The government’s restrictions on passenger transportation and delivery services in Vietnam’s key cities – Hanoi and Ho Chi Minh City – to prevent the spread of the new wave of Covid-19 are expected to create a short-term but significant impact on ride-hailing and on-demand delivery service companies.
Seen as a model country in COVID-19 management since the pandemic emerged in late 2019, Vietnam is currently witnessing a record spike with government data putting the total number of cases, as of July 30 this year, at 133,405. The country has also recorded 524 deaths due to the pandemic. Ho Chi Minh City accounts for the highest number of cases.
Against this backdrop, the state has beefed up containment measures to bring the pandemic spread under control. The state’s directives have severely impacted the operations of tech-based transport and food delivery firms such as Grab, Be, Gojek, Now (a unit of Sea Group-backed Foody)) and Beamin (backed by S Korean unicorn Woowa Brothers) in Hanoi and Ho Chi Minh City.
The firms are only allowed to transport essential goods such as food, medicines and medical equipment within a certain time frame.
Local ride-hailing company Be Group, which has about 300,000 drivers, has suspended all services in Hanoi and Ho Chi Minh City from July 27-August 1, or until a new state announcement. The company said the halt of transport services during this time could cause inconvenience to customers, and affect the income of drivers as well as company revenues.
“However, we believe this decision would help contribute to the fight against COVID-19 and ensure the well-being of our customers, drivers and the community,” said the company’s spokesperson.
Grab, meanwhile, has officially announced a temporary shutdown of GrabExpress and GrabMart services in Hanoi from July 27 until further notice. However, the services continue in Ho Chi Minh Cỉty from 6 am to 5 pm daily.
Global market advisory firm ABI Research said Grab completed 62.5 million rides in the first six months of 2020. In contrast, Grab completed 146 million rides in the first half of 2019.
Gojek, which has about 200,000 registered drivers in the two cities, has also suspended its GoRide, GoSend and GoFood services in Hanoi as the city imposes 15-day social distancing.
Gojek said, in its latest announcement, during social distancing, its driver-partners have to work extra hard to stay afloat. The time it takes to complete an order, especially a GoFood order at supermarkets and convenience stores, is longer than usual – many orders take over an hour to complete because drivers need to follow social distancing regulations.
“Many orders have had to be cancelled,” it said.
Grab and Gojek have long touted the fast-growing food delivery industry as a big opportunity.
“GrabFood is an important centerpiece to complete our ecosystem in Vietnam. The development of all services, especially GrabFood, created a strong springboard for Grab to come up with innovative models such as GrabKitchen,” Grab said.
In Vietnam, GrabFood saw gross merchandise value in the first half of 2019 grow by 400%, with average daily orders hitting 300,000.
The tightening of government regulations on passenger transportation and delivery is disrupting the operations of logistics businesses, according to industry experts.
In the absence of the Covid-19 vaccine, the challenges for the supply chain system will remain. The impact of those challenges will depend on how quickly the government opens up economies and how quickly the supply chain system recover, according to Dang Thanh Son, Managing Partner of law firm DNA Vietnam LLC.
The immediate impact of the restrictions will be seen on the driver-community of these businesses.
“Drivers, who are working for tech-based transport and delivery firms, are very sensitive about income. When they find the income is not stable, they will leave quickly and find another job. That makes an increase in churn rate in a business. After the pandemic, it will take time and money to re-engage the workforce in this industry,” a local investor told DealStreetAsia in an interaction.
While the demand for delivery during this time in both Hanoi and Ho Chi Minh City is increasing at least 4-5 fold than normal, the number of drivers is drastically decreasing because they fear the risks of going out if they get fined or if they get infected, according to Phan Xuan Canh, Co-Founder and CEO of Viet.co, a blue-collar staffing platform backed by South Korea’s VC firms Access Ventures and Nextrans. Viec.co, itself, is working very closely with logistics, e-commerce players in Vietnam.
“I believe that it would be better if the government considers shippers as the core force of this epidemic prevention campaign and give priority to them being vaccinated first,” Phan said, adding that on-demand delivery Ahamove and Grab have to continuously recruit new drives.
Lozi, which owns the on-demand delivery service LoShip, is also witnessing a significant decrease in the number of drivers. CEO & founder Nguyen Hoang Trung told us that the number of drivers has been reduced to 4,500 at the moment.
“In order to respond to Covid-19, the government should consider removing paperwork for transportation agents, logistics enterprises and focusing on improving the effectiveness of control and management system,” Dang said.
He emphasised that, in the short term, the associated fees and timing for delivery of goods will significantly increase. Food-service companies will need to apply IT solutions to meet the requirements of the local authority and the demand of consumers.