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Mar, 2022     

Vietnam eB2B – 10x growth waiting to be unlocked

Vietnam’s Tier I locations account for ~40% of retail market. FMCG and Fashion dominates the sector


1. Vietnam’s Tier I locations account for ~40% of retail market. FMCG and Fashion dominates the sector

Vietnam’s key economic regions in the north, central and southern parts of the country account for proportionately higher (~40%) share of the ~ $ 150 Bn retail market. FMCG dominates the retail sector with more than 50% share. It is followed by Fashion and Electronics. Fresh is a significant part of the FMCG pie. It is followed by Staples, Packaged Foods and Beverages.

2. High prices and delivery delays top the pain points for Retailers. Promo campaign leakages and retailers going out of stock are key issues for Principals

The unorganized and fragmented nature of the market creates friction for both Retailers and Brands/Principals. The multi-tiered supply chain has inherent inefficiencies in the flow of goods, payments and information.

Our interactions with key stakeholders highlight a need gap that can be addressed by eB2B ecosystem.

Pain points for Brands and Retailers

 

3. Small independent stores account for ~40% of the unorganised retail market

More than 50% of mom-and-pop stores are “small” from a turnover perspective. Collectively they account for around a quarter of retail sales via independent stores. Medium-sized retailers account for another quarter of independent stores, while larger outlets make up the rest. The medium-sized retailers do not have access to the distributors and are invariably serviced by wholesalers or “larger” retailers. These offer an attractive opportunity for eB2B players.

Split of stores by size1 and sales, # of stores, Value split of store sales

4. eB2B market in Vietnam is entering a phase of accelerated growth…

Cross-border eB2B takes off
In Sep 2021, the Vietnam government launched a cross-border eB2B e-commerce platform with the EU. The platform aims to help Vietnamese businesses access the EU market more conveniently and boost Vietnam’s exports to Europe. The development highlights the potential of eB2B to connect the SMEs with domestic and international markets.

New players step-up to tap into the opportunity, while…
In Nov 2021, eB2B player Kilo raised USD5mn in its pre-series A round. The company plans to deploy the funds to grow its team by 4x by 2022 and build additional features such as financing, logistics, and online store creation for retailers.
In Oct 2021, EI Industrial raised ~USD700k in its seed round. EL Industrial is the first industrial-focused B2B marketplace in Vietnam that aims to accelerate digital procurement for industrial purchasers in the country.

Incumbent, Telio beefs up its capital and partnership with VNG
In Nov 2021, Telio raised USD22.5mn from VNG group. As part of the investments VNG aims to lift Telio’s presence on Zalo’s instant messaging platform and thereby allow more merchants top into Telio digitized order management. The two partners also aim to offer financial products to SMEs

5. eB2B retail has seen strong growth and its FMCG penetration has increased in 2021. Nonetheless, another 10x growth is waiting to be unlocked by 2025

At least 10x growth potential between 2020 and 2025

  • Retailer Penetration is low (sub-10%) now. However, this is expected to expand rapidly as more smaller retailers come onboard
  • The current market penetration is low (sub 1%)
  • Active retailer base is high currently (>50%) owing to high engagement through sales agents in the nascent stage of market.
  • Retailers have a sizable (~30%) wallet share from eB2B
  • Average transaction values are expected to irmpove gradually, while order volumes are expected to increase rapidly.

eB2B reseller market by category, 2019-2025