VietNamNet Bridge - Though e-commerce is a promising industry in Vietnam, investors still hesitate to inject money into the field as they know e-commerce will need large startup costs.

$1.5-2 million a year would be needed to maintain a competitive firm in Vietnam

The manager of an e-commerce website said all e-commerce firms anticipate they would have to spend big money and accept losses in the first years of operation. 

He said $1.5-2 million a year would be needed to maintain a competitive firm in Vietnam. 

Meanwhile, foreign investors would accept to pour no more than $2-3 million into an e-commerce firm in Vietnam.

VNG, one of largest technology corporations, once injected big money into e-commerce. However, in 2013-2014, it had to close Zing Deal and 123.vn, and sold 123mua.vn to FPT’s Sendo in a deal worth less than $500,000, though 123mua.vn is one of the best shopping websites in Vietnam.

In early November, Beyeu announced its shutdown after two years of operation. One month later, Foodpanda of Rocket Internet announced its decision to sell Vietnam’s branch to Vietnammm after four years of operation. 

Though e-commerce is a promising industry in Vietnam, investors still hesitate to inject money into the field as they know e-commerce will need large startup costs.

According to e27, the news website about startups, one of the reasons behind Foodpanda’s exit was the lack of cost control.

A manager of Lazada, considered the biggest e-commerce firm now, when asked if it is true that it spent $4 million a year to keep running last March, did not say, but said it would be worth it to pay a big sum of money for a bigger market share.

Meanwhile, Nhip Cau Dau Tu quoted its sources as saying that Lazada ‘burns’ $8 million a year, not $4 million as rumored, and that since 2011, when it began operation, $70 million was spent.

Consumer confidence

However, analysts believe that the key problem that hinders the development of e-commerce is not the required initial investment capital. Investors would accept to spend big money if they are sure they can make money.

The problem is in customers’ habits of making payments in cash. An official report showed that 80-90 percent of customers only make payments after receiving goods (cash on delivery, or COD).

Fabian Wandt from Lazada Vietnam also noted that the COD proportion is very high because of low customer confidence in online transactions and product quality.

The Vietnamese habit of making payments in cash is the reason why Uber, which only accepts payments in cards in all other markets, has to accept cash payments in Vietnam.

A survey found that Vietnam’s e-commerce firms report a rate of rejects at 13-17 percent. However, analysts believe the reported figure is lower than the actual rate, while the rate is 20-40 percent in the world.


NCDT