E-commerce has taken off in Vietnam thanks to soaring internet connectivity and smartphone adoption, a young tech-savvy population, and rising disposable incomes. The appetite for online shopping is growing and the number of licensed e-commerce platforms is expanding rapidly.

Development of e-commerce in Vietnam 

The development of Vietnam’s online industry can be broken down into three distinct periods: 1998 to 2005: the establishment of the first ever internet infrastructure 2006 to 2015: mass proliferation of the internet. Almost 50 per cent of the population goes online for the first time, allowing Vietnamese to engage in e-commerce every day 2017 to 2020: further expansion, with e-commerce crossing into new areas of the economy.

Vietnam’s internet economy has experienced rapid growth since 2014. Starting from a total business-to-consumer (B2C) revenue of US$2.97 billion, the sector doubled its value in three years to reach US$6.25 billion by the end of 2017.2 Since 2017, the internet economy in Vietnam has been well established with four key active sectors: e-commerce (first-hand goods); online travel (online flights, hotels and vacation rentals); online media (advertising, gaming, subscription music and video on demand); ride hailing (transport, food delivery).

Outlook

The outlook for e-commence in Vietnam is positive. The country is experiencing a ‘golden population’ period, meaning more than half of the population are of working age, with rising incomes. In addition, there is a consistent flow of foreign direct investment and a high level of government support to create legal frameworks and infrastructure to ensure a robust online economy.

Challenges 

While the government and local e-commerce players have taken measures to create and maintain a healthy environment for growth, challenges remain for the market’s long-term development. From the perspective of an e-commerce platform owner, the first challenge is ‘unhealthy competition,’ which stems from the lack of a consistent set of regulations, particularly regarding dispute resolution.

Conclusion

Vietnam is an emerging e-commerce market that will become more dynamic as more global players enter the market. E-commerce companies are spending to gain market share and competition is intensifying. Developments in the industry are unlocking new opportunities for foreign businesses. Increasing internet access, widespread smartphone usage, improved technological infrastructure and improvements in regulations are advancing Vietnam’s e-commerce industry.

While challenges remain around consumer confidence in product quality, data privacy, unfulfilled orders, and logistics infrastructure, rising disposable incomes mean that consumers are paying for higher value products online. Additionally, foreign-branded products are considered to be safe and of high quality so Australia’s reputation for producing premium quality products is a strong advantage in market.

Australian businesses with existing operations in Vietnam should be actively looking at how to make the most of current e-commerce opportunities. Alternatively, cross-border online exporting offers Australian companies with the potential to expand their reach and sell directly to consumers, without becoming involved in complicated local supply chains.