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Potential of e-commerce market remains untapped

VietNamNet Bridge - Analysts have compared the investors and the e-commerce market with foxes and grapes. The foxes have come, but the grapes are still not ripe.
VietNamNet Bridge - Analysts have compared the investors and the e-commerce market with foxes and grapes. The foxes have come, but the grapes are still not ripe.

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Deca near the end of 2015, for example, announced their withdrawal from the Vietnamese market, which has been valuated at $5 billion.

Beyeu.com, which received capital from IDG Ventures Vietnam, also left the market.

Its managers left a message on its website: “Thuong mai dien tu can rat nhieu tien. Nhieu cong ty quyet dinh khong dot tien nua. Chuc may man cho nhung nguoi dang tiep tuc co gang” (It will take a lot of money to do e-commerce. Many firms have decided not to waste more money. Good luck to those who continue making the effort.)

Despite the undeniable great potential in the Vietnamese market, e-commerce players still cannot succeed here.

Though 67 percent of Vietnamese internet users intend to shop online as reported by market survey firms, most Vietnamese still prefer making payments in cash rather than via electronic means. 

Only a small proportion of the reported 67 percent shop online regularly. The majority of Vietnamese still buy goods at shops.

An analyst said the development of e-commerce would heavily depend on consumer culture. Japanese people are busy, but they still shop at convenience stores rather than online.

Though 67 percent of Vietnamese internet users intend to shop online as reported by market survey firms, most Vietnamese still prefer making payments in cash rather than via electronic means.

Most firms which have injected money into the Vietnamese e-commerce market now to familiarize Vietnamese customers with the online shopping habit. They are not just focusing on making money at the moment. 

Most of the firms, including the big players, have accepted losses in the first phases of operation. 

Rocket Internet, which owns Lazada and Zalora brands, which make up 43.2 percent of the total market sales, for example, has reported a loss for another year.

In 2013, it reported a loss of $151.9 million for the two brands, while the figure rose to $235.3 million in 2014.

A report of the Ministry of Industry and Trade’s E-commerce and Information Technology Agency showed that foreign-invested enterprises’ revenue had accounted for 59 percent of the total market revenue by 2014. However, they still could not make profit.

Vietnam e-commerce market is money-eater

It is estimated that Lazada and Zalora every month have to pay hundreds of thousands of dollars to Google, Facebook and ad firms to lure customers.

They also take losses because they have to sell products at prices lower than the market prices to obtain more buyers. Prices attract Vietnamese, not convenience.

However, the analyst noted the biggest mistake that many e-commerce firms make is their inappropriate approach to customers.

“They try to slash selling prices in hopes of boosting sales, but they don’t think it is necessary to improve delivery service and product quality,” he said.


MTG

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