With a turnover of up to 10 billion USD in the next four years, Vietnam’s e-commerce is considered by many enterprises as one of the most attractive markets in the region for promoting investments.
In the recent report by Topica Founder Institute, e-commerce is one of the factors that attract a strong foreign investment wave. In 2017 alone, there were 21 investments in e-commerce field with total value of 83 million USD.
Formerly known as the “unicorn” startup in Asia, SEA startup (formerly Garena) topped the list of investors pouring capital into Vietnamese startups in 2017.
According to Topica’s report, SEA spent 64 million USD to acquire 82 percent stake of Foody, a unit that provides food ordering and delivery services.
CyberAgent Ventures the venture investment fund from Japan continues to be an active fund in Vietnam. In 2017, the fund successfully carried out four investments in projects including Foody, CleverAds, Tiki and Vexere.
In addition, Telenor, a Norwegian telecoms group acquired 701Search, the owner of Chotot.vn, at a value of up to 109 million USD.
Tiki an ecommerce unit also received an investment in Series C investment round worth 54 million USD from JD.com and STC Investment. Although both Tiki and JD did not reveal the specific number of the deal, the local media made a rough estimate that JD.com’s investment in Tiki is nearly one trillion dong (44.04 million USD).
Sharing about this investment, Winston Cheng, Chair of JD.com, in a statement earlier this year, said that he was delighted to continue his expansion in Southeast Asia with the cooperation with Tiki a company with deep understanding of Vietnam and a reputation for outstanding customer service. JD.com and Tiki share a common business philosophy which is to gain market share by capturing customers’ liking.
Nevertheless, the fierce competition on the e-commerce market has made the situation of “investing-losing-investing” to last for a long time.
For example, Tiki, from VNG’s annual report on the losses at affiliate companies, suffered a loss of about 282 billion dong in 2017. Including the loss of 40 billion dong posted by Tiki in 2016, this e-commerce unit has lost 322 billion dong.
Tiki is one of the leading e-commerce websites in Vietnam, along with other names such as Lazada and Shopee. From a website which only sold English books in 2010, Tiki has received different investments and then over 380 billion dong investment from VNG in 2016 after expanding into electronics, fashion and more. From the investment of VNG, Tiki has continuously reported losses, and perhaps this startup has not yet been profitable after eight years.
Similar to Tiki, other names such as Lazada or Shopee are also said to have not made profit in Vietnam’s market. However, Lazada and Tiki are still receiving more investment from investors.
The investment in Tiki of JD.com took place after Alibaba the number one rival of JD.com in China poured capital in Lazada in Southeast Asia.
Previously, some projects had to cease operation such as Beyeu, Lingo or Foodpanda, etc.
Nevertheless, investors are still injecting capital in Vietnam’s e-commerce sector. Certainly, the market has continuously growing at a double-digit number and there are positive forecasts saying that the market size can reach 10 billion USD in 2020. The young population and the high proportion of people using smartphones and Internet still make investors stay optimistic about this market.
Nevertheless, online shopping is still at a potential level, and the proportion of online shopping compared to the overall size of trade remains very modest. Thus, the large e-commerce sites still have to sacrifice profits to attract customers.
Expanding items, offering discounts, promotions, shipping costs, warehousing, and customer care, etc. are the things that will burn the money of investors before the revenue is big enough and the ecosystem is strong enough to reduce costs and make profit. For these reasons, the large e-commerce sites will continue to accept losses until the online consumption habits become large enough. Until then, whoever is strong will move on and whoever is weak will stop the game. That is the rule of the e-commerce market.
