One of the burning issues at the 2023 Postal Business Forum was the unhealthy competition among service providers in terms of postal service fee, promotion programs and selection of shipping units.

Nguyen Dac Luan, deputy chair of the Postal Association, said the mushrooming of postal companies recently, with 800 operational units, including foreign invested ones, has caused stiff competition in the market. 

Service providers have had to lower service fees and run promotion programs regularly to gain bigger market share. The problem is that in order to ensure profits when having to slash selling prices, sellers cut product weight and use lower-quality materials to make products.

The current laws don’t set framework prices for postal services, including e-commerce delivery services.

The postal service fees offered by some foreign invested companies are lower than that of Vietnamese postal companies with large networks.

The gap between foreign and domestic service fees has caused serious consequences, and experts have warned that Vietnamese companies may lose their postal service market share to foreign hands.

The cooperation between e-commerce sites and foreign shipping firms may lead to the market being dominated in both goods and logistics service.

Ha Thi Hoa from Vietnam Post affirmed that there is unhealthy competition in e-commerce shipping fees. 

Foreign invested postal companies are following a policy under which their service fees are always lower than that of Vietnam Post and ViettelPost, large Vietnamese-owned firms.

The ‘race to the bottom’ forces domestic companies to slash shipping fees, which leads to low profitability of the postal sector, just 3 percent.

Phan Xuan Dung, president of Ninjavan, said that in order to ensure the sustainability of the e-commerce shipping sector, it is necessary to set floor prices to stop the race to the bottom.

A representative from J&T Express said the proposal needs thorough consideration, because it is hardly probable that the floor pricing setting would help protect consumers.

The transportation costs in e-commerce have been decreasing rapidly, by 10-20 percent per annum. In China, the decrease is up to 30 percent. Therefore, if state agencies set floor prices, the adjustments in service fees may not catch up with the price decreases in the market.

Le Thanh Hoai, founder and CEO of SuperShip, disagrees with the proposal on floor service fees, saying that this would violate the competition law. He believes that it would be better to let the market determine service fees. If so, the shipping units that can provide better services and at lower fees will be chosen.

A senior executive of Giao Hang Nhanh warned that the application of floor prices would cause big difficulties for newcomers in the market. In general, when joining the market, transport firms need to offer good prices to obtain clients. In the long term, business performance will depend on enterprises’ capability, not on price. If they cannot satisfy requirements after several years of operation, they will have to reconsider their strategies. 

Vu Duc Thinh from Lazada Vietnam said in other transport market segments, ‘cheap’ and ‘good’ never go together, but in e-commerce, both must be implemented. 

The competitiveness is determined by the operation process, high technology application (automation, AI) to optimize business performance, and high-quality staff. Once businesses can optimize their operation, they will have advantages in price, and this is what shipping firms need to strive for.

Nguyen Kim Anh, CEO of SPX Express, shipping firms belonging to Shopee, said two things need to be done well in the logistics sector – providing good services at low prices.

Commenting about pricing strategies in e-commerce, Ngo Duc Minh, deputy chair of the Competition Committee, said reasonable service fees for consumers are always encouraged. However, the competition in pricing must be healthy.

According to Minh, the answers to the problems in competition raised by enterprises at the forum can be found in the Competition Law. In general, it may not be feasible to set floor or ceiling prices. In other countries, market supply and demand determines goods and service prices.

It is estimated that the revenue of the postal service market will reach VND59 trillion in 2023.

Ngoc Cuong