E-commerce realm requires roadmap

There has been a substantial rise in the number of people buying things online because of the global health crisis. Photo: freepik.com

Greenjoy, a local startup specialised in grass-based straws has been using Amazon’s and Alibaba’s sites as effective tools to approach overseas markets for more than a year now. Straws from Greenjoy are present in Japan, South Korea, Taiwan, Cambodia, and Europe.

The go-global strategy through e-commerce platforms has greatly profited the company. “To date, Europe is occupying about 60 per cent of our outputs,” Nguyen Vo, co-founder of Greenjoy, told VIR.

“Thanks to cross-border e-commerce, we have quickly shifted to markets such as Japan and South Korea, and the number of orders from these countries remains stable since the third quarter 2020,” Vo added.

In addition to Amazon and Alibaba, Greenjoy diversified its sales channels through Tiki, Lazada, and Shopee which have also promoted cross-border trading.

According to Tiki, the growing local demand for overseas purchases is the main reason behind its decision to penetrate cross-border trade through its Tiki Global site.

Along with Tiki, smaller platforms such as Fado and newcomers Phong Duy and 1Ship have also targeted cross-border trade as the business form from their very beginning.

Positive prospects

From the end of last year, payment providers like Payoneer, an American financial services company that provides online money transfer, digital payment services and provides customers with working capital, have been organising several workshops aimed at informing and connecting local vendors as they feel the time has come to penetrate the market through cross-border trade on sites like Alibaba and Amazon.

Tran Xuan Thuy, director of Amazon Global Selling Vietnam, said that cross-border e-commerce will keep developing from the end of 2020. “The growth rate of cross-border e-commerce will be much larger than local e-commerce in certain markets,” Thuy said.

Thuy projected that the current global value of cross-border e-commerce of around $900 billion will keep extending thanks to favourable conditions. With international e-commerce growing, smaller players like Greenjoy may also be able to profit and extend their business.

New international trade deals, such as the EU-Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – which both came into effect for Vietnam – formed a solid base for local importers and exporters. About 32 per cent of domestic companies have established business relations with foreign partners through online platforms, according to information published by Alibaba at a seminar on cross-border trade last October.

According to the Ministry of Industry and Trade’s (MoIT) e-Commerce and Digital Economy Agency (iDEA), the pandemic has leveraged the annual growth rate of Vietnam’s e-commerce sector to 35 per cent, 2.5 times against Japan’s, and its scale is forecast to reach $33 billion in 2025, ranking third in the region, only behind Indonesia and Thailand.

The agency’s recent survey with 4,000 participating businesses also showed that most of them are using the internet for parts of their business, with about 70 per cent of them being small- and medium-sized enterprises (SMEs).

More than half of the remaining 30 per cent constituting larger enterprises participate in e-commerce platforms, while the rate for SMEs stood at about 36 per cent. In addition, about 42 per cent of businesses with online sales activities claimed that their online sales make up about 50 per cent of total revenue.

With cross-border e-commerce growing in popularity, domestic import-export could expand. According to the General Statistic Office, the total import-export turnover of the country reached $544 billion last year with a trade surplus of $19 billion, the highest level over the past five years.

Right time to enter

“Through cross-border platforms, businesses can approach new markets and integrate into global supply chains with reasonable operation costs,” said Dang Hoang Hai, director of the iDEA.

However, Nguyen Hoa Binh, chairman of technology developer Nexttech, said that reaching global markets requires the right blueprint. “A slew of larger Vietnamese businesses have been inferior to overseas medium-sized competitors, just because of their strategy.”

Binh referred to the example of VNG and its competitor Garena under Singaporean SEA Group in the gaming sector. For about a decade, both companies have been the biggest competitors to each other in the local market. Currently, the total business value of local unicorn VNG is assessed at over $2 billion, while Garena’s value amounts to up to $100 billion.

“Garena went global as soon as it entered the gaming market, while VNG initially focused on the local sphere, which is the main reason for the disparity,” Binh said.

Similarly, many local businesses from other sectors are also facing the risk of losing the upper hand to overseas players. Hai therefore argued, “this time should be the most appropriate to map out a strategy and make use of the favourable conditions for cross-border e-commerce development. Vietnamese companies should quickly grasp the opportunities to keep the initiative in the market.”

Most e-commerce platforms in Vietnam have been backed by overseas investors from China, Singapore, and Japan, among others. As a result, Vietnamese goods may potentially lose market share on those platforms.

In comparison with other retail business models, supervision on e-commerce sites has been less tight. Perceiving the issue, the MoIT last year published a draft amendment for Decree No.52/2013/ND-CP from 2013 on e-commerce.

The draft decree outlines the responsibilities of operators of e-commerce platforms regardless of where overseas vendors operate from. Accordingly, these operators are obliged to gather and filter information about international vendors to ensure they can be held liable for their trade activities on the platform.

The draft is currently awaiting comments from related agencies before being finalised and enacted, which typically takes a few months.