The online retail sector: What opportunity for logistics service enterprises?

(Vietnam Logistics Review) With the growth rate of 25% over the prediction, the retail sector has made great breakthrough and has been the trend for future. The question is how can logistics business make good use of the opportunity to develop?

Growth and risks

Statistics from functional organizations show around half of Vietnam population using internet in various forms and being in the top of using their time online in the South East Asia. It is noted that there has been an increase in the number of people having trends of buying or selling on line in e-transaction floors or social networks. At the same time, hundreds of enterprises have introduced online selling website with various forms of products, services, and payment as well.

It is matched with evaluation from Vietnam E-Commerce and Information Technology Agency (VECITA)- the Ministry of Industry-Trade on the plan of developing e-commerce in 2016-2020: growth rate of e-commerce will be around 20% pa and reach USD 10bn in 2020. However, the rate was 25% faster than prediction and even faster in 2018.

In some fields of online retail, income growth rate in 2017 increased 35%. Surveys on some leading couriers showed the income growth rate of 62% to 200%. Information from NAPAS showed in 2017 there was an increase of 50% in the number of using local credit cards for payment and an increase of 75% in value.

The online retail market in Vietnam is a good pie. That is why leading online retailers having been in Vietnam as Alibaba, Amazon…

However, according to Ho Tung Bach, Deputy Director of Consumer Protection Office, Vietnam Competition and Consumer Authority (VCCA), there have been many potential risks for customers. In reality, e-commerce attracts the large number of customers but also involves a lot of risks.

The office has received thousands of complaints annually through its hot line and in documents: received products were not similar to their advertisement in terms of appearance, functions, technical specifications, and usage…; origin; prices; damaged products without being returned; late delivery; and canceling orders without reasons…

Opportunity for enterprises?

Although there have been inadequacies in term of service and product quality, in the future, enterprises who “cry wine and sell vinegar” will be eliminated from markets.

Expert Vu Vinh Phu said for better competition abilities in markets, enterprises should have better preparation on logistics with products of large quantity and good quality. And credibility should be put in the first place for it is of the most importance to keep customers in e-commerce.

From another view angle, these inadequacies bring new opportunities for Vietnam logistics enterprises to develop more professionally and properly. But how?

According to many experts, the weakest stage in the retail in general and only retail in particular is its logistics services: storage scale, management methods, information technology, on-time delivery, payment, and human resources… And enterprises are not fully aware of the importance of outsourcing or of taking part in supply chains.

For example, if taking part in a stage in a supply chain of a large international corporation, an enterprise can make great benefits for goods are not delivered in local markets only but they are exported to many other countries worldwide.

And matters of storage, transshipment, and transport have been handled by technology software, enterprises, when properly invested, will not worry about market problems.

Besides, there are many other fields to exploit as human resource training, management software…

With the target of reaching USD 10bn in e-commerce- 50% of the total retail in the country- besides administration innovation, business condition reductions and infrastructure investments, the government has had various mechanisms and policies to lever Vietnam logistics sector to regional level. If they can make good use of the opportunities, enterprises in the sector will surely have good developments in the coming future.

There have been ideas that VLA should play a larger role in consulting the Government, State’s management offices and business community on mechanism policies and solutions for more efficient and specific implementations.