Deal underscores e-commerce potential

eBay’s acquisition in Vietnam’s PeaceSoft company has triggered a new trend of similar deals in the future conducted by foreign institutions in local Vietnamese e-commerce companies.

Dr Stephen Onu, Senior Management &Technology Consultant cum Professor of International Business – Columbia Southern University, talks about the meaning of the acquisition to Vietnam’s e-commerce sector.

Three years after working together with Vietnam’s PeaceSoft eBay paid $2 million to acquire a 20 per cent in the local partner. What does this deal mean?

The fact that eBayagreed to buy 20 per cent of PeaceSoft, a Vietnamese e-commerce company, is a manifestation and testimony on the emerging and potential growth of e-commerce in Vietnam. This partnership signaled the awaking of untapped opportunity both in the human and knowledge capital areas available in Vietnam – this awaking is being led by the fearless leader of PeaceSoft – Nguyen Hoa Binh.

eBay, a well established American e-commerce company has a long history of buying, partnering or investing in companies that are at the cutting edge of the e-commerce market as evidenced by PayPal purchase. The ability of eBay to integrate newly acquired companies into eBay culture and practices have proven to be successful and I predict that this partnership with PeaceSoft would equally be successful.

eBay did not only invest but insisted on having a representative on the board as a way of ensuring that managerial and leadership expertise is made available to the PeaceSoft team in Vietnam.

One of the lessons learned from successful e-commerce partnership is the need for effective management and mentorship which PeaceSoft has lacked so far. With more than one million users engaged in various e-commerce activities, PeaceSoft is positioned to grow and make a lot of money, if the right structures including organization and leadership are in place and this is the genius of partnering with eBay.

What are benefits to eBay in this deal?

PeaceSoft is not the only beneficiary of this unique partnership. From a market entry strategy, partnership with PeaceSoft allows eBay to enter a non-English speaking emerging country with a local partner that understands Vietnam local market sensibilities and culture. Let’s face it, buying and selling goods is effective if the customer’s sense of value preposition is understood and enabled – PeaceSoft knows Vietnam market more than any other e-commerce company in Vietnam.

There is also a positive synergy between PeaceSoft core market and eBay’s. One of the long term strategic objective of eBay is on how to encourage Vietnam-based manufacturers to use eBay’s platform to sell their goods not just in Asia but around the world, this partnership provides the opportunity.

Does the deal pave way for other foreign institutions to enter the e-commerce market in Vietnam?

Unlike other Asia countries, 33 per cent of Vietnamese are online and yet only very few e-commerce are successful or even viable. Vietnam is a country with high e-commerce awareness but somehow has managed not to produce equally successful e-commerce companies. This disconnect has scared off potential investors. The eBay-PeaceSoft partnership has reestablished confidence in the e-commerce industry in Vietnam. My prediction is that many foreign investors will follow soon. Second, this partnership if successful would create a model for entry for other western companies. This is a big deal and is being watched by a lot of potential investors looking for new frontier in Asia. Third, for the Vietnamese upstarts, there is a lesson to learn. If you embrace business best practices including financial transparency, innovative culture and management practices you will be rewarded just like PeaceSoft.

How can e-commerce companies in Vietnam build their attractiveness?

There is a great potential for other e-commerce companies in Vietnam to attract foreign investments. If the followings are observed:

- Have a clear business model with strong local focus. You should know the Vietnamese market more than any foreigner. Support this local knowledge with a clear business case that is singularly focused on a defined market segment.

- Adopt both accounting and financial best practices. In the long run the valuation of your company will depend on the clarity and accuracy of financial data. If your financial is doubtful, you have lost trust of any potential investor.

- Seek out young engineers and MBA students with potential and give them opportunity to own part of your company. There are many structures on how to do this, the benefit is incredible. Encourage innovative culture, which of course requires transformational leadership styles.

- Seek out mentors across the globe, amazingly many e-commerce innovators are willing to share their experiences. One example is to have a Vietnamese e-commerce awareness day.

- Engage and encourage the government to adopt policies that support intellectual property rights, copy rights and patent laws. – VIR

Tags: Vietnam E-commerce