Group Report Present The Status And Trends Of E- Commerce In Vietnam.pdf

NATIONAL ECONOMICS UNIVERSITYSCHOOL OF ADVANCED EDUCATIONAL PROGRAMS

GROUP REPORT

Group 6

Table of Contents

I INTRODUCTION 3

I.1 Background: 3

I.2 Research Questions: 3

II MAIN REPORT 4

I.1 What is e-commerce? 4

I.1.1.1 Definition 4

I.1.1.2 Type of e-commerce 5

I.1.1.3 Ecommerce Timeline 6

I.1.1.4 Differences between e-commerce and traditional commerce: 9

I.2 Present the status and trends of e- commerce in Vietnam? 10

I.1.1.1 The status 10

I.1.1.2 The trend of e-commerce in Vietnam 12

I.3 Discuss some possible ways in which growth in e-commerce may affect the spatial distribution of economic activities? 13

I.1.1.1 Delivery Infrastructure for ( warehouses, logistic hubs ) 13

I.1.1.2 Service sector transformation 15

I.1.1.3 Shift from Physical to Digital Spaces: New Business Models 18

I.4 What should Vietnam do to promote e- commerce? 20

I INTRODUCTIONI.1 Background:

As technology advanced, e-commerce expanded beyond the realm of retail and extendedits reach into various sectors such as finance, travel, education, and more Online bankingand secure payment systems facilitated reliable financial transactions, overcame the issueof geographic boundaries In present times, e-commerce has become an integral andindispensable part of everyday life It has fundamentally reshaped consumer behavior byoffering convenience, an extensive range of choices, and personalized shoppingexperiences Businesses have recognized the potential of e-commerce as a means toexpand their market reach, access global markets, and optimize operational efficiencies.While e-commerce presents abundant opportunities, it also brings forth challenges.Businesses must continually adapt to changing consumer expectations, invest in robustonline platforms, and implement effective marketing strategies to remain competitive.Consumers, on the other hand, need to maintain a cautious approach to online security andprivacy while enjoying the benefits and convenience of the digital marketplace.

E-commerce has emerged as a transformative force, revolutionizing business operationsand consumer shopping habits Its trajectory has been shaped by technologicaladvancements, evolving consumer demands, and the pursuit of convenience.Understanding the background and dynamics of e-commerce is crucial for individuals andbusinesses to thrive and succeed in the dynamic digital age.

I.2 Research Questions:

1 What is e-commerce?

2 Present the status and trends of e- commerce in Vietnam?

3 Discuss some possible ways in which growth in e-commerce may affect the spatialdistribution of economic activities?

4 What should Vietnam do to promote e- commerce?

II MAIN REPORTI.1 What is e-commerce?I.1.1.1 Definition

E-commerce, which is short for electronic commerce, refers to the electronic buying andselling of goods and services over the internet It provides users with a virtual shoppingmall that is accessible at any time and from any location via computers, smartphones, ortablets These technologies make possible the transactions between businesses, consumers,and other entities.

Imagine yourself in a vast marketplace that houses numerous stores, each offeringdistinctive products Instead of physically navigating from one store to another, e-commerce facilitates the convenience of accessing this marketplace directly through theinternet.

Through e-commerce, individuals have the opportunity to explore an extensive range ofproducts originating from various parts of the world Whether it's fashionable clothing,electronic gadgets, books, furniture, or even groceries, the possibilities are virtuallylimitless This enables users to embark on an unending shopping adventure withoutleaving the comfort of their own homes.

So, how does e-commerce function?

Figure 1 E-commerce customer journey

When a desired product is found, users can view images, read detailed descriptions, andeven consult reviews from other customers, commonly referred to as social proof, whohave previously purchased the same item This wealth of information assists in makinginformed purchasing decisions.

Once a selection has been made, the chosen item can be added to a virtual shopping cart,serving as a centralized location for collecting desired purchases

Upon deciding to proceed with the purchase, users are guided to the checkout stage, wherethey provide their payment information, such as credit card details or utilizing services likePayPal It is essential to note that stringent security measures are in place to ensure thesafety of this transaction process.

Subsequent to the completion of payment, the seller receives a notification and begins thepreparation of the ordered items for shipment This step can be likened to having apersonal shopping assistant taking care of all necessary arrangements Depending on theseller's location, the delivery time may vary from a few days to several weeks until thepackage reaches the buyer's designated destination.

In summary, e-commerce revolutionizes the way goods and services are bought and soldby leveraging the convenience of the internet It provides individuals with a vast andaccessible marketplace, facilitating product exploration, informed decision-making, securetransactions, and efficient delivery processes.

I.1.1.2 Type of e-commerce

1 Business-to-Consumer (B2C) e-commerce: Online businesses selling products to

individual consumers through websites, mobile apps, or e-commerce platforms Examplesinclude online marketplace such as: Amazon, Lazada, Tiki, Shopee.

2 Business-to-Business (B2B) e-commerce: Buyers and sellers are both business

entities, comparable to manufacturer supplying goods to the retailers or wholesaler E.g.,Alibaba, Amazon business.

3 Consumer-to-Consumer (C2C) e-commerce: The category involves consumers

directly buying and selling products or services to each other through online platforms.Examples include eBay, Facebook Marketplace.

4 Consumer-to-Business (C2B) e-commerce: The practice of consumers engaging

in direct buying and selling of goods or services with each other through online platforms.Individuals act as both buyers and sellers, using online marketplaces or platforms toconnect and conduct transactions Examples: freelance websites like Upwork, Fiverr,Facebook marketplace, Craigslist.

5 Government-to-Business (G2B) e-commerce: This type involves governments

providing goods or services to businesses Examples include government websitesproviding procurement information and transactions with businesses.

6 Government-to-Consumer (G2C) e-commerce: Government entities providing

online goods, services, and information directly to individual citizens It facilitatesconvenient access to government services, such as registration for documents, governmentservices and making payments, through digital platforms

I.1.1.3 Ecommerce Timeline

1960 – 1982: Invention and the Early Days

The emergence of the Electronic Data Interchange (EDI) in the 1960s revolutionized thelandscape of electronic commerce By enabling digital data transfer between computers,EDI eliminated the need for traditional methods of document exchange such as mailingand faxing.

Online shopping was pioneered in 1979 by entrepreneur Michael Aldrich in the UnitedKingdom Aldrich was able to connect a modified domestic television to a real-time multi-

user transaction processing computer via a telephone line The system was marketed in1980 and offered as business-to-business systems that were then sold in the UK, Ireland,and Spain (Miva, November 23, 2020)

He proposed connecting a television to the supermarket, enabling the delivery of groceriesto customers' homes This groundbreaking invention, termed "teleshopping" or shopping ata distance, can be considered the precursor to contemporary online shopping.

1982 – 1990: Early Ecommerce Platforms

From the outset, it was evident that these initial advancements held immense commercialpotential for B2B online shopping However, the success of B2C would only come laterwith the widespread use of personal computers and the advent of the World Wide Web.In 1982, France introduced Minitel, an online service that utilized Videotex terminalmachines connected through telephone lines Minitel was provided free of charge totelephone subscribers and connected millions of users to a vast computing network.By 1997, over 7 million households were equipped with Minitel terminals, making thesystem highly popular However, its popularity waned in the subsequent years followingthe rise of the internet, which surpassed Minitel's capabilities and functionalities (Miva,November 23, 2020)

Present times

Throughout the history of e-commerce, there have been notable platforms that haverevolutionized the way we shop and do business Globally, Amazon stands out as aprominent example Established in 1994, Amazon started as an online bookstore and hasgrown into one of the largest e-commerce platforms worldwide, offering a vast array ofproducts Another influential platform is eBay, founded in 1995, which introduced the

concept of online auctions and allowed individuals and businesses to buy and sell a widerange of items.

In the context of Vietnam, several e-commerce platforms have emerged to cater to thegrowing online shopping trend Take Shopee, Lazada and Tiki as an example They havegained popularity with its diverse product offerings, secure payment options, and reliabledelivery services These platforms exemplify the dynamic nature of e-commerce, bothglobally and in Vietnam.

I.1.1.4 Differences between e-commerce and traditional commerce:BASIS FOR

Physical inspectionPhysical inspection of products ispossible prior to making a purchase.

Goods cannot be inspectedphysically before purchase.

Customer interaction Face-to-faceScreen-to-face

Scope of businessLimited to particular area.Worldwide reach

No uniform platform for exchange ofinformation.

Provides a uniform platform forinformation exchange.

PaymentCash, cheque, credit card, etc.Credit card, fund transfer etc.

I.2 Present the status and trends of e- commerce in Vietnam?I.1.1.1 The status

Vietnam's e-commerce market is experiencing rapid growth, positioning itself as one ofthe fastest-growing internet economies in Southeast Asia It is projected to reach a marketvalue of $39 billion by 2025, making it the second-largest e-commerce market in theregion after Indonesia The country's increasing digital population and internet penetrationprovide favorable conditions for the thriving e-commerce industry As a result, the share ofe-commerce in total retail sales is rising rapidly, with online channels outpacing traditionalretail channels, especially in the fast-moving consumer goods (FMCG) market (MinhNgoc, 2023)

In the Vietnamese e-commerce landscape, international platforms like Shopee fromSingapore and Lazada owned by Alibaba hold dominant positions However, there is alsoa growing number of local e-commerce sites, particularly e-marketplaces, emerging in themarket The Gioi Di Dong, a local brand specializing in consumer electronics and ITdevices, has gained significant popularity Over the years, the business-to-consumer (B2C)revenue of the e-commerce sector has witnessed substantial growth, increasing from lessthan $1 billion in 2012 to over $16 billion in 2022.

Figure 2 The scale of e-commerce in Viet Nam

The size of the e-commerce market is estimated to be in Vietnam, according to GlobalData.

Prior to the COVID-19 pandemic, the travel, mobility, and accommodation sectoraccounted for the largest share of e-commerce expenditure among Vietnamese internetusers However, due to the pandemic's impact on the travel and tourism industry, thissector experienced a significant decline in consumer spending in 2020 On the other hand,other e-commerce categories, particularly consumer goods like food and personal careproducts, saw notable growth In 2022, consumer goods surpassed travel, mobility, andaccommodation to become the largest e-commerce category in Vietnam, with totalconsumer spending reaching nearly $13 billion The pandemic has also driven a shift inconsumer behavior, with more Vietnamese consumers embracing online grocery shoppingand preferring it over traditional retail outlets This change is likely to persist even after

the pandemic, indicating continued expansion of the e-commerce sector in the country.(Minh Ngoc, 2023)

When it comes to payment methods in online shopping, Vietnam remains a cash-reliantcountry compared to its Southeast Asian counterparts Cash on delivery remains the mostpopular payment option among Vietnamese consumers, as it minimizes risks associatedwith online transactions Although cashless payments are gaining traction, e-wallets, inparticular, with their increasing user base and provider options, are leading the way

I.1.1.2 The trend of e-commerce in Vietnam

The e-commerce market in Vietnam has undergone significant expansion over the pastdecade, boasting an impressive average growth rate of over 60%(Ooga, 2023)

The adoption of e-commerce in Vietnam has historically been propelled by the increasingnumber of internet users and the growth of digitally-savvy consumers

The COVID-19 pandemic has further accelerated e-commerce usage due to concernssurrounding the transmission of the virus Moreover, the Vietnamese government hasimplemented initiatives to promote e-commerce adoption, with the aim of fostering growthamong segments of the population that have traditionally been less engaged in onlineshopping

The government's strategic vision entails raising e-commerce usage among the populationto 55% and elevating per capita e-commerce spending to approximately $600 by2025(Ooga, 2023).

Throughout the pandemic, as customers shifted away from traditional brick-and-mortarstores, many merchants adapted by redirecting their focus toward digital platforms tomaintain customer engagement

Lockdowns and social distancing measures prompted increased support for the program asconsumers turned to online shopping Additionally, the Vietnamese governmentencouraged e-commerce platforms to offer fresh food products, leading to the launch ofinitiatives such as TikiNgon by Tiki and the expansion of Lazada's product assortment toinclude fresh food

During the 2021 lockdowns, consumers heavily relied on e-commerce platforms liketiki.vn, lazada.vn, and shopee.vn for their grocery needs, given the temporary closures ofnon-grocery retailers.

Furthermore, an increasing number of small and medium-sized retailers are embracing commerce as a means to benefit from reduced maintenance costs and the absence of rentalfees

e-The engagement of teenager consumers with social media exposes them to rapidlyevolving fashion trends, fostering consistent demand for health and beauty products Consequently, the e-commerce segments for consumer health and beauty & personal careare projected to outpace the overall channel average in terms of growth in the comingyears.

Despite a comparatively slower e-commerce growth rate in 2022, attributed to the baseeffect, Vietnam's market remains dynamic and presents significant potential

Increased consumer spending on non-grocery items, coupled with a positive economicoutlook, contribute to this potential As vaccination rates rise and uncertaintiessurrounding the pandemic recede, sales in traditional store-based retail are expected torecover Although reliance on e-commerce may diminish, the sector will continue toexhibit robust double-digit value growth, driven by urban consumers seeking convenienceamidst their fast-paced lifestyles.