E-Commerce in Vietnam: Goodbye Barriers [Part 2]

Hung Huynh, associate at IDG Ventures Vietnam

Last week, I thrashed Vietnam’s e-commerce market and outlined the many barriers it faces. But Vietnam’s a market full of gossip and rumors so it’s always valuable to get another perspective. Luckily Hung Huynh (pictured) from IDG Ventures Vietnam was willing to sit down with me and give me an inside look.

Hung’s the ideal guy to talk to about e-commerce. He worked at chief level positions at Mua Ban (the number one classified ads site in Vietnam, invested by IDG Ventures Vietnam), Vinabook (the largest B2C ecommerce site that sells books, CDs, DVDs and magazines, also invested by IDG Ventures Vietnam), Hotdeal.vn, and was also the CEO of the Nha Sach Phuong Nam’s (the online bookstore of second largest bookstore chain in Vietnam) online branch. To say the least, Hung has paid his e-commerce dues. He was just recently hired as an associate with IDG Ventures Vietnam for his practical perspective on e-commerce because of his background in bringing e-commerce sites to market.

Group Buying And Its Unexpected Contribution to Vietnam Online

Last week I outlined three barriers that e-commerce companies face in Vietnam: a cash economy, a non-buying online generation, and skepticism of digital content. Hung puts these barriers into perspective.

Group buying sites made the logistical demands of cash on demand easy and got early adopters to trust their content. Thus, a cash economy (and subsequent dependency on cash on demand models) and skepticism of digital content were largely tackled by the group buying craze. The craze was so fast that group buying companies couldn’t spend enough time on customer service and could only focus on delivering the products. If you look at the numbers, group buying grew 700–800 percent annually versus the ordinary e-commerce sites that only grew 200–300 percent. Although they educated the consumer market on e-commerce by going so big, the craze will die in one or two years, and ordinary e-commerce will continue its steady growth. What group buying has done for these big companies is taught them how to handle the logistical demands of a larger-than-expected market.

Vietnamese E-Commerce Is Impatient

Of the three points that I outlined in my previous article, Hung and I have the same thoughts on the young population. Hung and I agree that it’s a big barrier to progress that Vietnam’s youth are not buying online.

About 10 percent of the online population are potential buyers. That means three million people. Therefore, most e-commerce websites have gone very general (offering a large array of products from fashion to electronics to toys), they think “There is no such company as Amazon here, so I want to be that!” What these companies don’t realize is that Amazon started in a very specific market and then extpanded after gaining a strong foothold. In addition, investors also force their hand to offer everything. This certainly defies economies of scale, where they can focus on good pricing, improving their profit margins and develop purchasing power. But their thinking is they want to invest in user acquisition because users are a long-term investment.

This makes a lot of sense given the fast pace of change that the Vietnamese technology scene goes through year by year. If group buying is already quickly being phased out, it makes sense that the major players would want to secure a base of customers to push them into the next trend. This is precisely what Mua Chung is doing with Solo.vn and what Nhom Mua is doing with Zap.

In a sense, Vietnamese technology companies have been forced to go lean because the market here is so young and so dynamic.

Next Year’s Big Fight: Vertical E-Commerce