Keeping up with the SEA digital consumerJuly 14, 2021
eCommerce’s rapid ascension during the COVID-19 lockdown has completely transformed buying habits across Southeast Asia (SEA), and is poised to stay. With the rise of consumers prioritising choice, convenience, and contactless transactions, eCommerce is no longer an option for many companies, and even traditionally brick-and-mortar companies have had to jump on the bandwagon.
During a recent client engagement, Eden had the opportunity to look in-depth into Vietnam’s eCommerce market and the massive social and economic changes which make for fertile ground for eCommerce expansion. For Vietnam, a myriad of trends — from an emerging middle class and increased urbanisation to fast-growing digitalisation — has spurred the digital retail revolution. On the other hand, trepidation with eCommerce in Vietnam has been rooted in factors including lack of familiarity and a populace particularly concerned with health and safety following scandals which have rocked consumer trust. As eCommerce platforms evolve in line with local needs, new players come on the scene, and household names jump on the eCommerce bandwagon, we uncovered five key insights which we think will shape the industry’s future developments:
1. eCommerce is still a very small portion of the overall market. While growth figures are high, in 2020, eCommerce only made up about four percent of total retail sales in Vietnam. Basing a retail strategy around eCommerce alone severely limits the consumer base. Instead, retailers are honing their omnichannel strategies to tap into both the burgeoning online market and majority offline market. Vingroup, one of Vietnam’s largest conglomerates and a much-loved name in the supermarket scene, is following in the footsteps of Walmart in the US with an omni-channel charge for Vietnam. VinMart 4.0 — a shopping concept which amalgamates physical and virtual shopping — includes semi-virtual stores with the images of more than 100 products arranged as if they were on supermarket shelves. Shoppers only need to download a VinID application, scan the product QR codes, pay through the app, and they will have their goods delivered by VinMart within two to four hours. Omnichannel is, for now, the best strategy for success for new entrants and incumbents in Vietnam’s retail scene.
2. Fresh food eCommerce is gaining traction. Due to historical food safety scandals, Vietnamese consumers are particularly conscious about food safety and hesitant about the quality of fresh food online. The need for rapid delivery and cold chain logistics means that this market channel is currently only viable in the urban centres, with choices limited at the city fringes and virtually non-existent in the rural regions. However, fresh food eCommerce is growing rapidly as a result of COVID-19, as many consumers are forced to buy online during the lockdown.
3. Foreign brands must differentiate through product localisation. Foreign brands used to signal prestige and social status to the emerging middle class. However, with a default preference for foreign brands starting to fade, and a plethora of foreign brands entering the market, brands must find a way to differentiate. Successful foreign brands have localised their product, brand, and marketing strategies to cater to the increasing sophisticated market in the urban centres. Many foreign brands are tapping into influencer marketing in Vietnam to gain consumer trust and product awareness. Maybelline has leveraged local Key Opinion Leaders (KOLs) and celebrities to feature their products in social media posts, Facebook ads, and music videos. International luxury brands focus on running campaigns featuring local celebrities shot in local destinations.
4. Social shopping should not be overlooked as one of eCommerce’s most important channels. Vietnamese consumers value the convenience of direct interactions with sellers, social network ads, and recommendations from friends on platforms like Facebook, Zalo, and Instagram. Our market intelligence shows 80 percent of nationwide eCommerce sales are from Facebook shops, and — unlike for the other eCommerce platforms — these shoppers are not just in cities but spread nationwide. Facebook was voted the preferred eCommerce platform in Vietnam by 89 percent of respondents in a 2019 survey by Asia Plus inc. Fashion and beauty are the most common searches, and shoppers are increasingly buying luxury, high-value goods through social networks. While social shopping is currently dominated by C2C, an increase in B2C participation may only be round the corner.
5. A mobile-first strategy is increasingly popular. Our market intelligence revealed that the smartphone is the most preferred mode of shopping for Vietnamese consumers. With smartphone adoption in SEA expected to surpass 80 percent by 2025, some eCommerce platforms have prioritised developing their platforms to be optimised for mobile use, with additional features that are only available on mobile such as Shopee’s Livestream feature. Coupled with the social shopping trend, customers will be able to shop and browse seamlessly at all times as long as they have an internet connection. New entrants into the SEA market should ensure that their eCommerce offering is optimised for mobile.
eCommerce has spearheaded the democratisation of the retail space in SEA and it is growing rapidly with the entry of various foreign and local new players. Any merchant with access to the Internet from part-time individual merchants to household brand names has tremendous opportunity to reach potential customers, given the increasing number of daily activities that are migrating and staying online. As companies are thinking of entering the crowded eCommerce market in SEA, it is important to consider societal trends, consumer needs, and buying preferences of consumers in a hyperlocal context as there is no one-size-fits-all approach.