When Alibaba announced its $1 billion acquisition of Rocket Internet-backed Lazada’s businesses in Southeast Asia, local players knew that the Chinese giant will present a real threat.
That includes e-commerce companies in Vietnam, among the fastest-growing markets in the world. Lazada was the top player in that market, and now Alibaba will hold that position. Vietnamese people buy a lot of Chinese goods, and Alibaba has a strong hold on that supply chain.
But the players are not intimidated. They believe there is enough space for multiple players to compete, and that they can leverage their in-depth local knowledge to beat Alibaba.
“If Jack Ma is the crocodile in the Yangtze River, then we will be a school of piranhas to fairly compete with Alibaba in Vietnam,” said Nguyen Hoa Binh, chairman of Hanoi-based Peacesoft Corp, which runs operations from e-commerce to logistics, and aims to be the top e-commerce destination in the nation.
Binh said that local companies have unique strategies and deeper understanding of the market, which will help them compete with the Chinese giant, even though they have fewer funding resources.
Peacesoft has helped develop a supportive ecosystem for e-commerce, including companies such as online payment gateway Nganluong.vn, cross-border e-commerce website eBay.vn (in partnership the US-based parent company), shipping portal Shipchung.vn, and the country-first warehousing and fulfilment system BoxMe.vn.
Vietnamese e-commerce startups are also growing rapidly, and are used to fierce competition.
Chodientu.vn, the oldest e-marketplace of Vietnam, was ranked the second largest e-commerce website in sales revenue in 2015 by the Vietnam E-Commerce and Information Technology Agency (VECITA). It captured that slot after pushing back homegrown rival Hotdeal.vn, which had held that position earlier.
Adayroi.com, the e-commerce arm of one of Vietnam’s largest private companies Vingroup, managed to reach to the top 10 in just a year of its launch. Vietnam’s top internet firm VNG Corporation is funneling $10 million in e-commerce firm Tiki, one of the rising players in the sector.
Such startups might also find a easier venture funding environment. Vietnam, home to 90 million people, is drawing interest from VCs that want a share of companies that are capturing consumers in the emerging middle class. The economy is growing at more than 6 per cent annually, and half the population is online.
In March, Silicon Valley-based 500 Startups said it was starting a $10 million fund dedicated to Vietnam.
Binh attributes such failures to continuous discounts. “In the last few years, a lot of deep pocketed players have been giving big discounts and promotions to achieve growth. A spate of sites had to shut down, losing dozens of millions dollars due to high cash-burn rate,” he said.
“For the last 11 years, the total funding into Chodientu.vn was 50 per cent smaller than the spending by Deca.vn in less than 2 years. What helps it go to the market is investment in infrastructure and a team of people with in-depth local understanding,” Binh said.
The e-commerce sector is expanding fast, and local players who have not fallen into the trap of high cash-burns have managed to survive. With Alibaba’s entry, it is clear that opportunities exist for both international and local players to co-exist and benefit from emerging opportunities in the young market.