When I buy something online in Vietnam, I usually pop over to my favorite site. I book the product online and go through a three- to four-step process to confirm my email, address, and payment information. Usually, I choose the cash option. I don’t want to have to deal with any of Vietnam’s complicated payment models. After I’ve confirmed everything, I usually get an email from the site confirming my order.
A few minutes later, because delivery people in Vietnam can’t just drop off boxes at my doorstep due to theft and lack of a mailbox, I get a phone call.
“Hi. Yes, this is Ecommerce.vn, confirming your order for a brand new iPhone 7s. Can we ship the item to you Monday next week?” (It’s Friday)
“Hm… Unfortunately, I won’t be there on that day. Is there a better time?”
“Yes, how about…Thursday next week or Friday the week after that?”
“Um…yes, I think I’ll be there.”
This charade goes on for awhile. Sometimes it goes on for days. Eventually, I get the package a week later. Sometimes it takes two weeks. Sometimes I schedule with an operator from the ecommerce company. Sometimes I schedule with the logistics company that the ecommerce company works with. It’s messy, but it works.
Today, ecommerce in Vietnam is worth more than $700 million and by some estimates, it may hit $1.3 billion in 2015. But these numbers may be dubious. As Ho Khanh, CEO of CungMua, has stated, it’s not clear what the methodology for obtaining those numbers is. The murkiness of the methodology soon becomes evident when you look more closely at some of Vietnam’s top ecommerce companies. There’s a huge gray area between online and offline commerce.
15 percent of MobileWorld’s revenue comes from ecommerce, almost $60 million per year
One of Vietnam’s top ecommerce companies is not even strictly an ecommerce company. It’s a massive mobile retailer called MobileWorld, or The Gioi Di Dong in Vietnamese. Last year, its revenue hit over US$370 million and it’s set to IPO this year. Its revenues from ecommerce thus far in 2014 make up 15 percent of its total revenues. That’s almost US$60 million. In the next five years, MobileWorld’s plan is to grow that number to 20 percent. But how will this really work for MobileWorld?
Basically, if you go to a local MobileWorld store, you can check out a new phone and then buy it using your current phone. Many customers go home after identifying their favorite model and buy it from their computer on MobileWorld’s site. This allows them to receive a discount. If a customer’s house is near a MobileWorld store, the phone can be shipped – sometimes as fast as 30 minutes to a person’s house.
MobileWorld is one example of Vietnam’s big future in omnichannel commerce, in which ecommerce and traditional shopping coexist in a grey area.
MobileWorld is not an outlier. Vingroup, one of Vietnam’s top real estate companies, and owner of Vincom, Vietnam’s biggest mall chain, is now dedicating over $30 million to building a new ecommerce division. Basically, the company with the biggest malls in the country is now pursuing ecommerce.
Companies going from online to offline
VatGia, Vietnam’s longest and biggest player in ecommerce, is entering the space from the opposite direction: from online to offline.
VatGia has long been one of the key places for Vietnamese people to shop online. It’s a C2C marketplace with influences from Rakuten and it’s arguably one of the most crowded places to find products, mainly because a large number of stores and individuals uploading their products to the site. In the face of new B2C models like Tiki.vn and Lazada.vn, VatGia has arguably plateaued with a set of data that is too messy to sift through and turn into targeted valuable content. But VatGia has found a new brand and chapter in CucRe.
So far, CucRe – VatGia’s offline and B2C solution – is finding a new fast-growing market with over 10 operating offline stores. According to the CEO of VatGia, Nguyen Ngoc Diep, CucRe’s brand is initially much stronger than VatGia and customers feel safer knowing there is a host of actual offline stores, mainly based in Hanoi. Nguyen says CucRe will quickly expand its offline stores in Hanoi and in Ho Chi Minh city.
Lazada Vietnam is also looking at this strategy for 2014. It already opened an offline store in January. These two giants see the power of an offline model. They see that online is not enough for them to access a bigger consumer market. They see the power of offline.
Are these the frontiers of ecommerce in Vietnam?
It’s clear that the big Vietnamese companies are looking more at omnichannel models. Having an offline store that pairs with an online site is a one-two punch that solves considerable problems for Vietnamese consumers:
- An offline store gives the brand a physical face and the feeling of security that comes with a real store.
- It solves the payment problem in a country where most customers pay in cash and the credit card penetration is very low.
- Customers don’t have to wait around at home or their office to pick up a package but can actually come to the storefront to pick up their package.
If you have the budget, why not open a storefront? It cuts down considerably on the kinds of phone calls that I have to make with customer service and eliminates the need for a logistics company that will take care of all their delivery orders like Giao Hang Nhanh.
Essentially, this merging gives us a picture of what Vietnam’s consumer experience will be like in the very near future. Consumers are inundated by brands and products that co-exist both online and offline. They will have more choice, able to buy products how they choose. At the same time, this makes it increasingly unclear what counts as ecommerce and what does not. But customers are indifferent to these labels. Getting the products into their hands in the easiest way possible matters most.Editing by Paul Bischoff