The establishment of warehouses at the border with a series of massive facilities by China will undoubtedly streamline trading activities, making the process more efficient and ensuring quicker delivery of goods to consumers. However, what will be the role of e-commerce retailers importing goods from China for distribution? How will small and medium-sized enterprises, as well as local Vietnamese brands and businesses, be affected? What changes will they need to make to address this challenge? Join Upbase in exploring the answers to these questions in the article below!
China is ramping up cross-border e-commerce with four warehouses at major border crossings
Since 2022, China has become Vietnam's largest trading partner with a total trade turnover reaching $177.7 billion, accounting for nearly 25% of Vietnam's total import-export turnover. This demonstrates that the Chinese market continues to play an extremely important role in Vietnam's import-export sector and economy. This also has a significant impact on Vietnam's e-commerce industry, as a considerable proportion of goods imported from China contribute to the market.
Read more: Overview Report on E-commerce in Quarter 3 and Forecast for Quarter 4
In the three border cities of your country, namely Ha Khau (bordering Lao Cai), Bang Tuong (bordering Lang Son), and Dong Hung (bordering Mong Cai), a series of massive warehouses are being constructed. Chinese factories will come here to rent warehouses, hire Vietnamese staff for daily live-streaming, and immediately deliver goods back to Vietnam.
Before China opened up, purchasing domestic goods from China was still challenging for Vietnamese consumers due to difficult customs clearance and long waiting times. Therefore, they needed to rely on intermediaries to consolidate orders and proceed with purchasing domestic goods from China, then transport them back to Vietnam and deliver them to buyers. Although the variety of products was diverse and prices were relatively affordable, due to the long waiting times, Vietnamese consumers sometimes still preferred to prioritize buying from domestic sellers or brands to receive their items more quickly.
However, now that purchasing goods from China to Vietnam has become so fast and easy, do Vietnamese consumers still need intermediaries to purchase goods? Can Vietnamese SMEs compete with China when they have an advantage in diverse manufacturing capabilities, fulfilling consumer needs with various designs and functionalities at the same price point, even within the same industry or product category?
What challenges will sellers face?
The trend of opening small businesses on e-commerce platforms with the form of receiving orders for domestic goods from China is becoming increasingly popular due to the consistently high customer demand. This approach requires minimal capital investment while offering attractive profits.
However, with China establishing four large warehouses at four border crossings with Vietnam, it will facilitate easier and faster access for Chinese domestic goods to Vietnamese consumers. Consequently, the role of intermediary sellers may become almost obsolete, as buyers can now easily purchase Chinese domestic products themselves, with quicker delivery times and potentially lower costs.
What challenges will SMEs face?
China is regarded as the "world's factory" due to its manufacturing capacity and the wide range of goods it supplies, serving not only its massive domestic market but also competing in neighboring markets like Vietnam. With the opening of four warehouses at four Vietnamese border crossings, China will further promote cross-border e-commerce as Chinese domestic goods can be cleared into Vietnam more easily and reach Vietnamese consumers more readily.
Products from China, with reasonable prices, diverse designs, and functionalities, will attract a significant number of consumers to choose these items over domestically manufactured goods from SMEs.
While products from established brands and large corporations may maintain their positions in the minds of Vietnamese consumers and remain largely unaffected by this wave, SMEs that have not yet established a strong foothold in the market will need to take action to retain customers. In a situation where they lack advantages in terms of pricing, product variety, and transportation time, SMEs must focus on strategies to differentiate themselves and enhance customer loyalty. This may involve emphasizing unique selling points, offering personalized services, enhancing brand awareness, and improving the overall customer experience.
Despite equivalent product quality, if Chinese goods offer reasonable prices and more attractive designs and functionalities, consumers may indeed opt for them over products from local SMEs. Therefore, local SMEs need to innovate, improve their product offerings, and enhance their competitiveness to maintain their market share and appeal to Vietnamese consumers.
Read more: How do consumers adapt in a volatile market?
What do sellers and SMEs need to change to stay in the race?
Producing and promoting agricultural and specialty products from different regions on e-commerce platforms
To increase competitiveness in this context, Vietnamese businesses and sellers need to gradually reduce dependence by shifting towards products that they can produce themselves or at least do not need to import from China or other countries.
Although China may have a slight advantage in terms of manufacturing capacity and product diversity, there are still products and industries where Vietnam can compete, providing goods for domestic consumers and even exporting to China and other countries. Key examples include agricultural and aquatic products in which Vietnam has a comparative advantage. Businesses may consider transitioning to these industries for e-commerce. Some have already found success, such as Trường Food with their pickled meat products. They have achieved significant sales on e-commerce platforms and during livestream sessions by producing products tailored to the Vietnamese market's needs, where China faces challenges in competing.
Focusing on developing high-quality products with a clear Unique Selling Proposition (USP) rather than just trading generic items
In a market where many sellers offer similar generic products, competition becomes increasingly challenging. Therefore, to stand out in the market, businesses need to focus on developing products with unique qualities and a clear Unique Selling Point (USP) instead of simply trading or producing commonplace items already saturating the market.
Researching the market and devising a production and product development strategy that aligns with the needs of Vietnamese consumers is crucial. This approach helps create strengths and clear points of differentiation from competitors in the same industry or product category. By doing so, businesses can enhance competitiveness and maintain resilience in the face of market fluctuations.
Creating co-branding campaigns with local businesses to boost product visibility on e-commerce platforms
To reach consumers in various locations nationwide, businesses need to expand their product range by creating co-branding campaigns with local enterprises offering similar or complementary products with shared values. By collaborating with local businesses to strengthen product presence on e-commerce platforms, SMEs can increase market share and enhance sales effectiveness in more locations. Additionally, this cooperation allows businesses to leverage the strengths of their partners for their own sales and marketing campaigns.
Influencer Marketing with KOC/KOL cannot be overlooked.
Increasing media coverage through suitable KOC/KOL (Key Opinion Customers/Key Opinion Leaders) with follower profiles aligning with the potential customer base of the business is a wise choice to compete more effectively.
Utilizing affiliate marketing through KOC/KOL supports both branding activities and sales revenue for the business. It helps the business stand out and avoid getting lost or overshadowed in the online media environment.
Read more: Being famous doesn't always mean being associated with quality products.
Conclusion
With the market and economy constantly shifting, along with countless unexpected variables, it's crucial for businesses to proactively stay informed and adapt to changes promptly.
To achieve this, sellers and businesses need to regularly update themselves with market news, economic updates, and any new developments in their industry. From there, they can flexibly devise appropriate and timely strategies to address emerging issues and changes. Most importantly, they must always be prepared to pivot when necessary.
UpBase is always honored to accompany sellers and businesses on their journey to breakthrough revenue and sustainable development in the e-commerce industry.
Contact UpBase now for comprehensive consultation and support!
