With the increasing prominence of Vietnam’s startup ecosystem in the Southeast Asian, there is increased scrutiny on the startups that occupy the ecosystem.
Vietnam’s booming tech and startup sector is showing no signs of slowing down and continues to grow steadily. The main city hubs, Hanoi and Ho Chi Minh City, in particular, have strong ecosystems which has resulted in an influx of both local and foreign startups. Meanwhile, there has been considerable growth in the influx of foreign investment as well.
In fact, in just two short years, Vietnam jumped from the second last to third, behind only Singapore (1) and Indonesia (2). This is in relation to investment activity among the top 6 ASEAN markets. The amount of invested capital and the number of technology deals done in the first half of the year Vietnam has grown six-fold in the two years when compared to the same time in 2017.
In an increasingly competitive market, a local startup has started to gain visibility in the international investment community and post strong results in the market.
We had to chance to speak to Lozi founder and CEO Nguyen Hoang Trung about his journey so far and how his company has continued to grow for the last six years. He took time out of his busy day to share his insights into the Vietnamese market and how Lozi has grown over the years.
What is your journey? Did you really start as Lozi nowadays?
Lozi was founded in 2014, inspired by my passion of creating a place where everyone can easily find food and restaurants online. After 12 months since its inception, the service attracted about 200,000 users with the website traffic reaching over 2 million. With our growing success, the investments soon followed and we quickly attracted some initial funding. Shortly afterwards, what first started as the food review site had blossomed into a hyperlocal e-commerce platform, connecting buyers and sellers of not only food items but also other product categories such as fashion, vehicles, electronics, etc.
From then on, we enjoyed exponential growth on our e-commerce platform; however, it was still a relatively small piece of the pie. Back in the day, we didn’t really know if the transactions between buyers and sellers were actually completed, or whether there were any delivery hiccups happening along the way. We had in place the buyers, sellers but lacked delivery men. This was when we came to realize that we had something to do with that.
In late 2017, we initiated Loship, our own fleet of local delivery to keep pace with e-commerce demand. So what exactly is Loship, and how do we differentiate it from the competition? Everybody has been asking me this one question since the day we rolled out the service.
At the beginning, we actually did not know how to develop Loship, how to recruit drivers, how to arrange orders and assign them to drivers in the right way so that customers always get delivery at the fastest time. Then, I, as a CEO, set the motto for the team “If we don’t know, we copy. If we can’t control, make it manual. Head down, Learn & Evolve until we master what we are doing.”
Our strategic imperative is to provide one-hour delivery to consumers with an in-house fleet of more than 50,000 drivers who pick the items up directly from local merchants. Now in the race for one-hour deliveries, not many players can afford to keep up with, and those offering the quickest delivery times will win the game. Today we are handling more than 71,000 transactions per day, and we expect to triple our daily transactions to 150,000 transactions in the next 12 months.
Not to mention, 2019 was a sweet year for us after years and years of sweat. I remember there came a time when we first met the representatives of Smilegate Investment in South Korea and we went out to have lunch together. We weren’t in a rush to talk about investment opportunities at that time – it was rather a deep and thoughtful discussion about Loship, Vietnam, and the future of this market. One day they called me and said “Trung, I will invest”, and the rest is history.
However, raising money and getting massive investment aren’t the end results for startups. It is meaningless if you aren’t able to make a profit, a return on investment, and on a larger scale, an impact on society. Therefore, I don’t judge our success by a few rounds of fundraising; it is about creating profits, driving value for customers, and making a positive impact on society. This is absolutely a great start, and there’s still a long journey to go.
Is Loship looking to create a Vietnamese super-app in the same vein as Go-Jek and Grab?
Frankly speaking, in the e-commerce delivery market in Vietnam, Loship is a latecomer as compared to other players. However, being the late-mover has its own benefits.
As Steve Jobs once said: “You can’t look at the competition and say you’re going to do it better. You have to look at the competition and say you’re going to do it differently.” Being a startup founder, I often wonder how my competitors are doing, what works and doesn’t work for them, but I rather base my own decisions on my customers. Competition is a great way to keep us on our toes, but you need a differentiator, something that sets you apart from the crowd – and this is where innovation comes into play.
Looking back, we have gone a long way and brought into Vietnam many new innovations in such a short time. We started from a vertical but with a vision to grow very big, both vertically and horizontally. So don’t go calling us a super app; it’s just the beginning of an ecosystem approach. We want to be the Loship of the World, not something of Vietnam.
What are some of the challenges of the Vietnamese e-commerce market? How did you overcome them?
I believe the E-commerce market in Vietnam is not yet ready to cater for the diverse needs of local people. For me personally, I haven’t used any E-commerce platform before I brought Loship into service as I didn’t find anything useful for me there, or at least it didn’t serve my need of instant delivery. There must be something wrong with all of the current platforms though they have been spending a hefty amount of money on advertising and promotion. Vietnamese people are still more likely to make purchases in-store instead of virtual shopping. And people no longer expect online things to come within 3 to 5 days.
Aside from this, Vietnam is mainly a cash-based economy, with most transactions conducted by cash as a means of payment. Cash on delivery would lead to higher product return rates, which in turn diminishes the level of customer trust in E-commerce platforms. Statistics show that at least 30% of all products ordered online are returned as compared to around 9% in brick-and-mortar stores. From that perspective, E-commerce firms are forced to rely heavily on operation and logistics to maintain the relationships between customers and the platforms.
Also, e-commerce logistics, especially last-mile delivery companies in Vietnam have still been in the early-stage of development; thus haven’t fulfilled customer expectations for timely and cost-efficient delivery when dealing with a large number of orders at a time. Poor quality products, rural areas and failed delivery attempts are also amongst the significant challenges for e-commerce firms. What’s more, there are a lot of funny stories happening every now and then in Vietnam, for example, you order a smartphone and then get a brick. Usually, the items are intentionally switched by a delivery man for the sake of greed.
However, the e-commerce market is ripe with opportunity for anyone who can uncover and capitalize on the factors holding consumers back from shopping online. We don’t believe in any magic or silver bullet. We believe that when customers want a product, they want it fast, and that customers yearn for a seamless buying experience. That means, if we can deliver everything within an hour in a seamless way, customers will feel a sense of familiarity between our delivery services and their traditional shopping experiences. This is very powerful if you see from a customer stand-point, and this is also how we win customers and keep them coming back.
As a local startup, we have to face a lot of operational & financial challenges. In order to overcome all obstacles, we have to really understand ourselves and our capabilities: knowing where to win, and where to lose. We don’t develop new features by looking at competitors; instead, we focus on our customers. Our Loship team, and even I as a CEO, always spend time looking at every note and feedback from customers when they make a purchase and then ask ourselves: What do the customers expect from here? Once we understand thoroughly, we quickly deploy. By doing this, we can keep our service development process relevant to customers’ needs. Relevance is a traditional but never old-fashioned word. In a rapidly changing world, if you can keep your brand relevant even when your company becomes bigger, you will be very powerful. No competitor can take away your customers.
What we are building under our platform is the distribution network. The biggest problem for developing countries always comes down to an effective logistics network, simply speaking, how to move an item from A to B. If we can create enough density for our distribution network, we can put any items on the platform and deliver them in the fastest way possible.
What’s more interesting is that customers are now increasingly rooting for homegrown businesses and willing to support the locals. For local customers there is a sense of “Yes, Vietnamese can do it”, fostering a sense of local optimism and patriotism. As a Vietnamese startup, we are receiving a little more “local love” and that’s what keeps us thrive in the highly competitive game.
You recently mentioned that your new service Lo-supply will “…be a catalyst for Loship’s business growth and profitability in the near future.” How do you see this happening?
Lo-supply handles wholesale business-to-business (B2B) e-commerce, a huge market that none of the big players yet dominate or even tap into. For now, Loship is among the front-line companies spearheading this service.
According to the General Statistics Office, the wholesale and retail sectors in Vietnam account for more than 14% of the country’s GDP. Currently, Vietnam’s Supply chain landscape is still dominated by traditional trade channels. The inventory and retail supply chains seem to be fragmented, with Vietnamese retailers lacking a clear view of pricing, quality and even availability of products. By developing Lo-supply, we aspire to leverage our own delivery fleet and a strong network of merchants and warehouses to provide retailers with better choices in terms of pricing and efficient delivery. Doing this, we can further create a win-win scenario that profits both retailers and our own.
With all that in mind, it is fair to assume that Lo-supply will be the driving force of our business growth, and from that start, it’s inevitable that greater profitability will follow. Yet, don’t get us wrong. We are not B2B. We are a B2C & C2C platform with a customer-focused approach. All we want is to make our merchants feel less burdened when it comes to sourcing for ingredients and raw materials.
What is your opinion of the startup ecosystem in Vietnam? Do you see potential for it to become a regional or even global player?
Vietnam has been relatively under the radar when it came to startups. However, the situation has changed, and the country now has around 3,000 startups involved in sectors such as fintech, food tech, and e-commerce, making it the second largest startup ecosystem in Southeast Asia.
Vietnam has all it takes to create a fertile startup environment such as young demographics, favorable government policy, political stability, increased attention from foreign investors, and an ever-expanding pool of young, tech-savvy talents. In my view, it’s a really rare combination, hard to find and tough to beat.
Also, what’s very unique about Vietnam is its entrepreneurial culture. Nowhere else in the region can you find as much drive, spirit and enthusiasm from young people to start their own businesses from scratch. Vietnamese people are hungry for entrepreneurship and innovation, and the influx of returnees from overseas is really helping improve the quality of the startup ecosystem.
However, I think that Vietnam is still a bit behind other countries in the region, namely Singapore and Malaysia, given that Vietnam hasn’t produced any Unicorn yet for the last 10 years. But if proper investments are made and the government can further leverage its economic advantages, there is no reason why Vietnam can’t catch up with, or even surpass, those regional players. The market is full of potential for breakthroughs and worth keeping an eye on. We feel we have what it takes to be the next unicorn from the region, and it’s only a matter of time before we reach that stage.
In 2019 Vietnam jumped from the second last to third in relation to investment activity. What do you see as the reasons for this strong growth?
I think the biggest reasons for Vietnam’s recent growth in investment are its strong socio-economic development, favorably regulatory changes and business-friendly environment. The local government has put into great efforts to promulgate and apply investment incentive policies as well as to improve the legal framework. The clearer, more transparent legal framework has made a positive impact on investor confidence, encouraging a large number of investors to gain a foothold in the Vietnamese market.
On the other hand, with a population of nearly 100 million, increasing purchasing power and an emerging middle class, Vietnam has enormous market potential for various types of business investment.
If nothing goes wrong, I believe Vietnam will see a huge trend in the next 5 years. Vietnam nowadays has so many golden factors to become the next tiger of Asia or even the world.
What can we expect next from Loship? Are there new services or industries that you are currently looking at?
First, we want to focus on one-hour delivery and expand to as many verticals as we can. We always keep looking around and check if there are any new services that can be delivered instantly – from food delivery to transportation, entertainment, and lifestyle. Currently in discussion, Housing Services, Applicant Fixing are already around for a while. Ticket booking, massage & nail services booking are also some verticals that we are looking at. With that said, we want to become Vietnam’s biggest one-hour delivery e-commerce platform and nothing can stop us from that ambition.
Next, we are working to improve the delivery services for heavy and bulky items such as furniture or appliances, which cannot be delivered within one hour. With even the bulkiest of items, we offer same day home delivery in as little as 24 hours.
In addition to expanding into new verticals, we will be entering the fintech sector with the development of our own e-wallet to facilitate cashless payments for all of the services offered through Loship. The future is cashless, and we are moving towards it. 95% transactions are still made with cash or gold and only 31% of Vietnamese adults have a bank account so an e-wallet is the natural next step.
What are your future expansion plans? Are you looking to move beyond the Vietnam market?
At the moment, we are utilizing our local know-how and market insight to focus on the domestic market. However, regional expansion is definitely part of our strategic plans in the long run, with Laos and Cambodia as must-win markets. We set our sights on conquering a total market of 400 million population; and once we have researched enough and have our resources in place we’ll be ready to start operations there.
Hmmm, interesting. Vietnam is a growing market, but there is still so much we don’t know about it yet.