More than 105,000 sellers across four platforms, Shopee, Lazada, Tiki, and Sendo, exited the market in 2023. It can be said that the e-commerce market is becoming increasingly competitive. Selling online is gradually becoming more challenging due to the economic downturn's impact on consumer habits.
The online retail market at the beginning of 2024
As of the end of February, many associations and sectors are sharing optimistic views. After a long period of struggling due to a lack of orders, export contracts have begun to show signs of resurgence. VinaCapital expects Vietnam's export order quantity to continue increasing in the coming months due to increased consumer confidence in the United States, Vietnam's largest export market.
In particular, for China - Vietnam's largest market for fruits and vegetables - our country plans to open two new items, fresh coconuts and frozen durians, to this market. Thanks to the resurgence of business activities, laborers have more opportunities to find new job opportunities after the Lunar New Year.
For example, in Hanoi, the City Employment Service Center reported more than 44,000 recruitment targets. Meanwhile, in Ho Chi Minh City, as of the last week of February, the city's labor market is experiencing a shortage of personnel and needs to recruit an additional 52,000 laborers.
On the contrary, the online retail market is starting 2024 rather slowly. According to the e-commerce platform data from TMĐT Metric, purchasing power has not shown signs of recovery after the extended Lunar New Year holiday. From February 15th to 18th, the revenue of Shopee and TikTok Shop reached only 1,500 billion VND, a 65% decrease compared to the week before Tet.
According to statistics, due to increasingly fierce competition, more than 105,000 sellers across four platforms - Shopee, Lazada, Tiki, and Sendo - left the market in 2023. This indicates that selling on e-commerce platforms is a trend, but it is not easy for sellers.
Moreover, it's not just online stores facing challenges; there's also a cautious approach to travel and purchasing high-value items among consumers. According to data released by the General Department of Customs, in January 2024, both the volume and value of imported automobiles into Vietnam experienced a significant decline compared to the same period in 2023.
The challenge of ultra-low prices
For businesses, despite having experience in exporting products to demanding markets like Europe and the United States, Mr. Pham Van Viet, CEO of VitaJean, admits that doing business on e-commerce platforms and cross-border platforms is not easy due to pricing challenges.
According to Mr. Viet, competing at standard prices is very difficult because competitors' products are only one-third the price of VitaJean's. Mr. Viet gives the example of jeans: on e-commerce channels, some stores sell them for around 200,000 VND per pair, equivalent to the cost of raw material fabric for producing jeans at VitaJean. However, there are many other costs involved in making a pair of jeans.
Mr. Viet explains that this very low selling price is because many stores primarily use surplus fabric for manufacturing, or they sell floating goods, products from China with questionable quality that fades quickly or gets damaged easily. However, most customers prefer to buy low-priced goods.
The comprehensive market report on online retail platforms in 2023 by Metric (an e-commerce data platform) shows that the total revenue of the five largest e-commerce platforms in Vietnam (Shopee, Lazada, Tiki, Sendo, Tiktok Shop) in 2023 increased by 53.4% compared to the same period in 2022 - the highest growth rate in the past 3 years. Specifically, the sales in 2023 reached 233.2 trillion VND, with 2.2 billion units of products sold.
However, in 2023, the market continued to witness a decline in the number of sellers compared to 2022. The total number of shops with generated orders on the five e-commerce platforms was 637,273, a decrease of 1.3%, equivalent to about 10,000 sellers, despite the emergence and strong development of new e-commerce models and platforms.
The reasons for this decline stem from objective factors such as the unstable economy, political instability, disruptions in the global supply chain, and increasingly fierce competition. Particularly, this decline is also attributed to subjective factors from businesses such as choosing the wrong target markets, chasing trending products without proper production/import plans, etc.
Competition with cross-border platforms
During this period, more than 95,000 new sellers appeared on the TikTok Shop platform, balancing the market on online retail platforms in 2023 and maintaining a vibrant pace. It is forecasted that in 2024, revenue on online retail platforms will continue to increase sharply by 35%, reaching approximately 310 trillion VND.
Making custom-made ao dai (traditional Vietnamese long dress) may seem challenging to sell online, but Ms. Cao Thi Phuong Lan, the owner of Phuong Lan áo dài shop, still decided to participate in live-streaming sales on a social network. She believes that while buyers change minimally, sellers must change significantly. "For me, it's almost a comprehensive change, from approaching young people online to ensuring credibility, returns, and the quality of goods. How to make customers repeatedly choose my products and ensure their rights when buying online," Ms. Lan said.
According to Mr. Pham Bao Trung, Director of Sales at Metric data platform, in reality, many customers have the need to buy directly on entertainment platforms, but some search for products, compare prices, quality, and designs on different sales channels. This will stimulate the overall development of Vietnam's e-commerce market.
This also indicates that the trend of online sales is irreversible, mainly in terms of approach, creating a competitive advantage in this challenging yet lucrative business environment.
Mr. Dang Anh Dung, Deputy General Director of Lazada Vietnam, believes that young users are becoming more demanding, with a tendency to seek value when shopping and will change brands if they find the product quality unsatisfactory. Additionally, the new generation of tech-savvy consumers, willing to spend, is the most important component of the digital economy.
Meanwhile, Mr. Tran Van Trong, Secretary-General of the Vietnam E-commerce Association, believes that Vietnam is experiencing an explosion in business through e-commerce platforms as the number of new online consumers continues to increase in both quantity and quality.
This is the foundation that many people grasp for doing business online. In today's world, businesses that do not sell online will be eliminated from the "game."
