Jun, 2020      |     By Roshan Raj Behera, Mrigank Gutgutia, Akshay Jayaprakasan, Adesh Saikia and Rajat Bharti

Vietnam eCommerce – Leashing COVID, Unleashing 10X growth

Vietnam’s Ecommerce sector to achieve 10X growth to reach US$50bn GMV during 2019-26.


redseer consulting bangalore

Roshan Raj Behera

Partner, SEA

Mrigank-Gutgutia

Mrigank Gutgutia

Director

Akshay Jayaprakasan

Engagement Manager

Adesh Saikia

Associate Consultant

Rajat Bharti

Business Analyst

Executive Summary

In a blue-sky scenario, we estimate Vietnam's ecommerce sector to achieve 10x growth to reach US$50bn GMV during 2019-26. The country has deftly handled the COVID-19 crisis and mitigated potential risks to its economy. At the same time, the mobility constraints introduced during the short phase of the pandemic have triggered faster digital and eCommerce adoption.

The formal eCommerce leaders are rightly stepping up to cater to this emerging opportunity. Hence, we expect the sector to go past a narrow base of buyers/ sellers, selected locations, categories, and way beyond the confines of popular social media platforms like Facebook and Instagram. A more secular and broad-based growth awaits ahead.

1. Strong macroeconomic growth, as COVID-19 comes under control.

COVID curve has remained flat, 0 deaths reported. Vietnam is the fastest growing economy with size >100 Bn in 2020 as per IMF. Sustained 6% GDP growth is expected over next 5 years – one of the fastest growth outlooks in SEA / Globally. 

2. COVID-19 provides impetus to faster Internet and eCommerce adoption.

Digital funnel is expanding rapidly thanks to COVID with high levels of user stickiness on digital platforms. This coupled with better variety and reach of online products is driving up online eCommerce penetration.

3. EdTech and HealthTech seen as structural beneficiaries.

COVID has given significant boost to online learning – EdTech sector is turning focus towards more lucrative K-12 segment, business models becoming more scalable with focus on content creation, SaaS offerings etc. Adoption of skill-based courses, language learning also has picked up strongly among middle aged adults.

COVID has also instilled more legitimacy to digital health solutions thanks to government's NCOVI app. ePharmacy & eConsultation services are picking up in a big way. Supply crunch for healthcare services coupled with increasing spend per capita on healthcare point towards a strong untapped opportunity. Both these sectors seem set up for fast paced growth over next 3-5 years.

4. Formal players gaining share from social media platforms

COVID has served as a strong tailwind to adoption of electronics which has been a late bloomer in Vietnam (owing to strong offline supply). FMCG growth has also surged online with GMV expected to grow 2-3x in 2020. Growth in FMCG & Electronics also expected to accelerate the shift towards B2C in a predominantly C2C market.

5. Buyers maturing with propensity to spend more.

We expect buyers to spend substantially more as the current pain-points around delivery times, delivery costs, SKU variety etc. are sorted over the next few years. Higher online spend is likely to be led by the more mature buyers in top cities like Hanoi and Ho Chi Minh. Meanwhile newer buyers are expected to join from the regional areas, where the formal players are expected to improve their service and network coverage levels going forward.

6. Sellers see benefit from online channels, starting to adopt VAS.

Better logistics/payment options, value-added services, and large transacting customer base leading to better revenue and profit in absolute terms are expected to be the key pull factors for transacting on the formal platforms. Accordingly, we expect a meaningful increase in the number of sellers and the SKUs in the predominantly C2C platforms in the country. COVID has accelerated VAS adoption giving seller monetization also a strong push.

7. Payments and logistics bottlenecks getting sorted.

Growth of in-house logistics at the leading players – Shopee, Lazada and Tiki as well as emergence of several 3PL players like NJV, GHN, GHTK should help in deepening the offline reach of the online platforms and in reducing the delivery costs and time. Meanwhile, wider adoption of wallets should reduce any payments-related friction.

8. Path to profitability could come sooner.

Lower appetite for high cash burns is likely to incentivize a more disciplined eCommerce growth in Vietnam, unlike what has been witnessed in markets like India and Indonesia. Also, Tiki-Sendo merger brings together a lot of complimentary capabilities resulting in wider geographic reach, diversified customer base and more balanced portfolio of offerings across categories, for the merged entity. This will augur well for sector growth and profitability in the long run.