The market size of Vietnam’s B2C E-commerce was US$6.2 billion in 2017 and is forecast to continue rising rapidly in the upcoming years. In tandem with such booming, the demand for logistics service within the e-commerce ecosystem, e-logistics, is expected to be a very high, according to Viet Dragon Securities Company (VDSC).
Owing to the country’s increasing Internet penetration and the emerging trend of online shopping, Vietnam is one of the fastest growing e-commerce markets in Southeast Asia, stated VDSC in its latest report.
In this context, Vietnam e-commerce retail logistics market is valued at EUR90 million (US$103 million) in 2018, and is forecast to experience an average growth of 42% per year till 2022, according to Ken Research.
According to Vietnam E-commerce and Digital Economy Agency, goods transportation and delivery is one of the most important factor affecting customers’ decision when shopping online. Therefore, e-retailers recognize logistics as the indispensable factor to improve customer experience and to adapt to the increasing demand of customers such as speed of delivery. As a result, e-commerce retailers have started to develop their own logistics department for fulfilling orders, besides relying on third-party logistics partners for cost efficiency.
For instances, Lazada and Tiki are doing fulfilment service by themselves, Lazada E-Logistics Express and Tiki Now, which includes warehousing, packaging and shipping. Lazada invested huge capital to develop in-house logistics to increase capacity and expand facilities. Recently, Lazada E-Logistics Express completed second sorting centre in Hanoi, after the first one in Ho Chi Minh City.
Besides, some large B2C electronic e-commerce sites namely Thegioididong, Dienmayxanh, FPTshop and Nguyen Kim also do fulfilment by themselves thanks to their large store networks.
Meanwhile, the top C2C sites, namely Shopee, Sendo are provide shipping mostly through its 3PL shipping partners, such as giaohangtietkiem and DHL eCommerce.
Traditional couriers
With rapid growth of e-commerce in Vietnam, traditional postal service providers (state-owned enterprises) such as VN Post, EMS, Viettel Post, have started providing e-retail focused logistics solutions in order to stay relevant.
With large coverage of existing nationwide post offices network and high operational capacity (infrastructure and labor force), they usually undertake the orders on a broader scale (national and international) and offer the most competitive price. With regard to e-commerce last-mile delivery, they are especially strong in meeting rural area orders. Nevertheless, speed of delivery within urban cities seems slower than new-rising startups which are strongly supported by technology.
Currently, most of these companies' resources still mainly serve the normal express delivery service while the contribution from serving e-retailers is not significant. Thus, the room for these companies to grow is huge. However, the report stated that the key to taking advantage of this growth is the investment and quick technological application to their huge system to optimize operations, improve quality service and maintain competitiveness in this industry.
Delivery start-ups
In the past few years, many e-commerce retail focused delivery start-ups have entered the market. By using a technology-centric approach and significant financial support from investors, these players are trying to grow as fast as possible. They are willing to suffer losses for a couple of years in return for gaining market share.
Expanding efforts are witnessed through developing warehouse system, building fleets of shippers, vans and especially launching customer collection point model. Customer collection points are designed for customers to pick up/send orders from a designated location at any time, without being required to wait to receive/send goods.
For instance, GHN, one of the leading start-ups in the delivery industry, is building its network of customer collection points in convenience stores like Shop & go, Circle K, Vinmart+. With this strategy, start-ups can quickly broaden coverage through networks of retailers without costing too much money for building service points.
With the leverage of technology, these startups seem to outperform traditional couriers in cities (HCM City, Hanoi) orders’ delivery time through optimized services, such as: guaranteed delivery time, same-day deliver.
Due to lack of nationwide network, the big issue for these players is to maintain cost efficiency and competitive price when scaling up the operation to reach rural customers. Currently, start-ups still have to join forces with traditional couriers to fulfill inter-city or rural areas orders which may reflect in higher price of these orders.
