E-commerce market in Vietnam has grown by a whopping 300 per cent during the recent three years, from a market size of just some $100 million, according to data provided by Rocket Internet-backed e-commerce platform Lazada.
Estimated to reach nearly $3 billion in 2014, e-commerce turnover is expected to hit $4 billion this year and $7.5 billion by 2019, buoyed by the increasing number of Internet penetration and smartphone users, India-based information service company Ken Research predicted.
Gerald Glauerdt, COO and co-founder of Lazada Vietnam, asserts the country will witness an e-commerce boom within the next five years.
Operating in Vietnam for three years, and the first foreign company in this sector, Lazada Vietnam’s Glauerdt spoke to DEALSTREETASIA on the the local e-commerce scene and his plans for expansion. Edited excerpts.
A lot of companies and investors are looking at the Vietnamese e-commerce market. What is your assessment of the market?
I think it is one of the most interesting markets in the world for e-commerce at the moment. It’s very young with a big population that is growing very fast. It’s in an early stage but it’s already kicked off. The future is really bright for e-commerce in Vietnam.
There are still some challenges but we are seeing that all the actors that are necessary for e-commerce, for example logistics companies, have already seen the future and are now heavily investing. So I think it can only continue in that way. The next five years will see a huge boom for e-commerce. And if you look at the share of online business, out of the total percentage of retail business, it’s still tiny, so I think what we’re seeing now with Lazada and some other competitors here in Vietnam is just a tip of the iceberg. I think in the next two to five years, we’ll see a massive growth.
Did you have any challenges when you forayed into this market?
It always comes down to the trust of the customers. The customers were not familiar with shopping online. It’s a new way of shopping, they need to learn how that works and have to trust to buy something that they cannot physically touch and feel. But there are substitutes that we have. We offer them, for example, ratings and reviews that other customers leave that help customers decide to click and buy.
Still, this is something that takes some time to educate the customers, also for the payment options, to use credit cards online, which is not yet very common (in Vietnam). Some people in the beginning did not know they can shop online on Lazada with cash on delivery. We actually allow customers to open the box, see the products and then decide if they really want it and pay in cash. It’s very convenient but a lot of customers just don’t know how that works. So, it’s a lot about education, making people aware that it’s risk-free to shop online.
How do you position Lazada in the Vietnamese e-commerce market?
We are the market leader and the pioneer as well. We were the first to come to Vietnam, being really serious that we have the ambition to be the market leader. We will make sure that we’ll stay as the number one.
Can you elaborate on the market share?
There are different numbers on market shares that you can find. Honestly, it’s hard to say because there’s no official market share that we would know. It’s a little bit of a blurry market, it depends on where you cut the line and where you say this is online and this is not, or whether you include services, travel and so on. There are some reports that say Lazada is around 30-35 per cent. But again, I think the number is fluctuated a little bit.
What’s your investment allocation for the Vietnamese market?
We invest in different areas. Of course, we do invest in marketing, but we also invest in infrastructure, in logistics. I can tell you how important it is to invest in a very good fulfillment capability. We’ve just opened a new warehouse in Ho Chi Minh City. We also have a warehouse in Hanoi and potentially we will open one in Da Nang. Also, we have our own delivery company, Lazada Express, which is growing strong.That’s also where quite a lot of the investment goes.
Tell us about your B2B platform.
We’ve just started again to open that area. We haven’t done that for a while but we’re currently building up the sales team for B2B. Right now our main market is the B2C market. We want to be the shopping mall for the 90 million Vietnamese people. But we’ve got a lot of requests from companies that want to participate and buy from us. That’s why we decided, “Ok, we will offer that again”, but it’s not the main focus.
Do you have any intention to acquire other businesses as part of your expansion plan?
The expansion for now is focusing on opening more categories, offering more products and broadening the assortment, because we want every Vietnamese to think about Lazada whenever they want to buy anything. And we’ll continue to build out our logistics part. At the moment, there’s no other strategic focus.