E-commerce: windfall for express delivery services

02-Mar-2021 Intellasia | TheSaigonTimes | 5:02 AM Print This Post

In Vietnam, e-commerce is projected to grow by 15-20 percent annually due to the country’s young population and the enormous popularity of mobile phone use. These growth rates also benefit fast delivery firms.

The Covid-19 pandemic has extensively changed the way humans work and interact. In addition to the many enterprises and industries which suffer from social distancing measures and lockdowns, some others benefit hugely from them. A case in point is e-commerce.

Although e-commerce had silently expanded before Covid-19 broke out, the pandemic has accelerated this tendency. It is estimated that Vietnam’s e-commerce market might generate sales of $12 billion last year, posting an annualised growth rate of 15%. The highest jump was made in the segments of food and grocery delivery services, at 33 percent year-on-year, while those of garments and cosmetics posted growth rates of 5 percent and 12%, respectively.

Another notable point is although Internet access and mobile phone use are fairly popular in Vietnam, e-commerce application in local businesses remains relatively slow. According to the Ministry of Information and Communications, the total number of mobile phone subscribers here amounted to 130 million in 2020, of which 72 million were 3G/4G subscribers (out of a population of 96 million people). However, only 4 percent of all enterprises in Vietnam registered for a domain names on the Internet. Moreover, only 17 percent of the websites with a domain name had a version optimised for mobile phones, slightly higher than the 16%-mark in 2019. Given that current low rate among enterprises, Vietnam’s e-commerce may have considerable room for growth, especially when Covid-19 still plays a role in fast-forwarding digitalisation.

The e-commerce ecosystem cannot go forward without the express delivery industry, which has been named as a crucial logistic link for e-commerce development. It is this highly potential attraction which has captured the attention of players bringing in new business models.

According to an analysis prepared by the stock brokerage house SSI, during 2019-2020, two foreign companies joined the market of fast delivery serviceJ&T Express (in late 2018) and Best Express (in late 2019). The newcomers have soon become the movers and shakers of the market gaining their market shares and offering competitive prices. The franchising model in the express delivery service introduced into Vietnam by these two companies enables them to expand much more rapidly relying on costs lower than those of traditional players, such as VNPost, Viettel Post, GHTK and GHN. As a result, foreign newcomers have gained significant market shares, forcing local players to cut their service charges.

Big players on the express delivery service

Google maintains that Vietnam’s C2C e-commerce sales are expected to grow from $7 billion in 2002 to $29 billion in 2025 in line with its double growth rate of 34 percent compared with the same period in the previous years. The gross merchandise volume (GMV) growth rate of transacted commodities both in C2C and B2B may range between 15 percent and 20 percent annually within the next five years.

Aside from the favourable macroeconomic background created by a young population that gains easy access to technology, when it comes to microeconomic conditions, the draft decree on transnational e-commerce activities being proposed and completed by the Ministry of Finance is another factor believed to contribute to the development of this new form of business. Currently, transnational e-commerce activities are considered trading of normal commodities which are subject to conventional procedures and tariffs. When approved, probably this year, the decree will solve some problems in this aspect and thus step up demand in transnational e-commerce of both domestic consumers and traders.

As regards the express delivery service, also according to SSI, competition is poised to become fiercer. Yet more market segments are to surface. In 2021, new express delivery companies are likely to boost their promotional campaigns. Therefore, cost optimisation will be the key to success. Moreover, delivery firms may resort to market segmentation instead of direct confrontation. Franchising/low-cost companies will focus on mass markets or segments which tolerate lower expectations of goods order taking and timely delivery. Meanwhile, other firms may place more emphasis on high-end markets.

Not many express delivery companies have been listed on the stock market. The most prominent among these few is Viettel Post (stock code VTP, UpCom). VTP’s business results in the first nine months of 2020 were relatively good with an annualised profit rise of 15 percent despite the nationwide social distancing order in April last year.

Being one of the four “pillars” of Viettel Group during 2021-2025, VTP is comprehensively supported by the group, receiving state-of-the-art technology and a national infrastructure network. As per technology, VTP is assisted by the mother company in terms of human resources with which it develops hitech products designed to solve three problems: taking large numbers of orders, cutting the total delivery time, and providing diverse services as well as obtaining bigger sales.

As far as the network is concerned, after taking over the 823 telecom outlets from Viettel Telecom in 2019, VTP currently has 1,825 post offices and 6,000 points of delivery. VTP boasts the second-largest postal infrastructure in Vietnam behind only VNPost (with 11,235 post offices and delivery points).

Besides plans to expand its network in the years to come, VTP may optimise the existing extensive network of Viettel to cross-sell its services. All considered, VTP is expected to reach a double growth rate of 18-20 percent in the express delivery service during 2020-2023.

https://tienphongnews.com/e-commerce-windfall-for-express-delivery-services-141367.html

 

Category: Business, Vietnam

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