. REFERENCES
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Available at: https://www.wto.org/english/tratop_e/covid19_e/ecommerce_report_e.pdf
(Accessed: 05 September 2023).

2. (2022) Vietnam - trade agreements, International Trade Administration | Trade.gov.

Available at: https://www.trade.gov/country-commercial-guides/vietnam-trade-
agreements#:~:text=Together%20with%20the%20ASEAN%20countries%2C%20Vietnam
%20has%20also,signed%20a%20free%20trade%20agreement%20with%20the%20EU.
(Accessed: 05 September 2023).

3. Nguyen, M.-N. (2023) Vietnam: Average monthly income per capita 2022, Statista.
Available at: https://www.statista.com/statistics/1021888/vietnam-average-monthly-income-
per-capita/ (Accessed: 05 September 2023).

4. Pratap, A. (2017) Pestel analysis of the e-commerce industry - CH blog, CH Blog -.

Available at: https://cheshnotes.com/pestel-analysis-e-commerce-industry/#:~:text=A
%20PESTEL%20ANALYSIS%20OF%20THE%20E-COMMERCE%20INDUSTRY
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5. Phan, S.-T. (2021) The effect of PESTLE factors on development of e-commerce, Contents
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6. (2023) Vietnam’s e-commerce industry: Opportunities and Challenges in 2023,

VietnamCredit. Available at: https://vietnamcredit.com.vn/news/vietnams-e-commerce-
industry-opportunities-and-challenges-in-2023_14942 (Accessed: 05 September 2023).

7. Duc, T. (2023) Vietnam e-commerce can reach $32 bln, shoppertainment $8 bln in 2025,
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8. (2022) Industry report: The e-commerce pivot in Vietnam. - acclime Vietnam. Available at:
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%20report.pdf (Accessed: 05 September 2023).

9. Diep, J. (2023) The 10 biggest ecommerce trends set to dominate in 2023, Secomm.
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10. Huynh, T. (2022) The state of Social Commerce in Vietnam, Decision Lab - Agile Market
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11. Nguyen, T. (2022) How Vietnam’s social commerce industry is powering e-commerce,
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12. (2021) 47 số liệu về user-generated content (UGC) phản ánh xu hướng Digital Marketing
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15. (2022) Overview of Vietnam’s B2B e-commerce market, Federation of Business

Information Service. Available at: https://www.febis.org/2022/05/03/overview-of-vietnam-s-
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