SBI-backed Vietnamese e-commerce firm Sendo looks beyond top-tier cities for growth

Tran Hai Linh, CEO of Vietnamese e-commerce company Sendo.

One of the earliest e-commerce companies in Vietnam, Sendo – built by FPT Corporation in 2012 and the subsequent acquisition of marketplace 123mua.vn from VNG in 2014 – has followed the hinterland strategy to grow its business.

As e-commerce is a cash burning game, Sendo chose to focus on the provinces and not just the top-tier cities to compete with regional and cash-rich overseas rivals.

During the time of its establishment, CEO Tran Hai Linh said a lot of local people did not have access to consumer products. A long coastal country, two-thirds of Vietnam are rural areas.

“The math for us was how to convince them (consumers) that e-commerce is a solution to improve the quality of life and increase the choices of goods,” Linh told DEALSTREETASIA.

Sendo has come quite a distance since then.

Last year, Sendo raised $51 million in a Series B round led by SBI Group, the investment company split from Japanese giant SoftBank. Linh said the financing is being used for continued investment in technology in order to increase customer experience, as well as in human resources.

Earlier this month, Sendo submitted a revised business registration that saw foreign investors hold more than 57 per cent of the firm. Of that, SBI has the largest stake of 20.65 per cent, while Japanese payment platform eContext Asia has 10.57 per cent, venture capital firm Beenext has 6.27 per cent, and Japan’s Beenos has 5.52 per cent.

While Sendo has never revealed its valuation, the aggregate ownership of overseas investors and the Series B round alone hint that the company has surpassed the $100 million mark.

The Vietnamese e-commerce market has seen significant deal activity since 2016 when VNG Corporation invested in Tiki and Rocket Internet exited Lazada to Alibaba and Zalora to Central Group.

Today, the market is dominated by two overseas companies, Lazada and Shopee, and two local proxies, Tiki and Sendo.

With other e-commerce majors having the financial resources from parent firms like Alibaba (for Lazada), Sea (for Shopee), and Vingroup (for local rival Adayroi), companies such as Sendo and Tiki depend on external capital to compete effectively.

Linh said, this play is judged by the number of customers a company has acquired to have an irreversible advantage, so investors are looking at this sector as a long-term game and are willing to invest in the targeted company to grow them to the leading position.

Edited excerpts:

Sendo is one of the first e-commerce businesses in Vietnam. How was the Vietnamese e-commerce market when Sendo was launched?

Vietnam has long had the demographic advantage with a large population of nearly 100 million people, and annual economic growth rate among the fastest in the region and the world. But modern trade channels were not developed, so most people did not have opportunities to buy more diversified goods and products. They were put in a more disadvantaged position than residents in big cities like Hanoi and Ho Chi Minh City.

In 2011, the proportion of mobile Internet users was only 27 per cent of the entire Internet users, but since 2012, with the Internet boom, it has grown to 56 per cent. This is the premise for e-commerce, for companies like us to supply goods to people with few choices, in addition to the traditional markets. We came to even rural areas to understand that there existed a lot of market problems, such as delivery time and user demand. The biggest challenge was to convince consumers to use e-commerce.

In around 2012, we encountered a lot of challenges. First, consumers were not used to e-commerce. The math to us was how to convince them that e-commerce is a solution to improve the quality of life and increase the choices of goods for Vietnamese people across the country, which had been a privilege to people in tier-1 cities. Second, logistics was not strong enough to serve e-commerce, neither was digital payment. And finally, capital was one very thorny issue at that time. Sendo had to compete with deep-pocketed foreign companies from Europe, and later China.

To date, many of the early Vietnamese e-commerce businesses are no longer active. How did Sendo overcome those challenges to develop and continue to receive investment?

Those difficulties urged us to be different from others. First, we chose to serve Vietnamese across the country instead of focusing on big cities.

This stemmed from our market researches in provinces which showed that locals had to ride 10-20 km to major markets for their necessary items. It prompted Sendo to create an e-commerce platform to provide everyday life products to consumers even in lower tier cities and provinces.

In addition, instead of building in-house delivery capacity, in our early stage, Sendo chose to cooperate with local logistics companies to grow together.

Finally, to address the suspicion of customers toward e-commerce, Sendo encouraged our logistics partners to support cash on delivery, in order to help users overcome their doubts first and trust e-commerce.

Was the resource from FPT an advantage for Sendo?

Coming out of FPT Corporation, we always treat technology as the core foundation for Sendo and have a reasonable level of investment into our technology to build a convenient, user-friendly platform. We are still in an effective cooperation with FPT to develop and update our technology.

In 2019, Sendo will continue to invest more in AI to optimize the shopping experience and automate our operations. Along with building a team of AI experts, we are also working with universities and data scientists in Vietnam and Singapore to bring AI into key operational issues such as product search, display personalisation, customer care, counterfeiting, anti-fraud in transactions, optimising transportation and protecting customer data.

Our goal in 2019 is 80 per cent of customer care operations as well as fraud prevention and anti-counterfeiting will be handled by more intelligent algorithms.

Japanese investors are famous for their careful due diligence. In addition to a long-lasting cooperation between FPT and SBI, what attracted Japanese investors to support Sendo? What is Sendo’s competitive advantage?

First, let’s take a look at the potential for e-commerce in Asia Pacific. While China’s e-commerce accounts for more than 20 per cent of the total retail market, Indonesia’s is more than 10 per cent, this figure in Vietnam is only 3 per cent. The prospects for Vietnam is still very large and there will be breakthroughs in the next 24 months as logistics, seller credit and people’s awareness of e-commerce significantly improve. According to Google and Temasek, Vietnam is the fastest growing e-commerce market in Southeast Asia, and is expected to be the second largest in the region by 2025.

Meanwhile, Sendo is one of the fastest growing and most sustainable e-commerce enterprises in Vietnam. In the long run, investors tend to believe that local companies will gain greater advantage. This can be observed in countries with a more developed e-commerce market like China and Indonesia.

And we have certain competitive strengths compared to other businesses. More than two-thirds of our customers do not come from Ho Chi Minh City and Hanoi, who account for the majority of the population. In addition, our strategy is also focused on SME merchants, which is in line with Vietnam’s target to promote the sector as well as bringing different kinds of benefits to consumers.

How do you plan to use the Series B investment?

We continue to invest in technology to enhance the consumer experience, including partnering with more partners to improve the quality of logistics and online payment. Enhancing the product assortments and services is also our focus in this period to meet the increasingly diverse needs of Vietnamese consumers.

As we expand, we will focus on investing in human resources.

What’s your future plan for payments and logistics?

We are actually the first e-commerce marketplace to operate an e-wallet. Our SenPay was licensed by the State Bank of Vietnam very early in 2016.

In terms of logistics, we have SenGo, which is responsible for connecting with carriers to provide and manage shipping services.

We are developing technologies for both SenPay and SenGo to improve Sendo’s ecosystem. We have started digital payment since 2012 and 100 per cent of the sellers on our platform have used SenPay. In the future, we will continue to invest in SenPay and cooperate with partners to develop consumer finance services.

Please provide us with some performance metrics for Sendo.

Sendo has maintained 3x growth annually over the past few ears. To better visualise the remarkable growth of Sendo, we can look at the revenue in January this year, which equals the total sales of 2016.

How do you see the e-commerce competition currently? Will the next investment flow come to existing players or do new startups stand a chance? 

It is the strong competition in recent years that created a habit of online shopping for Vietnamese people. However, e-commerce transactions take up only a modest portion of 3-4 per cent of total retail sales. We believe that e-commerce in Vietnam will continue to accelerate in the coming years.

It is also this growth that will create a solid foundation for startups to develop vertical businesses. For example, startups in transportation, logistics, advertising and specialised operations for e-commerce have been established a lot in recent years and were invested by both domestic and international investors.

How will 2019 look like?

E-commerce as well as the internet sectors have received huge investments. More than 50 per cent of the capital has been poured into Indonesia because of its economy and demographics. However, the e-commerce market in Indonesia is saturating, and investors are diverting to Vietnam. This is a positive sign for startups in e-commerce as well as other industries.

Therefore, from 2019, the Vietnamese market will see significant changes because of the growing attention of international investors. Along with the economic growth and demographic factors, we expect higher adoption of information technology and increasing investment in logistics and e-payment.

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.