Foreign “big guys” eyeing Vietnamese e-commerce market

Within three more years, the Vietnamese e-commerce market would be the playing field of foreigners unless Vietnam immediately applies strong measures to support the field, experts have warned.

The names like eBay, Amazon, Rakuten or Alibaba have been well known by Vietnamese people. eBay and Alibaba have been officially presenting in Vietnam after eBay purchased 20 percent of stakes from Peasoft, the owner of chodientu.vn website, and Alibaba chose Vietnamese OSB as the official authorized dealer in Vietnam.

Meanwhile, Amazon and Rakuten are also considering cooperating with some Vietnamese well known e-commerce businesses. As such, even though Vietnamese e-commerce is still considered a “fledgling”, foreign investors are still determined to pour their capital into the sector.

According to Tran Huu Linh, Deputy Head of the E-Commerce and Information Technology Agency under the Ministry of Industry and Trade, the B2C (business to customer) market in Vietnam proves to be the market with great potentials. Therefore, it is understandable that foreign investors are considering jumping into the market, either by setting up new legal entities in Vietnam, or purchasing stakes of existing Vietnamese companies.

Nguyen Ngoc Diep, General Director of Vat Gia Joint Stock Company, the owner of vatgia.com, has also affirmed that within three more years, if Vietnam does not apply strong support measures to enterprises, especially in capital mobilization, e-commerce would be the “playing field” of foreign investors only, while there would be no room for domestic enterprises.

It is really costly to develop an e-commerce website. It is estimated that it takes about two or three million dollars to create and run the website, while it will take investors a long time to take back the investment capital. Therefore, the enterprises with no long term capital sources will not be able to survive. Meanwhile, foreign investors all prove to be well financed.

Diep said on Dau tu that in 2010, vatgia.com got the revenue of two million dollars and it hopes to obtain 5 million dollars this year. However, the company is still incurring losses, because it has to spend all the money it can earn, especially on personnel and infrastructure development.

In the period of 2007-2010, vatgia.com “gobbled up” three million dollars, including the sum of one million dollars funneled by IDG Venture, one of the first venture funds which specialize in pouring money in the information technology sector.

Diep has revealed if vatgia.com cannot get additional capital from investors or the loans from funds and commercial banks, it would have to think of cooperating with foreign partners.

Meanwhile, Diep said, the State should create most favorable conditions for e-commerce companies to attract capital from the domestic sources instead of relying on foreign capital. The nature of foreign investment in e-commerce sector is simply pouring investment capital and the investors will only make investment in technology, business experience when they have “swallowed” domestic companies.

E-commerce in Vietnam remains a fertile soil which has not been fully exploited. This has been blamed on the low readiness of Vietnamese people. Though they understand well that e-commerce helps reduce the time needed and expenses for transactions, they still have not got ready to approach the modern way of doing commerce.

The time that people and businesses have to spend on e-commerce transactions is just equal to 7 percent of the time spent on transactions via fax messages, 0.5 percent of the time needed on transactions via posts. Meanwhile, the money spent on e-payment is just equal to 10-20 percent of the expenses with normal payment methods.

Tags: Vietnam e-commerce market