Tiki battles to keep up with financially muscular rivals

July 17, 2023 | 18:00
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Amid the resignation of Tiki’s co-founder, Vietnam’s e-commerce landscape faces a challenging period underscored by intense competition, performance challenges, and the pressing need for a strategic overhaul.
Tiki battles to keep up with financially muscular rivals
The biggest e-commerce platforms in Vietnam are backed by international names, Photo: Shutterstock

Tran Ngoc Thai Son, CEO and co-founder of prominent e-commerce platform Tiki, tendered his resignation to the company’s Board of Directors last week.

The news came as a surprise to many, given Son’s pivotal role in shaping Tiki since its inception 13 years ago. Son’s reported departure comes at a critical juncture for Tiki as it grapples with recent performance setbacks. Over the past decade, the platform climbed the e-commerce ranks in Vietnam, providing stiff competition to regional giants such as Shopee and Lazada.

However, the recent fiscal year presented significant challenges for the company. In the light of audited reports, Tiki’s total revenue for 2022 declined by 7 per cent compared to 2021. Concurrently, the company’s total expenses rose by 4 per cent, which resulted in a 39 per cent surge in its operational losses.

This suggests that an initial public offering (IPO) may be delayed until 2024 or early 2025.

Once considered the brightest star among Vietnamese startups, Tiki received hundreds of millions in investment from various funds. In May last year, Shinhan Financial Group – South Korea’s second-largest banking behemoth – agreed to acquire a 10 per cent interest, making it the company’s third-largest stakeholder In 2021, Tiki successfully raised $258 million in a funding round led by AIA Insurance.

However, Vietnam’s e-commerce scene has always been a fierce battleground, and Tiki’s competitors are internationally experienced and financially muscular.

Lazada has the backing of Alibaba, the Chinese e-commerce titan, while Shopee is financially supported by Sea Group, once the highest-valued startup in Southeast Asia. All three players have engaged in a costly race, splurging on promotions and advertisements to draw users.

Tiki’s growth pace has slowed significantly, unable to keep up with the intense competition and rigorous market demands. This trajectory has sparked questions about the company’s future in the high-stakes e-commerce industry.

The e-commerce landscape is primed for a shift from short-lived rapid expansion to a focus on sustainable business growth, said Pham Thi Quynh Trang, COO of Lazada Vietnam in an interview in March.

Despite the evolving focus, Trang remains confident that the e-commerce sector continues to offer substantial opportunities for a diverse range of businesses. “Lazada, in particular, has chosen to prioritise a strategy of stable, sustainable operation,” Trang said.

Vietnam’s e-commerce sector has seen a rise in revenue in 2023 so far, according to the country’s Department of E-commerce and Digital Economy. The retail e-commerce revenue reached an estimated $10.3 billion, marking an approximate 25 per cent surge from the same period last year and contributing to 7.7 per cent of the total consumer goods and services revenue nationwide.

However, the Vietnam E-commerce Index 2023 report released last week puts forward a caution to the growth story. The rapid expansion of e-commerce has unmasked several sustainability issues, particularly pertaining to environmental repercussions.

“The process of order completion in the realm of online retail, particularly logistics and last-mile delivery, has given rise to significant environmental concerns. Key areas of concern include the overuse of packaging materials that are not environmentally friendly, coupled with the emission of a substantial amount of carbon. The issue becomes more severe in the context of express delivery services,” the report said.

To effectively mitigate these challenges, it is of paramount importance that all stakeholders within the e-commerce ecosystem come together, the report added. Government regulatory bodies, e-commerce companies, academic institutions, research bodies, and professional social organisations need to work in unison to address these environmental concerns, it said.

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By Le Luu

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