E-commerce in Vietnam: Thriving Amidst Economic Challenges
A Growing Sector
E-commerce in Vietnam continues to thrive, becoming a beacon in the country’s economic landscape. The first half of 2024 witnessed an impressive shift in consumer behavior, with approximately VND800 billion (US$32 million) spent daily on online shopping across major platforms such as Shopee, Lazada, Tiki, Sendo, and TikTok Shop. This robust growth reflects a transformation in retail dynamics, as more consumers turn to online channels for their shopping needs.
Impressive Sales Growth
According to the “Online Retail Market Report for the First Half of 2024” by Metric, Vietnam’s foremost e-commerce data provider, the total sales from these five platforms reached VND143.9 trillion ($5.7 billion) during the first six months of 2024. This represents a staggering 54.91% increase compared to the same period in 2023. In contrast, the overall retail sector, as reported by the General Statistics Office, experienced only a 7.4% growth, highlighting e-commerce as a key driver of economic advancement.
Market Share and Insights
The total retail sales nationwide were nearly VND2,400 trillion ($94.7 billion), with the five e-commerce platforms capturing an estimated 6% market share of the entire retail sector. Metric aptly noted, “E-commerce in Vietnam continues to thrive and stands out in the overall economic landscape,” reaffirming the sector’s vital role in modern retail.
Key Players: TikTok Shop and Shopee
The primary catalysts for this growth are TikTok Shop and Shopee, with staggering year-on-year sales increases of 150.54% and 65.97%, respectively. Both platforms have adeptly tapped into the nuances of the Vietnamese market, responding to consumer needs and preferences. Conversely, competitors like Lazada, Tiki, and Sendo have faced challenges, reporting declines in customer spending over the past six months.
Consumer Behavior Trends
In the first half of the year, consumer engagement surged, with 1.53 million products purchased online—a 65.5% increase from 2023. The low-price segment, particularly products priced under VND200,000 ($8), remained highly attractive, growing its market share by 3% compared to the previous year. This shift suggests that amidst economic fluctuations, consumers are prioritizing affordability, aligning their purchasing decisions with budget constraints.
Livestreaming and Promotional Sales
The rise of TikTok Shop is particularly noteworthy, as its innovative approach, including livestream sales, led to over 240% growth in product volume in the first half of 2024. Shopee’s sales also surged, with a 65.5% increase. Livestreaming has emerged as a pivotal strategy, creating an interactive shopping experience and providing sellers with a platform to engage directly with consumers.
Popular Product Categories
Consumers are directing significant spending towards specific categories, with beauty products, women’s fashion, and home and lifestyle items leading the charge. On average, VND144 billion ($5.7 million) is spent daily on beauty products alone, demonstrating consumer priorities in a competitive market.
Challenges in a Dynamic Market
While the growth of e-commerce presents myriad opportunities, it also brings challenges. Experts predict that Vietnam’s e-commerce market will reach $24 billion by 2025, yet the sector is evolving rapidly. According to a report by NielsenIQ Vietnam, the online environment is highly dynamic, requiring constant vigilance from sellers and buyers alike to keep pace with emerging trends.
Sellers are faced with intense competition, particularly during livestream events that have sparked frequent price wars. Moreover, the ease of online access to foreign stores has heightened competition, prompting many brands and celebrities to bypass traditional sales channels altogether.
Active Online Presence
Metric reported that 573,800 stores were active on the five major platforms during the first half of the year. Despite the notable sales growth, the number of active stores decreased by 7.54%, underscoring the competitive nature of the market and the challenges faced by sellers in maintaining consumer interest.
Quality Concerns and Consumer Priorities
Amid the trends of affordability and vast product selection, concerns about product quality persist. Instances of counterfeit goods have prompted market regulators to close several online warehouses selling substandard items. In response, consumers are increasingly favoring purchases from official stores (Shop Mall), with its market share rising by 12.29% in just six months. This shift reflects a growing demand for quality assurance and trustworthiness in the online shopping experience.
Conclusion
E-commerce in Vietnam is navigating a complex landscape, characterized by significant growth and evolving consumer dynamics. As platforms adapt to the market’s demands, the interplay between competition, consumer behavior, and regulatory measures will shape the future of online retail in the country.