Vietnam E-Commerce Report 2016–17

20 min readMar 18, 2018

Hi there, this is a prerequisite for my Amazon Vietnam Market Entry Analysis. This analysis is originally done in Vietnamese by the Ministry of Industry and Trade, Vietnam E-Commerce & Information Technology Agency (VECITA). The latest translated version posted on VECITA’s website is the 2015 report, the newest one has not been translated to English yet. Therefore, to support my article “My Thoughts on Amazon’s Entering Vietnam”, which I give a comprehensive overview of Vietnam E-commerce ecosystem and the factors Amazon will have to consider when it enters, I decided to take the heavy lifting for the government and translated it myself.

This is an abbreviated version, the original report in Vietnamese is here.

CHAPTER 1: E-COMMERCE GOVERNANCE

Continuing the success of the e-commerce development master plan for 2011–2015 period, the Ministry of Industry of Trade has drafted and proposed to the Prime Minister about Decision №1563/QĐ-TTg on August 8th, 2016 about approving the e-commerce development master plan for 2016–2020 period. The new plan states: “E-commerce is one of the essential infrastructures of commerce and information technology; it is the vehicle that will help Vietnamese enterprises in developing the domestic market and increase import and export, participating in the global supply chain, enhancing national competitiveness in the global competition, and contributing to the efforts in industrialization and modernization of Vietnam.”

Part 1: 5 Core Objectives for E-commerce 2016-2020

1.1. Infrastructure Development

Completing the legal infrastructure for e-commerce.
Building and developing national electronic payment system.
Restructuring logistics network to improve profitability and service.
Developing information security infrastructure for e-commerce.
Developing the human resource for e-commerce to fulfill the increasing demand of businesses and other social organizations.

1.2. E-commerce Market Size by 2020

Online Shopping: 30% of population shop online; average spending of US$350/shopper/year.
Online Retail Sales: Annual growth of B2C e-commerce increases 20%/year; B2C retail sales reaches US$10 billion; B2C sales accounts for 5% total retail sales of the nation.
Cross-border E-commerce and B2B Sales: Develop cross-border e-commerce rapidly to serve import-export; B2B transactions account for 30% of import-export turnover by 2020.

1.3. E-commerce Implementation in Enterprises by 2020

Forming large and credible e-commerce enterprises.
Encouraging enterprises and individual to start and integrate e-commerce business.
Forming and developing credible cross-border e-marketplaces.
Cooperate with other countries to promote cross-border e-commerce and non-paper trade.
50% of enterprises to be present on the Internet, regularly update information on products, services, sales and operation.
80% of enterprises to place and receive online orders.
100% of supermarkets, shopping malls, modern distribution agencies to accept card payments.
70% electricity, water, telecommunications and media providers to accept non-cash payments from individuals & households.
50% of enterprises to apply specialized software in management and production to develop B2B and B2C e-commerce transactions.
50% of individuals and households in metropolitan areas use non-cash payments in shopping and spending.

Part 2: Statistics on registered e-commerce websites/enterprises

(I combined statistics from 2013, 2014, 2015, and 2016 to provide a comprehensive view and show trends)

1. Numbers of E-commerce Websites Registered

2. Complaints From Consumers about E-commerce Sites

3. Common Violations Done by E-commerce Sites

CHAPTER 2: VIETNAM E-COMMERCE MARKET

Part 1: Overall View

According to the 2016 survey on e-commerce implementation conducted by VECITA, the average online shopping spending per capita reached $US170; B2C online revenue reached $US5 billion, a 23% increase compared to that of 2015 and accounting for approximately 3% of total retail sales.

Products and services that were most frequently purchased were clothing, footwear, cosmetic (56%); followed by technology and electronic equipments (55%); household appliances (48%). Most of online shoppers still preferred cash on delivery, with 89% of survey respondents chose this payment method. Shopping on social media (Ex: from individual sellers on Facebook) is the most popular option with 60% of those surveyed mentioned their previous experience buying from social media.

Online Shopping in Vietnam from 2014 – 2016

Part 2: Status of E-commerce Implementation in Society

In 2016, Vietnam E-Commerce and Information Technology Agency (VECITA) — Ministry of Industry and Trade (MOIT) surveyed 1,159 Internet users in the whole country about their personal experiences with e-commerce. The survey questionnaires were answered online or filled directly in the form.

2.1. Age Distribution

The age distribution of most respondents ranges within 18–25 (49%), followed by 26–35 (37%).

2.2. Occupation Distribution

50% of survey respondents were indirect employees (office workers, teachers, researchers …); 14% were direct employees (factory workers, manual labors); 28% were pupils and students; 8% were homemakers.

2.3. Devices for Accessing the Internet

In 2016, mobile phones were the most popular devices to access Internet, accounting for 89%, up 4% from 2015. Desktop & Laptop usage also increased by 8%, while Tablets usage increased 13%. More consumers are getting online through multiple devices.

1.4. Average Daily Time Spent Using Internet

31% of Internet users accessed Internet 3–5 hours/day and 21% accessed 5–7 hours/day.

1.5. The Most Crowded Time of Accessing Internet

The time when most people access Internet is 8PM — Midnight (51%).

1.6. Purposes of Internet Usage on Mobile Devices

Reading online newspaper and participating on forums & social networks are the most common purposes of daily Internet consumption.

Extra: A graph I made to compare 2015 and 2016.

Insight: More people are searching information of goods and services online (largest increase of 6% from 2015 to 2016).

Part 2: Participating in E-commerce

2.1. Percentage of Internet Users Who Shop Online

64% of Internet users shop online, an increase of 2% from 2015 and 4% from 2014.

2.2. Methods of Looking for Information Before Purchasing Online

There is an increase in percentage of people who look for product and service information on mobile devices.

Insight: The decrease in desktop & laptop consumption can signal a shift from these devices to mobile. “Asking friends and family” is an interesting behavior that I have analyzed in the Social-cultural Aspect of the Analysis on Vietnamese E-commerce I produced for Amazon.

2.3. Devices Used to Place Online Orders

Smartphones, desktop, and laptop are the most commonly used devices to place orders.

2.4. Preferred E-commerce Channels

There is an increase in online purchases on e-marketplaces and mobile applications. Percentage of people who shop on E-marketplaces increased 14% from 2015, and mobile applications also gained 12%. Less people are shopping on e-commerce sale websites.

Insight: combining the 14% growth in e-marketplace usage and the quadruple growth in e-marketplace sales, we can see a shift from shopping on direct sales website to e-marketplaces. Increasingly more consumers are shopping mobile, which correlates to the fact above that 68% of correspondents buy things on their phones.

2.5. Offered Product Categories

The type of goods/ services which were offered the most were clothing, footwear and cosmetics (56%), although less people are purchasing these products (dropped 8% from 2015). They were followed by technology and electronic equipment (55%), household appliances (48%), airline & train tickets (45%). There are large increases in Others, Tours & Hotel Bookings, and Professional Services.

2.6. Preferred Payment Methods

Cash on delivery (COD) is still the payment of choice with 89%. There is a 3% increase in credit card usage and 7% decrease in bank transfer & ATM cards.

2.7. Average Number of Products & Services Each Online Shopper Purchases Annually

There are abnormal fluctuations in the “Less than 5” and “10 to 15” groups.

2.8. Estimated Value of An Individual’s Online Order

Exchange rate as of March 18th, 2018: 1 USD = 22,769 VND

The average value of an individual’s online purchases was mostly over 1 million VND/year, in which 32% of buyers spent more than 5 million VND on online purchases. Consumers are buying more online, as the percentage of those who buy between 1,000,000–3,000,000 VND increased 4%, while those who bought under 1,000,000 VND of goods decreased.

3. Evaluating Consumer Satisfaction of Online Shopping

3.1. Important Factors Shoppers Take Into Consideration When Buying Online

“Product Quality” (81%) and “Pricing” (78%) are the two most important things online shoppers take into consideration. They are followed by “Credibility of Seller”, “Shipping Fee & Time”, and “Return/Product Change Policy”.

3.2. Important Factors in Choosing A E-commerce Website/Application

Reading online reviews/comments and getting introductions from friends and family are the most common practices a consumer would do to choose a website/application to shop on.

3.3. Satisfaction Level of Online Shopping

Consumers are becoming more satisfied with their shopping experience.

3.4. Percentage of Consumers Who Will Continue Shopping Online

97% of respondents would continue shopping online in the future, an increase of 2% from 2015.

3.5. Challenges Consumers Face When Shopping Online

Quality issue is the most common obstacle for online shoppers. The prices are getting cheaper compared to those offline, and the ordering process is easier.

3.6. Reasons Why Consumers Have Not Shopped Online

Consumers are having a hard time in examining the quality of products and services advertised online. Also, 1 out of 2 correspondents agreed that it is still easier and faster to buy in stores. Trust issues still remain high, but we can see an improvement in product offerings, ordering procedures, as well as the increasing need to shop online.

CHAPTER 3: E-COMMERCE IMPLEMENTATION IN ENTERPRISES

Part 1: General Information

In 2016, VECITA conducted a survey on e-commerce implementation of 3,134 nationwide enterprises. The enterprises were different in type, business sector and size.

1.1. Types of Enterprises

1.2. Areas of Businesses

1.3. Sizes of Enterprise:

SMEs: 88%

Large Enterprises: 12%

Part 2: Enterprises’ Readiness of E-commerce Implementation

1. IT Infrastructure

1.1. Hardware

In 2016, 99% of enterprises were equipped with PCs and laptops. The proportion of enterprises using tablets increased from 45% in 2014, 50% in 2015, and 61% in 2016.

1.2. Software

The most common softwares used by enterprises were accounting — finance (91%, up 2%) and human resource management (59%, up 10%). Other software used by enterprises included Customer Relationship Management — CRM (32%, up 9%); Supply Chain Management — SCM (28%, up 8%) and Enterprises Resource Planning — ERP (15%, up 2%).

Insight: There are strong increases in software usages and task automation.

1.3. Cost Structure

The strongest increase is in human resource & training, this correlates to tendency of enterprises to develop their own workforce to deal with the existing skilled labor shortage.

2. E-commerce Human Resource

2.1. Percentage of Enterprises Having Staffs Specializing in IT & E-commerce

Yes: 36%

No: 66%

2.2. Percentage of Enterprises That Are Having Difficulty Recruiting IT and E-commerce Staffs

31% of enterprises faced difficulties in the recruitment of IT and E-commerce specialized staffs, a 7% increase from 2015.

2.3. IT and E-commerce Skills That Are Hard to Recruit

3/ E-mail Implementation

Purposes of Email Usage

4/ E-signature & E-contract Implementation

4.1. Percentage of Enterprises Using E-signature

4.2. Percentage of Enterprises Using E-contract

31% of surveyed enterprises do use electronic contracts.

Part 3: Methods of E-commerce Implementation in Enterprises

1/ Web-based E-commerce

1.1. Percentage of Enterprises Having Websites

1.2. Proportion of Enterprises Participating in E-marketplaces Over Years

1.3. Proportion of Enterprises Selling Goods/Services on Social Networks Over Years

1.4. Proportion of Enterprises Ordering and Getting Orders Online

2/ Mobile-based E-commerce

2.1. Proportion of Websites Having Mobile Version

2.2. Proportion of Enterprises Owning Merchant Applications on Mobile Devices

2.3. Choice of Mobile Operating System

2.4. Percentage of Enterprises Allowing Shoppers to Perform the Entire Shopping Process On Mobile Devices

41% of enterprises allowed their customers to perform the entire shopping process on mobile devices, compared to 23% in 2015.

2.5 Percentage of Enterprises Having Promotions for Mobile Device Users

30% of enterprises have promotions for their customers who shop on mobile device, compared to 37% in 2015.

2.6. Average Time Customers Spend on E-commerce Mobile Apps

2.7. Enterprises’ Rating in E-commerce Implication Effectiveness

Part 4: Operation of E-commerce Websites & Mobile Applications

1.1 Frequency of Information Updates

1.2. Proportion of Developing & Operating Website/Mobile App in Total E-commerce Investment

2/ Advertisement for E-commerce Websites & Mobile Apps

2.1. Forms of Advertisement

2.2. Annual Advertising Expense

2.3. Effectiveness Evaluation of Forms of Advertisement

CHAPTER 5: IN-DEPTH ANALYSES OF E-COMMERCE WEBSITES’ OPERATION

Part 1: General Information

In 2016, VECITA conducted a survey to understand the e-commerce operation of individuals and enterprises who are registered with the Ministry of Industry and Trade. The statistics below are from the survey results gathered from 2593 entities.

5.1. Operation Models

VECITA surveyed two types of e-commerce websites: e-commerce merchant websites accounted for 89%; e-commerce service websites accounted for 11%.

5.2. Functions of E-commerce Service Websites

In the group of e-commerce service websites, 87% were e-marketplaces, 10% were online promotion websites, and 3% were online auction websites.

5.3. E-commerce Sales Websites’ Scope of Operation

According to the survey, 76% of websites were nationwide businesses, 16% were international businesses, 6% were provincial/city businesses, and 2% operate both domestically and internationally.

5.3. E-commerce Sales Websites’ Source of Investment

98% of surveyed e-commerce sales websites are self-funded, 1% received government funding, and 1% received foreign investments.

5.4. Product Categories on E-commerce Websites

Electronic, digital, audio and media became the most popular product categories in 2016, there are slight increases in Health & Beauty and Software, Website Design, and Storage.

5.5. Staffs Categorized by Work Specialization

There is an inconsistency from VECITA in 2016 and 2017 reports. The numbers add up to 106% in 2016, which could have been a calculation error or representation of multi-functional staffs. More Sales staffs were added, while the numbers of IT staffs and Mobile Developers were reduced.

Part 2: Supporting Utilities and Tools on E-commerce Websites

1. Supporting Utilities & Tools

1.1. Percentage of Websites That Require User Accounts Before Placing Online Orders

2015: 30%

2016: 29%

1.2. Percentage of Websites That Have Online Support

2015: 97%

2016: 91%

1.3. Utilities on E-commerce Websites

More websites are providing filter/search and comparison tools. Interestingly, when comparing between 2015 and 2016, less websites have order management tool to help shoppers manage and track orders, order confirmation via email & SMS, as well as product rating.

1.4. Social Networks Integration

More social networks are being integrated onto e-commerce websites.

Part 2: Website Policies & Supporting Services

2.1. Commonly Used Tools by Customers

Phone is still the most popular support toll (chosen by 90% of surveyed enterprises). The number of interactions done via email increased 6%, while online support decreased 2%.

2.2. Forms of Delivery Services

Compared to 2015, more enterprises are utilizing both in-house and third-party delivery services.

2.3. Websites with Warranty and Maintenance Policies

2015: 66%

2016: 80%

2.4. Websites with Changing, Returning, and Refunding Policies

2015: 63%

2016: 77%

2.5. Websites with Disputes & Complaints Settlement

2015: 89%

2016: 91%

2.6. Websites with Mechanism and Procedure to Review & Evaluate Information

2015: 70%

2016: 78%

2.6. Websites with Personal Information Protection Policies

2015: 87%

2016: 85%

Part 3: Payment Methods

3.1. Accepted Payment Methods

In the current, e-commerce websites satisfied the need of both online and offline payment methods of customers. The two most used methods were Cash on delivery (COD) and Online Payments.

Cash on Delivery: 71%

Online Payment: 54%

Others: 20%

3.2. Integration of Intermediate Payment Service Providers

Yes: 82%

No: 18%

3.3. Popular Intermediate Payment Service Providers

For websites which applied the online payment, the popular intermediate payment service providers were: Ngan Luong (increased 17% from 2015), OnePay (also increased 17%), Bao Kim (decreased 13%). Others include PayPal, Banknetvn, Napas, etc.

Part 4: Some Statistics of E-commerce Websites

4.1. Most Purchases Goods & Services

There is a strong increase in number of purchases for products within the Electronic, Digital, Audio & Media, Health & Beauty, Computers, and Housing categories. Fashion& Accessories and Home Appliances saw decreases.

There were no 2015 data for Professional Services, Real Estate Service, Car & Motorbike, Sport & Camping, Software, and Mom & Baby categories.

4.2. Values of Most Purchased Goods & Services

44% of the website owners said the most purchased goods and services were worth less than 500,000 VND.

The statistics from 2015 were weighted different, so I made a separate one for comparison.

As you can see, VECITA omitted the below 100,000 VND, which I think is a big error because purchases less than 200,000 VND accounted for 21% in 2016.

4.3. Proportion of Shoppers Who Purchase More Than Once

Only 65% of surveyed e-commerce merchant websites could track the number of customers who purchased more than one time on the websites (a 11% decrease). In which, 23% said that the proportion of these customers ranged from 10% to 30%. 13% had this proportion from 30% to 50%. This statistic is not clear enough to make a conclusion.

4.4. Percentage of Incomplete Orders

Among e-commerce merchant websites allowing online orders, the average percentage of incomplete orders was approximately 29%, increased from 15% in 2015. These were orders in which buyers could not be identified due to false information filling, or orders canceled immediately after being made, or orders unconfirmed by buyers.

4.5. Main Sources of Revenue

The main source of revenue for e-commerce sales websites is the sales of products & services.

4.6. Allocation of Fundings

Although e-commerce websites mainly operate online, a large percentage of funding still went to traditional advertising.

4.7. Business Performance

The total revenue of the first 10 months of 2016 of 1,181 surveyed e-commerce merchant websites was 11,300 billion VND (11,300,000,000,000/22,725 = US$ 497,249,725). Meanwhile, this total revenue of the first 10 months of 2015 of 875 surveyed e-commerce sales was 11,624 billion VND (US$ 511,507,151).

In 2016, the top performance sites specialize in providing the following product categories: Electronic, Digital, Audio & Media, Electric Refrigerant & Home Appliance, and Airline & Train Tickets.

4.8. Top E-commerce Sales Websites by Revenue

This list is not a ranking.

Part 5: E-commerce Service Websites (E-marketplaces & Group Buying Websites)

5.1. Most Purchases Goods & Services

In 2016, Real-estate service and Electronic, digital, audio & Media were two categories that were purchased the most on e-commerce service websites at a rate of 31% and 24%, respectively. There were no statistics available for a few categories in 2015. Overall, consumers are buying more in many product categories.

Extra: In comparison to the Most Purchased Goods & Services from E-commerce Sales Websites.

Some of the best selling product categories that both E-commerce Sales Websites and E-commerce Service Websites share are: Electronic, Digital, Audio & Media, Health & Beauty, Computer, Telephone & Office Equipments, and Fashion &Accessories. Real-estate Service and Car & Motorbike are more common in E-commerce Marketplaces.

5.2. Values of Most Purchased Goods & Services

Once again, there might have been a calculating error from VECITA, when the total number adds up to be 104% instead of 100%.

Extra: In comparison to the Values of Most Purchased Goods & Services from E-commerce Sales Websites.

They look very similar.

5.3. Main Sources of Revenue

The main source of revenue for e-commerce service websites comes from Advertising instead of Sales of Good & Services like that of e-commerce sales websites. We can see an slight increase in sales participation among surveyed websites.

5.4. Business Performance

The total revenue of the first 10 months of 2016 (obtained by charging fees of e-commerce services such as online store fee, membership fee, advertisement fee, fee calculated based on percentages of the orders’ value) of 107 e-marketplaces in the survey was estimated to be 9,185 billion VND, a 4.6 time increase over the previous year of 2015. This large increase is due to the entries of many new enterprises.

5.5. Top E-marketplaces by Revenue

This list is not a ranking. Total sales of 107 e-marketplaces is estimated to be 9,185 billion VND (US$ 404,180,418).

5.6. Online Promotion/Group Buying Websites

5.6.1. Business Performance (billion VND)

5.6.2. Top Online Promotion/Group Buying Websites by Revenue

5.6.3. Savings Amount of Consumers on Online Promotion Websites (billion VND)

On promotional values, the money that promotion websites saved for consumers decreased from 319 billion VND to 300 billion VND, a 6% drop.

Part 6: Difficulties & Hurdles in E-commerce Operation

Enterprises rated the obstacles and challenges they encounter when running e-commerce websites on a scale of 0: Not Challenging, 1: Fairly Challenging, 2: Very Challenging. The unfair competition among websites, high cost of delivery service, and enterprises’ lack of capable human resource are the most challenging issues enterprises are facing.