Recently, the Chinese government has implemented several policies prioritizing the development of cross-border e-commerce, leading to the emergence of large-scale Chinese e-commerce warehouses along the Vietnam border. In the context of a challenging economy and increasingly fierce competition, what will Vietnamese e-commerce sellers do?
Chinese goods flooding into Vietnam
Instead of having to rely on intermediary shipping companies between the two countries, the explosion of cross-border e-commerce has opened doors for Chinese sellers to flock to leading e-commerce platforms in Vietnam such as Shopee, TikTok Shop, and Lazada.
With superior logistics systems, goods shipped from the populous country no longer take many days to reach Vietnam but are shortened to a comparable time as deliveries from Ho Chi Minh City to Hanoi.
Mr. Pham Bao Trung, Director of Business Development at Metric, believes that the presence of border-adjacent giga warehouses will stimulate the scale of Vietnam's e-commerce market, while bringing attractive revenue to sellers by expanding shopping space. This is also an opportunity for Vietnamese sellers to exploit potential products to reach international customers.
Meanwhile, domestic consumers can easily access a diverse range of products in terms of design, quality, and price. Improving delivery speed through border-adjacent warehouses is also the foundation for Chinese products to appear more densely.
According to market research company eMarketer, the trend of cross-border e-commerce continues to explode in countries around the world, including Vietnam. It is estimated that Vietnam's cross-border retail sales (B2C) will reach $11.1 billion by 2026 and could become the 5th strong export sector by 2027.
Currently, Metric's data analysis platform shows that cross-border e-commerce revenue on platforms is not overly fluctuating but rather focuses on certain industries and product groups. However, with advantages such as fast delivery, reasonable prices, and convenient return policies, the competitive potential of cross-border sellers from China is significant.
Competitive on price and delivery time
The proliferation of e-commerce warehouses near the Vietnam-China border, coupled with the booming cross-border e-commerce, is intensifying the competition for Vietnamese goods.
The emergence of giant warehouses creates conditions for Chinese goods to access the Vietnamese market more quickly and easily. While this is good news for many buyers, it poses challenges for online businesses and disrupts the domestic e-commerce market.
Chinese sellers prioritize quantity, often selling products at very low prices, sometimes even close to factory prices. For example, for the same style of leather wallet, they are willing to sell it at 20-40% lower than us. Businesses find it difficult to compete as profit margins thin out.
A shopper living in Hanoi recently placed an order from China on the Shopee e-commerce platform. Just 3 days later, the order was imported into Vietnam and delivered to her the next day. Interestingly, despite being shipped from abroad, her order only cost 15,000 Vietnamese dong after applying a discount code, and she received free shipping.
Meanwhile, another order placed at a store with a Hanoi address also took 3 days to arrive. Why is there such a difference?
According to Mr. Do Quang Huy, a specialist in e-commerce and the Director of Ecotop Company, the delivery time from foreign shops has significantly shortened compared to before. Conversely, domestic logistics operations still frequently experience interruptions due to technological and infrastructure limitations. Mr. Huy asserts that current transportation companies lack consistency in their operations. Some prioritize larger partners and overlook smaller-scale sellers, forcing them to physically take their goods to post offices for shipment, resulting in additional "dead time."
Furthermore, human involvement remains crucial in the delivery chain, but it also poses risks of congestion and overload if businesses experience fluctuations in personnel.
Chinese localities also agreed to step up support
Not only the central government but also local authorities in China are intensifying support for businesses operating in the cross-border e-commerce sector.
Ha Khau District in China serves as a vital economic and cultural gateway between the populous nation and Vietnam. In this area, China plans to construct an integrated zone comprising warehouses, processing facilities for import and export, modern logistics, and cross-border e-commerce.
On January 1, 2020, Phase 1 of the China-ASEAN Cross-Border E-Commerce Industrial Park project in Ha Khau was officially completed and put into operation, with 150 companies currently operating in the area.
According to information from the Department of Commerce and the Investment Promotion Bureau of Yunnan Province in China, the country is currently investing in Phase 2 of the project at the Hong Ha pilot free trade zone.
The project is located in the northern part of Ha Khau District (Yunnan Province, China), bordering Vietnam's Lao Cai Province, 295 km from Hanoi and 416 km from Hai Phong Port. Additionally, the project is close to the Bac Ha Khau railway station, facilitating freight transportation by train and handling of goods, while also having cost advantages in transportation.
This project covers an area of approximately 85,886 square meters, with an investment capital of about 250 million RMB (nearly 35 million USD). The investment goal of the project is to develop cross-border e-commerce import and export, domestic e-commerce, livestreaming centers, logistics, and cross-border transportation.
Upon completion of the project, businesses are expected to process around 50,000 parcels per day, weighing approximately 800 tons, with the estimated annual transaction volume exceeding 2 billion RMB (280 million USD).
Similarly, in Dong Hung (Guangxi, China), just across a river from Mong Cai City (Quang Ninh, Vietnam), efforts are underway to develop the Dong Hung Border Trade Zone into the largest border trade zone in Guangxi Province.
Liang Yinghua, Chairman of the Dong Hung E-commerce Association, stated that Dong Hung City began establishing its e-commerce zone in July 2022, according to Xinhua News Agency.
Currently, there are over 20 cross-border e-commerce companies operating in the city, offering more than 200 product categories such as handicrafts and bamboo products, with approximately 500,000 products sold each month.
Bingtang City (Guangxi) is a border port city between China and Vietnam that has also seen significant development in livestreaming sales directly within the Bingtang Cross-Border E-commerce Zone.
In Guangzhou, China, there is also an urgent construction of an integrated e-commerce commercial center with a total construction area of about 44,000 square meters.
The increasing number of warehouses and e-commerce commercial centers springing up near the border between China and Vietnam, as well as neighboring ASEAN countries, is due to the favorable policies that businesses in China are receiving from regulatory authorities.
Not to lose one's footing on home ground
China not only captures and controls technology but also has abundant, skilled, and innovative human resources. This factor enables the country to have a large output for testing, researching, innovating, and setting trends.
Taking a broader view, China's "logistics miracle" has a significant impact on Vietnam's economy, as we share nearly 1,500 km of border with this neighbor.
In the context where Vietnam still relies on raw materials, even technology, from China, the easy penetration of Chinese goods and the shift in Vietnamese consumer buying habits could greatly affect domestic manufacturing industries such as textiles, household goods, etc.
Despite the short-term benefits, Metric representatives warn that if there is no change, small and unprofessional domestic sellers will be easily pushed out of the game.
Leveraging the advantage of market understanding
To avoid losing ground in the domestic market, Vietnamese businesses should capitalize on their advantages in grasping and understanding the local market and consumer preferences. They should readily access and utilize market research tools to develop and tailor their products to best fit the preferences of consumers.
Moreover, businesses need to develop specific local marketing and sales strategies to reach and attract customers in the area. This may involve enhancing online promotion, utilizing social media, and leveraging popular online sales channels within the local community.
Develop product quality and user orientation
Domestic sellers cannot sell products as widely as before. Businesses and sellers with an understanding of local culture and lifestyle need to take advantage of the large force of KOCs/KOLs to orient users.
Focus on improving the quality of your products and services to attract and retain customers. This can include improving manufacturing processes, enhancing quality control, improving customer experience and providing good after-sales service.
Search for diverse sources of supply
Instead of relying entirely on supply sources from China, retailers can explore supply options from other countries to minimize risks and ensure diversity in sourcing.
Optimizing shipping costs
In the face of competition from Chinese e-commerce warehouses, sellers may need to optimize shipping costs to minimize the overall expenses of their products. This could involve seeking out reasonably priced shipping partners and improving shipping processes to save time and costs.
Enhancing flexibility and innovation
To cope with competition from Chinese e-commerce warehouses, sellers need to be flexible and willing to adapt to the local market. This may involve quickly responding to changes in customer demand and developing new products and services to meet market needs.
In fact, sellers can also leverage strengths in items such as agricultural products, dried foods, organic cosmetics, or promote easily manufactured items in Vietnam. Additionally, sellers should focus on product design, leverage product strengths, and build brand stories to build trust with consumers.
Meanwhile, Vietnamese businesses should collaborate to leverage each other's strengths, engage in healthy competition, and move forward together.
