Foreign investors pour money into Vietnam’s e-commerce despite big losses

Many foreign giants have continuously invested in leading e-commerce sites in Vietnam even as they incur big losses as they continue to see the long-term potential of the country’s rapidly expanding online shopping sector.

Foreign investors pour money into Vietnam’s e-commerce despite big losses

Vietnam e-commerce market is forecast to reach US$10 billion in the next four years.

According to the Vietnam E-commerce and Information Technology Agency (Vecita) under the Ministry of Industry and Trade, with all the ingredients for a thriving e-commerce economy – a young population, 

rising disposable incomes and growing internet and mobile adoption – the Vietnamese e-commerce market is expected to maintain an annual growth rate of 25 percent to reach US$10 billion in the next four years.

The large growth potential has helped the Vietnamese e-commerce market attract big foreign capital inflows in the past two years. However, the market is still in an early stage of development, so it poses
major challenges to players.

According to industry insiders, companies need to pump significant funds into their e-commerce business to carry out tasks from sales and marketing to warehousing and logistics, so profits are easily eaten up. Also, many platforms suffered losses from special discount offers and promotion campaigns to snag new customers.

E-commerce companies have spent aggressively to gain market share, intensifying the competition and the short-term losses.

After acquiring Lazada, Alibaba continued to invest US$4 billion in the e-commerce site. To gain a large market share in Vietnam, Lazada ran up accumulated losses of more than VND5.3 trillion (US$227.47
million) by the end of last year, of which VND2.15 trillion (US$92.27 million) were incurred in 2018.

Despite an accumulated loss of more than VND2.7 trillion (US$115.88 million) by the end of last year, Shopee has continuously received investment from its parent company, Singapore’s Sea Limited (Sea).

It has pumped money into promoting its platform with plenty of discounts, free nationwide shipping service, training for sellers and other promotions.

After suffering a loss of some VND600 billion in 2017, Tiki got additional investment of some US$50 million from China’s second largest e-commerce group JD.com and some other investors.

Tiki has also planned to call for more investment worth some US$50-100 million in 2019, which JD.com will continue to take part in, despite a loss of more than VND1 trillion (US$42.92 million).

Industry insiders estimated the total loss of the top five e-commerce platforms in Vietnam – Lazada, Shopee, Tiki, Sendo and Adayroi – could top VND10 trillion (US$429.18 million).

 

Long-term investment

According to trade expert Vu Vinh Phu, foreign investors are relentlessly increasing their presence in Vietnam’s e-commerce market despite losses, as their current goal is to attract customers, stretching their influence in the market.

Nguyen Manh Dung, head of the Vietnam and Thailand Office under CyberAgent Ventures, said e-commerce requires a long-term investment, and investors could start to earn profits after five to 10 years of operation.

Even Amazon in some markets has only started making a profit after 10 years of investment, according to Dung.

With fierce competition in Vietnam, it is likely to take e-commerce firms some time before they start reaping the rewards, he added.

Online retail makes up only 1 percent of the total retail market in Vietnam, compared with the 14 percent in the US and China.

There is still a long way to go for the Vietnamese e-commerce market to reach its peak, so the foreign investors have invested in the country early to get ahead of the curve, experts concluded.

After the investment, the latest figures from the Map of E-Commerce released recently by iPrice Group - a meta-search website operating in seven countries across Southeast Asia, showed Shopee, Tiki and
Lazada maintained their positions as the top three sites in terms of traffic in Vietnam’s e-commerce sector in the first quarter of this year, with 40.7 million, 35.6 million and 29 million visits per month on average, respectively. Hanoitimes

Minh Tam

Shared database needed to fight tax loss in e-commerce in Vietnam

Shared database needed to fight tax loss in e-commerce in Vietnam

There should be a shared database of online sellers to make sure tax collection in e-commerce activities is sufficient, officials have said.  

E-commerce: profitable platform for Vietnamese exports

E-commerce: profitable platform for Vietnamese exports

Vietnamese businesses should take advantage of e-commerce to export to global markets, experts said at a conference on e-commerce and international exports via Alibaba.com held in HCM City yesterday.  

Shopee, Tiki solidify positions as top e-commerce sites in traffic in Q1 2019

Shopee, Tiki solidify positions as top e-commerce sites in traffic in Q1 2019

Shopee and Tiki maintained their positions as the two leading sites in terms of traffic in Viet Nam’s e-commerce sector in the first quarter of this year.  

 
 

Other News

.
Banks forecast lower profit and credit growth rates
Banks forecast lower profit and credit growth rates
BUSINESSicon  30/07/2020 

Domestic activities have returned to normal, but Vietnam’s major partner economies are still affected by the Covid-19 pandemic.

Pepper export turnover hits $385 million by mid-July
Pepper export turnover hits $385 million by mid-July
BUSINESSicon  29/07/2020 

Vietnam exported over 182,000 tonnes of pepper worth 385 million USD as of mid-July, according to the General Department of Customs.

ASEAN membership fuels Vietnam’s trade with regional markets
ASEAN membership fuels Vietnam’s trade with regional markets
BUSINESSicon  29/07/2020 

Vietnam’s participation in ASEAN 25 years ago has helped the country enjoy strong growth in trade with other member nations.

Despite Covid-19, Vietnam exporters still find new markets
Despite Covid-19, Vietnam exporters still find new markets
BUSINESSicon  29/07/2020 

Vietnam’s fruit exporters has been striving to sell to new markets because they understand that reliance on the Chinese market will bring high risks.

Garment, footwear and woodwork companies look forward to receiving orders in H2
Garment, footwear and woodwork companies look forward to receiving orders in H2
BUSINESSicon  29/07/2020 

After half a year of struggling to survive difficulties caused by Covid-19, Vietnamese enterprises are hoping that more orders will come over the next six months.

Banks face exchange-rate risks when issuing international bonds
Banks face exchange-rate risks when issuing international bonds
BUSINESSicon  29/07/2020 

Many commercial banks have presented plans at shareholder meetings to issue bonds in the international market.

Face mask prices on the rise
Face mask prices on the rise
BUSINESSicon  29/07/2020 

The price of medical masks is on the rise after two new COVID-19 cases were confirmed on Sunday evening, bringing the total number of community infections linked to Da Nang and Quang Ngai to four in the past three days.

Group set up to inspect VN pork market
Group set up to inspect VN pork market
BUSINESSicon  29/07/2020 

The Ministry of Industry and Trade has founded a group to inspect the pork market which saw prices at high levels since the end of 2019 despite the Government’s effort to increase supply to make up for the drops caused by African swine fever.

Start-up investment in Southeast Asian doubles despite COVID-19
Start-up investment in Southeast Asian doubles despite COVID-19
BUSINESSicon  29/07/2020 

Investment in start-ups in Southeast Asia soared in the second quarter of this year despite the COVID-19 pandemic, led by e-commerce and fintech companies.

Decree takes effect in September to raise standards for corporate bond market
Decree takes effect in September to raise standards for corporate bond market
BUSINESSicon  29/07/2020 

The Government’s Decree 81, which comes into effect on September 1, will help raise the corporate bond market standards and remove low-quality issuers to better protect investors.

First protocol amending ASEAN Trade in Goods Agreement approved
First protocol amending ASEAN Trade in Goods Agreement approved
BUSINESSicon  28/07/2020 

The Government has issued a resolution approving the first protocol that amends the ASEAN Trade in Goods Agreement (ATIGA).

VN securities firms enjoy strong Q2 gains
VN securities firms enjoy strong Q2 gains
BUSINESSicon  28/07/2020 

After touching bottom in the first quarter of 2020 because of COVID-19, Vietnam’s stock market staged a strong comeback in the following quarter, allowing securities firms to enjoy sharp increases in both revenue and profit.

Local airlines open new domestic air routes to increase revenue
Local airlines open new domestic air routes to increase revenue
BUSINESSicon  28/07/2020 

To offset the decline in revenue from international flights, airlines have been trying to exploit more domestic air routes.

Vietnam's trade surplus continued to grow in H1 despite Covid-19
Vietnam's trade surplus continued to grow in H1 despite Covid-19
BUSINESSicon  28/07/2020 

The trade surplus soared in the first six months, though the GDP rate grew by only 0.36 percent in Q2 as Covid-19 escalated in many countries.

VN banks still make high profits, though businesses hit hard by Covid-19
VN banks still make high profits, though businesses hit hard by Covid-19
BUSINESSicon  28/07/2020 

Applying drastic measures to cut costs and ease reliance on capital sources, commercial banks continued to make profits in the first half if the year, However, they have been warned of bad debts ahead.

Vietnam's catfish industry experiencing tough days, no improvement expected this year
Vietnam's catfish industry experiencing tough days, no improvement expected this year
BUSINESSicon  28/07/2020 

Catfish products saw the strongest decline among seafood exports in the first six months of the year. With weak demand, a gloomy year is anticipated for the industry.

Gold prices hit all-time high
Gold prices hit all-time high
BUSINESSicon  27/07/2020 

Gold prices soared near VND57 million (US$2,486) per tael (1.2 ounces) on the local market on first day of the week while the yellow metal also made its history in prices, hitting an all-time high.

Hanoi removes barriers to investment in high-tech agriculture
Hanoi removes barriers to investment in high-tech agriculture
BUSINESSicon  28/07/2020 

Hanoi’s farming sector has proposed that the city adjust the mechanisms and policies to promote marketing and branding of high-tech agricultural products.

Resurgence of Covid-19 further thwarts Danang's economic recovery
Resurgence of Covid-19 further thwarts Danang's economic recovery
BUSINESSicon  27/07/2020 

The complicated progression of Covid-19 in Danang has dealt a blow to the city’s efforts to grow its economy this year and may drag Vietnam's economic recovery.

Asia-Pacific investment volumes in real estate fall due to COVID-19
Asia-Pacific investment volumes in real estate fall due to COVID-19
BUSINESSicon  28/07/2020 

Asia Pacific’s commercial real estate market has felt the brunt of COVID-19 so far this year, with a sharp decline in investment volumes and rental prices across most major commercial asset classes, according to real estate services firm JLL.

 
 
 
Leave your comment on an article

OR QUICK LOGIN