Vietnam’s e-commerce startups tweak their business model amid pandemic drag

Photo: Pixabay

In a bid to survive the ongoing onslaught of the COVID-19 pandemic, e-commerce startups in Vietnam are increasingly gearing up to sell essential items – especially food – to woo consumers who are reluctant to venture out.

BEYOURs, a new brand that sells home furniture on e-commerce platforms, has recently converted its business to sell fresh food after Ho Chi Minh City issued a directive to only allow startups selling essential units to operate amidst the pandemic.

Vietnam is currently reeling under the second wave of COVID-19 pandemic – the worst affected cities being Hanoi and Ho Chi Minh City.

Tiki, the country’s largest homegrown e-commerce platform that bagged $20 million in funding from Taiwan Mobile last month, is ramping up its focus on its fresh food delivery service TiKiNGON as it seeks to increase revenue.

This marks the latest diversification for the company established in 2010. While Tiki started out by selling books, over the years it has grown into an e-commerce platform operating an online marketplace, fulfilment centres and logistics network.

Sendo, too, has recently started selling vegetables to help customers have all necessary items from the comfort of their homes. Sendo last secured $61 million in its Series C round from EV Growth, Kasikornbank SBI Group, BEENOS, SoftBank Ventures Asia, Daiwa PI Partners and Digital Garage in 2019.

The latest strategies adopted by Tiki and Sendo highlight how the two homegrown online marketplaces are gearing up to pursue their own growth strategies amid stiff competition, particularly from Shopee and Lazada, after their merger plan fell through last year.

The move to ship essential items alongside other things such as apparel, general merchandise and electronics, is, however, not restricted to local online retailers.

Foreign e-commerce major Shopee, owned by Singapore-headquartered Sea Group, has also started the delivery of fresh food items and fruits through its platform ShopeeFarm in Hanoi and Ho Chi Minh City.

Jeffrey Seah, partner for Asia Fund at VC firm Quest Ventures attributed this burgeoning trend to the throes of the pandemic that has thrown normal life off gear.

“Fresh produce and food purchase will become second nature as people get comfortable with the online medium,” Seah told DealStreetAsia over an interaction. “As lockdown continues to be implemented across the world, e-commerce is evolving. From being a temporary replacement, certain things will take a permanent place in our lifestyle now,” said Seah.

In the past, people used to frequent the local markets and supermarkets to buy their food items. However, the COVID-19 crisis has prompted people to look for safe and secure ways of consuming food.

“Consumers are willing to use, willing to try. If they find it convenient and the quality is good, they will continue to buy fresh food online,” Vy Le, co-founder and general partner at Do Ventures had earlier told local media Tuoitre.vn.

Echoing the same sentiments, Nguyen Xuan Dong, co-founder and deputy general director at Ecomobi said in a webinar: “The shift to essential sales may not be their core business, but it is important that they can generate income for employees and let the company’s machinery to continue its operation.”

Backed by VinaCapital Ventures, Ecomobi connects merchants with publishers and key opinion leaders (KOLs) to promote commerce via social media. The company is currently present in Indonesia, Thailand and Singapore outside its home market, Vietnam.

Homegrown e-commerce platform Vo So, which is owned by Viettel Post (a part of Vietnam’s biggest telecom company Viettel Group), said that it has recorded more than 36,000 orders within just 3 days after opening its ‘fresh food’ online service. The firm is expecting this number to touch 40,000 per day.

The boom in the sector has come in with the increase in growth in the overall e-commerce sector in the country.

According to the estimates of GlobalData, a leading data and analytics company in Vietnam, e-commerce sales in the country grew 30.3% to touch VND303.6 trillion ($13.1 billion) in 2020.

“COVID-19 has changed consumer buying behaviour … the accessibility of products online, during the pandemic, has not only increased online sales but has also converted several offline shoppers to online,” said Kartik Challa, payments senior analyst at GlobalData.

Besides ramping up their focus on essential items, e-commerce businesses are also changing their operating models and adopting new marketing measures in the wake of the pandemic.

According to a CEO of a Ho Chi Minh City-based company that specializes in providing solutions for e-commerce platforms, entrepreneurs are increasingly adopting new branding activities as they seek to adapt to the current situation.

Due to severe restrictions in movement, many supply chains have been broken during the pandemic, prompting merchants to find new distribution channels.

Over the past few months, startups have adopted diverse measures to ensure that their supply chain is not disrupted. For example, some startups have moved from a bigger warehouse in Ho Chi Minh to a smaller one in other cities where there are no restrictions on movement, while others have moved from a self-operating model to a fulfillment one.

Nguyen Hoang, CEO at Thuocsi.vn, an online pharma marketplace owned by BuyMed, said that the company’s operations in Ho Chi Minh City had been adversely impacted due to delivery restrictions amid rising COVID-19 cases. The company has been gradually expanding to Hanoi to weather the impact of the pandemic.

Recently, Yes24, an e-commerce platform fully own by South Korea’s HansaeYes24 Holdings Group, had to shut down its operations in Vietnam due to the adverse impacts of the prolonged COVID-19 crisis. The platform is famous for Korean cosmetics and apparel items.

Before shutting down, Yes24 claimed on its website that this platform reached 900,000 members, with more than 3.5 million visits, a growth rate of over 200%.

Online firms still mushrooming and raising funding 

Due to COVID-19, a lot of people who lost their jobs are wanting to start their own online business. However, the tools for them are still lacking. Therefore, social e-commerce platforms targeting this subject will be in demand, according to Valerie (Van) Vu, associate at Indonesia-based venture capital firm Venturra Capital that has slew of investments in Vietnam.

In May, the VC firm along with Golden Gate Ventures led a $1 million seed funding in e-commerce platform Mio. The round had seen the participation of other investors as well.

Founded in June last year, Mio primarily targets women aged 25-35 years in smaller cities or rural areas.

There are other early-stage businesses, too, that have secured funding this year. (Table below)

Startups in e-commerce sector raise funds in 2021

Expand Table

Company nameDetailsFunding amount/StageInvestors  
TikiE-commerce marketplace$94 million Series ETaiwan Mobile, AppWorks, CE Fintech Capital, Nextrans, among others

KiotVietProvider of sales management solutions on e-commerce platforms$45 million Series BKKR, Jungle Ventures, Kasikorn Bank, Cao Viet My
LoshipOn-demand ecommerce platform$12 million pre-Series CBAce Capital, Sun Hung Kai & Co. Limited, an alternative investment company listed in Hong Kong. Other investors participating in the round include MetaPlanet Holdings, a VC firm backed by Skype co-founder Jaan Tallinn; Saudi Arabia’s Wealth Well; Singapore-based Prism Ventures; and SQ Capital Group along with a plethora of individual investors.
KamereoB2B foodtech company, purchasing and sourcing platform for F&B businesses. $4.6 million Series ACPF Group, Quest Ventures, and Genesia Ventures.
MioSocial e-commerce platform $1 million Seed roundVenturra Discovery, Golden Gate Ventures, iSeed SEA, DoorDash executive Gokul Rajaram, Meesho co-founders Vidit Aatrey and Sanjeev Barnwal.
thuocsi.vnPharmaceutical distribution marketplace$8.8 million Series A
Smilegate Investment, Nexttrans, Cocoon Capital, B Capital, Surge, Genesia Ventures
KiloB2B e-commerce marketplacen/aGoodwater Capital, 500 Startups Vietnam, January Capital
SobanhangProvider of solutions for retailers in Vietnam sell online$1.5 million Seed roundFEBE Ventures, Class 5 and Kevin Ryan, founder of Business Insider
CoolmateVietnamese menswear brand that sells through its own e-commerce store.

$500 million pre-Series A
STIC Ventures

Going forward, many traditional businesses will embrace the online medium to sell their products, said Viet Nguyen, Investment Manager at Vietnam Investment Group, adding that the impact of COVID-19 crisis is expected to stay for at least another 5 years.

“More and more high-value physical items will be put up for sale on e-commerce platforms, or even services, courses, which are difficult to measure. Therefore, this will be a good opportunity for startups to provide technology solutions for after-sales services to help improve e-commerce services,” he opinioned.

Vietnam Investments Group (VI Group), which has largely backed consumer-focused non-tech businesses, is currently scouting for more tech investments to cash in on the digitalisation boom that has kicked off over the past few months. Its portfolio companies include retail firm Seedcom, and Tap Tap, an app through which users can accumulate points, AI-based English learning app ELSA, among others.

Road ahead: Increased M&A expected

With funding happening in hordes, the sector is expected to witness increased M&A as players look to strengthen their operation, Nguyen of VI Group emphasized.

In one of the most significant deals, an Alibaba Group-led consortium recently led a $400 investment in one of the units of Masan Group as the latter gears up to partner with Lazada to win Vietnam’s e-commerce market.

Vietnam’s e-commerce sector grew by 46% YoY to reach $7 billion in 2020 – it is expected to touch $29 billion by 2025, per a SE Asia e-Conomy report jointly published by Google, Temasek and Bain&Co.

The country currently has the highest number of people shopping on e-commerce platforms in Southeast Asia with some 49.3 million people, according to the E-commerce White Book 2021 released by the Vietnam E-Commerce and Digital Economy Agency (IDEA).

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.