Tailored last-mile delivery services the latest challenge

The statement was emphasised by Truong Bui, partner and general director of Roland Berger in Vietnam, at the Logistics Summit 2023 in Ho Chi Minh City last week.

“In Vietnam, we are seeing a similar price war in the last mile. While the market is significantly smaller than China, many companies have yet to fully embrace and maximise the benefits of comprehensive technology integration,” Bui said.

In fact, his estimates suggest that introducing technology could help reduce delivery costs by 15-25 per cent, through automation and other means, ultimately driving down expenses.

“However, in Vietnam, businesses have yet to exploit the full potential of technology. Despite a smaller market size, the available opportunities remain largely untapped,” he continued. “Determining a comprehensive strategy for technology utilisation is imperative for Vietnamese businesses. The question remains, should they go fully automated or opt for a hybrid model? Given that Vietnam’s workforce is generally younger, there may be considerations about the necessity of full automation.”

In addition, Bui believed that the rise of social e-commerce, exemplified by platforms like TikTok Shop, has harnessed the power of consumer data to enhance the overall shopping experience, thereby increasing competitiveness.

A key challenge is adapting foreign technology to the Vietnamese market, ensuring it is tailored and localised to align with the specific demands and nuances of the region.

Mai Hoang, co-founder and CEO of GHN Logistics, also believed that in a landscape marked by striking similarities in the quest for cost-efficiency, China and Vietnam find themselves embroiled in a battle for logistics supremacy.

“The pricing battle in China and Vietnam bears remarkable resemblance. In Vietnam, the cost of last-mile delivery has witnessed a significant reduction from $1.65 to $1. As the e-commerce industry surges ahead, the average order value hovers around $14.

Interestingly, both sellers and buyers are reluctant to incur costs exceeding 10 per cent of the order value, making it essential to strive for a 5 per cent reduction in expenses to maximise profitability.

In a bid to achieve this goal, embracing technology is paramount. However, Hoang stresses the need to strike a balance. “Technology should be married with the human touch. Collaborative efforts that enhance productivity and optimise time are essential,” Hoang said.

Moreover, he also warned that the dynamics of mobile warehousing have entered a new phase. “With available land for warehousing around Ho Chi Minh City becoming increasingly scarce, costs are on the rise. However, moving just one kilometre away from the city centre can lead to a substantial cost hike.”

Despite the economic downturn, e-commerce continues to grow steadily. The shift from offline to online is evident each year, with compound annual growth rates consistently reaching double digits. Therefore, logistics companies like GHN remain proactive by investing in the future of warehousing and logistics to stay ahead of the game.

Recent figures from the Department of E-commerce and Digital Economy under the Ministry of Industry and Trade reveal a 25 per cent surge in retail e-commerce revenue in Vietnam, reaching $10.3 billion in the first half of 2023.

This significant growth, constituting 7.7 per cent of the nationwide consumer goods and services revenue, has led to a surging demand for e-logistics services. As a result, logistics companies are diving into an increasingly fierce competition.

Foreign players like J&T Express, Best Express, and Kerry Express have swiftly expanded their market presence. They leverage franchise models, cost reductions, and, in some cases, zero delivery charges to secure market share.

On the other hand, domestic firms like GHTK, Nhat Tin Logistics, and GHN are grappling with network constraints. To handle inner-city or rural-area deliveries, they need to collaborate with traditional delivery companies, inevitably raising delivery costs.

Dr. Dang Thanh Tuan, head of the Logistics and Supply Chain Management Department at the Hong Bang International University in Ho Chi Minh City, emphasised the pivotal role of last-mile delivery in e-commerce. He notes that it accounts for approximately 28 per cent of the total transportation cost and could escalate to 53 per cent for on-demand deliveries. This underscores its influence on 97 per cent of online shoppers’ experiences.

“In addition, the efficiency and reliability of last-mile delivery significantly affect not only customer satisfaction but also the profitability and reputation of e-commerce enterprises,” he said.

“Before the e-commerce explosion, delivery providers were already facing challenges to enhance efficiency and reduce delivery costs. Approximately 28 per cent of the total transportation costs in e-commerce are attributed to last-mile delivery.”

Recognising the persistent challenges in last-mile delivery logistics in an increasingly competitive landscape, Vietnamese companies within the logistics ecosystem are innovating to expedite delivery processes and enhance customer satisfaction.

Hoang Trung Thanh, CEO of Viettel Post, said that the company has embarked on a comprehensive overhaul. This includes upgrading hardware and software infrastructure, operational procedures, and optimisation to ensure the highest quality, speed, and cost-effectiveness.

“The most significant challenge lies in cost optimisation on a per-order basis,” he acknowledged.

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