Last-mile delivery services battle over market share

The growth potential of the Vietnamese delivery market is drawing heavy investments, photo Le Toan

Luong Duy Hoai, CEO and founder of last-mile delivery firm Giao Hang Nhanh (GHN), told VIR that Chinese transport corporations have been entering Vietnam, such as J&T and Best Express, creating a fierce competition between local and international e-logistics brands in the market. With the aim to gain market share and with a strong investment background, these international competitors are willing to spend money and offer unbelievable prices, especially for big cities such as Ho Chi Minh City and Hanoi.

Compared with foreign players, Hoai noted that local counterparts boast some advantages such as operating for many years with key insight to the smallest details of customers’ needs. Local last-mile delivery firms can understand their customers’ needs even if they have not spoken out yet, Hoai insisted. Meanwhile, international competitors have operated in many markets so they will bring good key insights from other markets to Vietnam.

“GHN foresees both risks and opportunities in the current Vietnamese market now. Pricing has always been a crucial element. However, the core value of any organisation or corporation is the service quality, especially delivery lead-time,” Hoai said.

On the same note, TikiNOW Smart Logistics CEO Henry Low said that compared to foreign players, Tiki has the prime advantage of being the only e-commerce company in Vietnam with an integrated order management, fulfilment, and in-house delivery capability (aka Tiki Express Delivery). This value chain is supplemented by an in-house engineering team responsible for the home-grown software that the entire company is built upon.

“We believe this advantage can easily be lost and a culture of continuous improvement drives the regular upgrade of both hard- and software. New services are regularly added to support the growing needs of the customers. In the last two months, Tiki launched same-day deliveries and a heavy/bulky delivery and installation service (aka TikiPRO), in one instance. More projects are in the pipeline in the coming months,” he said.

The past few years have witnessed e-logistics developing hand-in-hand with e-commerce. This highlights the change since the early days of the e-commerce market, when warehouse and delivery services were not yet developed to effectively serve e-commerce. Nowadays, there is a growing presence of local and international companies in the field, which has created a tailored, unique solution for the Vietnamese e-logistics sector and paved the way for endless e-commerce growth.

The first group are e-commerce players with their in-house logistics teams such as Tiki, Lazada, Shopee, and Sendo. Secondly, local and foreign logistics companies like Vietnam Post, Viettel Post, GHN, DHL, FedEx, and TNT are also bolstering their last-mile delivery services to catch up with the surging demand. Last but not least, international players also entered the local market to tap into the market’s growth such as GD Express, BEST Inc, J&T Express, and Ninja Van.

Vietnam has become a fertile land for last-mile delivery players to tap into the booming e-commerce demand. The government has recently unveiled a national e-commerce development strategy for the country, which will see the sector growing by 25 per cent each year to reach $35 billion in sales within the next five years. This new strategy aims to have over half of Vietnam’s 98 million population shopping online by 2025.

The 2019 e-Conomy SEA report commissioned by Google and Temasek also lists Vietnam as the second fastest-growing economy in Southeast Asia after Indonesia, with the e-commerce market expected expand 43 per cent between 2015 and 2025.

According to Low from TikiNOW Smart Logistics, Vietnam’s e-commerce market has entered a trajectory of accelerated growth, as played out in the economies that have preceded it down the same digital shopping journey. Typically, the merchandise category of choice ranges from books and household consumer goods, to health and beauty products, fashion, and electronics. In any case, logistical services in support of these product entries have to be built and not far behind, otherwise top-line growth and expansion will be hampered.

“Last-mile delivery of a book is significantly different from a scheduled delivery and installation of an electronic appliance like a refrigerator or a washing machine,” he said. “As more households get accustomed to shopping for daily and weekly household item needs, speed, and reliability of deliveries will be more than an expectation. Vietnam’s key online platforms have directed a load of investments into warehouses and automatic sorting equipment and facilities. Third-party logistics providers are also rushing to secure warehousing space as well.”

As far as fulfilment capacity is concerned, Tiki has recently signed up for a mega-facility warehouse, which is already built and ready to move in.

Over the past year years, GHN has invested in infrastructure, applying state-of-the-art technology to maximise digitalisation of infrastructure. In 2019, GHN started operating the first two 100-per-cent automatic sorting systems in Vietnam with capability to process 30,000 orders per hour and save 600 workers, shorten the sorting time from three hours to only 30 minutes.

In August, GHN added 200 more trucks, bringing the total number to more than 1,000 to continually offer the best service with the fastest delivery lead-time possible.