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What is e-commerce going to look like in Vietnam in 2014?

e-commerce-vietnam

December is Vietnam’s month to cut e-commerce losses and look forward to a new year of big spending and e-commerce dreams. If you’ve been following Vietnam’s e-commerce trends, you’ll likely remember that this time last year, Vietnam’s ecosystem erupted with controversy over Nhom Mua’s management issues and alleged embezzlement. According to Tom Tran, former CEO of Nhom Mua before the scandal, at the height of Nhom Mua’s dominance, it was raking in up to $3 million in revenue per month. In other words, Vietnam’s e-commerce universe has a ton of potential.

Thus, it’s no wonder that folks like Project Lana, Rocket Internet, Tiki.vn, VNG, Hotdeal.vn, and a myriad of other specialist e-store players are now attacking the market. 2013 also saw the rapid growth of startups like Giao Hang Nhanh and Zship, logistics e-commerce services that could build businesses on top of the new e-shopping trend. And now, there’s even folks like Suma.vn and Disieuthi.vn making forays into grocery e-commerce. 2013 was a year for optimism and experimentation in e-commerce. But I don’t think 2014 will be like that. This December has brought on too much bad news for optimism. 2014 will be a year for realism and calculated optimism.

5 reasons why e-commerce is going to be way more realistic in 2014

  1. Rumors of 123.vn shutting down - There have been rumors across the ecosystem that lay-offs happened at VNG last week. The gaming company started its entry into the business-to-consumer (B2C) market battle in 2012 and if the rumors are true, has finally merged its B2C e-commerce staff with 123mua, its consumer-to-consumer (C2C) marketplace site. What does this tell us? VNG is unable to make a B2C model work. Even with all of its success with Zalo, its WeChat-like messaging app, and its backbone in gaming distribution, it has a hard time transitioning into businesses clearly outside of its DNA as a PC-era web portal. This tech giant can’t make e-commerce work, despite its massive reach.

  2. Project Lana “refocusing” - Another significant e-commerce company in 2013 was Project Lana. This very ambitious project attempted to cater exclusively to female e-shoppers to turn it into an e-commerce blitzkrieg. The project had over 100 people on board, working on several specialist online stores. But now that it is slowing diverting resources away from several projects – and that tells us a few things about the industry. Being too ambitious in the e-commerce market is unsustainable for a long-term strategy without oodles of funding like Rocket Internet. But it also underlines something else: sometimes certain verticals just don’t work even in almost perfect contexts. Project Lana attempted to sell fashion, beauty, and lingerie products to its existing female user-base from its popular web forums. The users didn’t want it. Babyware and baby-care items turned out to be the only surviving vertical. Next year, I doubt we’ll see successful projects that are so ambitious and diverse in scope. E-commerce sites will need hunker down and focus to win.

  3. CungMua and NhomMua merging - Vietnam’s number three and number four daily deals sites merged last week. That means the two market leaders, Hotdeal.vn and MuaChung.vn will be facing stronger competition in 2014. More daily deals consolidation is a good thing for the market. Vietnam’s e-commerce market is ridiculously fragmented with at least 30 e-commerce competitors battling it out. But the CungMua-NhomMua merger also foreshadows more such mergers in the future. Sites are bound to fail, and looking closely at the strategies of the successes and failures of the major players tells us a lot. More on the daily deals sites below.

  4. Rakuten entering the market - Rakuten, Japan’s massive e-commerce platform, is entering the Vietnamese market. It’s not clear yet how this will go since Rakuten has struggled in Indonesia but it’s a clear and present danger to the merchant marketplace startups in the market. That includes Vat Gia, 5giay, Chotot, Lamido, and others.

  5. Lazada receiving $250 million in funding - I’ll say it again, general e-commerce is not for the faint of heart. That’s because it involves huge logistic costs, setting up good customer service, lots of human resources, training, and more. But the single biggest thing that will scare you away from general e-commerce, even if you’re a big guy like VNG, is Rocket Internet’s Lazada. It just got an even bigger war-chest to battle in the general e-commerce market entering 2014. Even if you can rustle up the perfect team and services, there is no way you’re going to outspend these guys.

5 reasons e-commerce is going to be cautiously optimistic in 2014

  1. CungMua and NhomMua merging - The fact that these two daily deals sites are merging may indicate further mergers in the future. It’s market consolidation. CungMua and NhomMua both are having a hard time beating Hotdeal.vn and their last ditch move is to merge under one flag. Are we going to see more mergers like this in other verticals? For example, baby goods are an increasingly vibrant vertical in Vietnam with at least four major players. Someone is going to have to win out in the end.

  2. Daily deals sites are getting specialist - A trend that we’re seeing amongst daily deals sites is they’re not just daily deals sites anymore. Unlike in America, where Amazon dominates and Groupon absorbs a niche that Amazon would be reluctant to get into, daily deals sites in Vietnam have taken a unique blend. Over the past three years, daily deals companies have slowly built out logistics platforms by buying up warehouses and training fleets of motorbike delivery guys. It was only natural for them to get into conventional e-commerce. But the beauty of this is they’ve slowly understood Vietnamese consumer behavior by watching their purchases of coupons and deals. Two clear examples of this are how Hotdeal.vn is getting into travel with Yesgo.vn, and Cungmua is getting into baby products with Liulo. Daily deals sites are no longer all about coupons, they’re about vertical e-commerce.

  3. Tiki.vn got funding - One of the most hopeful things about e-commerce in 2013 is that a humble success like Tiki.vn, which started out in books just a few years ago, got a round of series B funding. In other words, despite the many slow successes and the rumors of closing of projects within Project Lana or VNG, there is still some potential in the market. It is not all lost. And that’s means a lot to the ecosystem.

  4. Vertical sites are on the rise - With the Lazada funding, Amazon-style general e-commerce is basically out. Lazada will be the only one carrying this huge burden coming into 2014, educating the market on its own. But that also means there is still a huge opportunity for specialist e-commerce sites that can adapt to the local market and take advantage of economies of scale. In 2014, we’re going to see a huge battle across verticals ranging from travel to fashion, baby products to shoes, electronics to furniture.

  5. Only the bootstrapped shall survive - What VNG, Project Lana, and Nhom Mua have shown us is that if you’re too ambitious, you grow too fast, and your spend is too high, then you will fall into the deadpool. VNG was pouring millions of dollars into Zalo and 123.vn, so it had to cut its losses – and it chose the mobile route. General e-commerce just wasn’t sustainable for the company despite its large revenues. Likewise, Project Lana had to cut its losses and refocus on two sites instead of its ambitious four sites. Nhom Mua grew way too fast, leading to not only managerial troubles but also a cash burn rate that was inherently not sustainable. The lesson here is pick your battles and bootstrap your e-commerce startup. Don’t spend like these beasts. Everybody is looking at Lazada’s big funding, but how long can this funding last? Big spending hasn’t worked in Vietnam yet.

Tech in Asia: 2013 in review

(Editing by Steven Millward)


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