Vietnamese people are shopping on social networks more than on e-commerce websites. The payment methods for goods exchanged on the social networks, however, remains very ‘primitive’.
Tiki, Lazada, Shopee and other marketplaces make up 40 percent of total e-commerce transactions in Vietnam. This information was released at the cooperation agreement signing ceremony between Vietnam’s NextTech, a technology firm, and Visa, the payment service provider.
This is an agreement on promoting digital payment methods on social networks.
Nguyen Hoa Binh, a technology expert, said Vietnamese consumers buy goods based on impulse, or fleeting emotions, so the country is a fertile land to develop e-commerce.
The distinctive characteristic of the Vietnamese market is the high number of sellers not officially counted on social networks. The four product items mostly displayed on social networks are functional food, make-up, fashion items, and household products.
Vietnamese people spend seven hours a day accessing the internet, mostly through smartphones. And they mostly use the internet to access social networks. This explains why social networks have become the most effective sale channel.
Citing statistics, Binh said that e-commerce platforms just account for 40 percent of total online transactions in Vietnam, while the remaining 60 percent of transactions belong to personal accounts, fanpages and groups on social networks.
This payment methods for goods exchanged on social network are still ‘primitive’ with COD (cash on delivery) remaining the major method.
In markets such as China, Thailand and Indonesia, COD is not a frequent choice. It is used in only 40 percent of total e-commerce transactions. Meanwhile, in Vietnam, 90 percent of transactions are implemented with COD payments, while 10 percent are with bank transfer.
In Vietnam, most delivery service providers do not collect COD service fees. Many logistics firms consider COD payments as an added service when providing transportation service. Meanwhile, in other markets, COD fees account for 3 percent of the value of orders.
However, there are disadvantages with the COD payment method: many clients cancel their orders, and capital turnover is slow. The order cancellation rate is 8-10 percent on average, and it is higher for some specific products and services, at 25-30 percent.
The reason behind the high rate is that Vietnamese change their decisions as they make impulsive purchases.
Orders are canceled also because buyers run out of money when goods arrive, or shippers cannot contact buyers.
Binh believes that the development of digital payment tools in the social network environment will help businesses quickly fix orders, and reduce the order cancellation rate, thereby promoting the development of e-commerce.
The service provided by VISA and Nextech allows users to make payments online on social networks.
Businesses need to develop specific business plans to succeed in e-commerce activities that are seeing strong development in Vietnam, according to experts.
Vietnam’s e-Commerce growth reached 32 percent last year and averaged about 30 percent annually since 2016, according to a report by the Vietnam e-Commerce Association (VECOM).