Vietnam is becoming the best frontier market for startups and could be Southeast Asia’s third-largest eCommerce market by 2025. Vietnam’s online markets in media, travel, ride-hailing, and eCommerce are growing at a rapid rate. Other countries have taken notice, and foreign investments have increased, it’s time to look at their impressive results.
We explore the top eCommerce startups in Vietnam
Vietnam’s manufacturing history
Vietnam has had a long-standing history with the world’s top manufacturers and is home to the manufacturing plants for Panasonic, Toshiba, and LG Electronics. Companies being affected by the US and China trade war, have looked to produce their products elsewhere. Vietnam has benefitted from this conflict and is now a leading manufacturer for electronics giant Samsung, making it the second-biggest exporter of smartphones in the world.
The vibrancy of Vietnam’s global tech market has more investors putting money into the country’s startups than ever before. The appeal is Vietnam’s low labour cost, stable currency, and regulations which aim to create favourable business conditions.
Vietnam made amazing progress over the last decade. The country’s Gross Domestic Product (GDP) annual growth rate expanded to 6.71% year-on-year in the second quarter of 2019. It has one of the fastest-growing export rates in the world at an increase of 40.2% ranking Vietnam as Southeast Asia’s second-fastest-growing economy.
Southeast Asia’s eCommerce market
While other regions’ emerging markets have slowed down, Southeast Asia has had a booming growth in tech startups. The largest markets in Southeast Asia are the Philippines, Indonesia and Vietnam. A ballpark $16 billion USD has been invested in what is being called Southeast Asia’s unicorn startups such as Bukalapak, Lazada, Traveloka, Go-Jek, Razer, Sea Group, Tokopedia, VNG and－decacorn Grab.
Southeast Asia’s ride-hailing company Grab, has benefited the most from foreign investments. It has the highest share of US investment of over $6 billion USD, elevating it from unicorn to decacorn. Grab is already using the money to expand its business into food delivery, financial services, and payments.
Indonesia’s Go-Jek also expanded into food delivery with its GoFood, becoming the fastest and largest growing unicorn company out of the group.
The growth of startups in Southeast Asia can be attributed to an increase in foreign investors to the region, and also to the area’s strong, educated and motivated middle class. The growing number of expats moving to these parts brought a developing need for better technology and the added value of outside expertise into the country’s market.
Southeast Asia’s eCommerce growth has doubled since 2017, with much of the expansion seen in online shopping, food delivery, travel bookings, gaming, music, and video on demand. With an increase in engaged mobile users, the eCommerce growth isn’t going to slow down.
eCommerce in Vietnam
Vietnam has three trends emerging in the eCommerce industry: the rise of the single market merchant, digital payment services, and entertainment. The fastest-growing eCommerce market in Vietnam is digital wallets, with superstar Grab leading the way in a partnership with MOCA, a Technology and Service Joint Stock Company. Their product will offer consumers bill pay, allow payments with partnered retailers, and allow consumers to add money to their prepaid phones.
Vietnam is poised to become the most dynamic market in the world
According to the E-Business Index 2019 report, drafted by the Vietnam E-Commerce Association, the country’s eCommerce market in 2018 was worth $9 billion USD, and it is predicted to reach $33 billion USD by 2025. This boom will put Vietnam behind only Indonesia’s projected eCommerce earnings of $100 billion USD, and Thailand’s $43 billion USD predicted earnings.
The original report, developed in 2012, had previously indicated that Vietnam’s eCommerce might not rapidly advance because it seemed to be confined to the country’s larger cities. The thought was, it would be difficult, at the rate they were going, to bridge that gap into the more rural areas of Vietnam.
Current developments and trends
One solution is already in the works. Google has recently partnered with Vietnam’s Ministry of Industry and Trade to provide free digital skills training to 500,000 Vietnamese small-and medium-sized enterprises (SMEs) with planned expansion into rural areas. This partnership is called Accelerate Vietnam Digital 4.0, and its fundamental purpose is to aid these smaller businesses in selling their goods and services online. An added benefit of Accelerate Vietnam Digital 4.0 is it gives rural consumers eCommerce access by adding skilled workers into their market.
Vietnam has a population of 95 million, with nearly 40 million of those people already using e-Commerce. As a result, many individuals and households have started selling goods and services through social networks. These social networks provide information about sellers, products and services, advertising, product marketing and customer care. Sometimes the social network is the only way to access that consumer. When Facebook marketed for Sapo a local Vietnamese retail chain, it was the second most effective advertising outside of direct sales for the chain.
E-Business Index 2019 took a survey of local enterprises that showed that the divide amongst regions in Vietnam is decreasing, not increasing as they had previously indicated in their previous report. Vietnam’s continued collaborations with local government agencies support companies’ initiatives, like Google’s job expansion and digital education programs. Social media giant, Facebook, is driving retail sales and growing consumer confidence through online marketing.
Vietnam’s eCommerce market is not slowing down and is in fact on track to becoming one of the largest eCommerce markets in Southeast Asia. An added benefit is that it will narrow the market for the consumer by providing more digital shopping opportunities throughout Vietnam.