1. Multiple challenges exist in Vietnam’s logistics infrastructure…
Some challenges in current logistics network include:
- Remote location of logistics facilities
- Cash-based transactions
- Traffic congestion in key cities
- Difficulty in access tier 2 and other locations
2. While first-mile needs some time to take-off, last-mile growth has strong due to increasing demand for online grocery and customers’ expectation of fast delivery
Vietnam’s inefficient logistics infrastructure (with logistics costs at high-teens % of GDP) offers ample scope for improvement and innovation.
The first-mile logistics stands to benefit from likely demand in the manufacturing sector. Currently, the segment is dominated by legacy companies with significant potential for technology-led innovation. While the pandemic has been a drag for first-mile logistics, the positive medium term outlook remains intact.
Meanwhile, last-mile logistics has witnessed strong growth momentum, due to demand for online products. In addition, newer opportunities in e-grocery and quick commerce offer a long runway for this segment. We estimate last-mile logistics shipments to grow 1.8x during 2020-23E.
Decision Drivers for Online Grocery Shopping, N=100
3. Smaller players still dominate the sector; many of them are trying to cater wider coverage across regions
Currently, less than 15% of ~3000 logistics players, have more than VND 10 Bn (USD 450K) in capital. The presence of this long-tail of small players creates room for tech innovation across the logistics value-chain. Accordingly, technological upgrades have been a key area of investments.
Meanwhile most eCommerce, QCommerce, Social Commerce, etc. players are also strengthening their in-house logistics capabilities. Accordingly, we expect the share of in-house logistics to improve over time. However, 3PLs are likely to contribute the majority share of logistics in the next five years.
Logistics Companies Capital Split, In Percentage (%)
4. Vietnam logistics market sees a promising growth with CAGR ~20% to 2023, with international players also eyeing to tap into this sector
Express delivery in Vietnam, which usually takes 24-72 hours to deliver goods, is witnessing a promising uptrend. Many local players have emerged, with international/regional players making significant inroads as well.
Express Delivery Market and Growth, In Mn Parcels