The popularity of mobile e-commerce in Vietnam has seen its strongest yearly growth with the usage of e-payment systems increasing at an estimated rate of 22% per annum.

Smart phones have been the medium for 72% of the total hits on e-commerce websites, while 53% of online shopping transactions have been conducted via mobile platforms.

According to Appota’s report on Vietnam’s mobile application market in the first half of the year, the number of online shoppers in Vietnam is estimated at 35.1 million, generating more than US$2 billion in revenue. That figure is predicted to reach 43.9 million  with revenue surpassing US$4 billion by 2022

The statistics show that the number of people goods purchasers through Facebook, accounted for 67% of online shopping in 2016 and that figure rose to 83% in 2017.

The report indicates that the millennial generation (18-35 age group) has made up 82% of shares of Vietnam’s e-commerce market. This is the most important segment for retailers and online service providers. HCM city has the biggest online shopping market with 38%, trailed by Hanoi (17%), Can Tho (3%), Da Nang (3%) and Hai Phong (1%) while the remaining localities hold 39%.

The findings of another report, by iPrice, also show that mobile platforms have contributed a large number of hits of e-commerce websites. Vietnam has the lowest rate of e-commerce website access in South-East Asia but posted the strongest growth over the past year.

Statistics indicate a 26% increase in the number of unique visitors to e-commerce websites using mobile devices. Strong growth after 2016 pointed to a gradual rise in the number of Vietnamese consumers using smart phones for online shopping. This requires retailers and service providers to design e-commerce channels which are smart phone compatible.

In addition, the use of work computers for shopping has increased 12% compared to 2016. Up to 53% of online shoppers use smart phone browsers to purchase goods, while 52% of online shoppers use mobile applications to buy goods.

According to experts, the use of mobile devices is now a common trend among consumers purchasing goods online and there has been a remarkable increase in consumers’ dependence on smart devices for their shopping habits.

At the recent Mobile Ecommerce Day 2018, Sapo Web released the statistics of visits to its system of more than 33,000 customer websites, more than 60% of visitors to e-commerce sites are from mobile phones (up 5% over last year) while the remaining proportion arrive from desktop and tablet.

The latest report from iPrice shows that the growth of visitors using smartphones in South East Asia and Vietnam in particular has seen continued growth during the year, accounting for 72% of the total hits on e-commerce websites.

However, the iPrice study shows one downside to the positive growth in the number of hits from mobile phones using mobile shopping apps, the percentage of visitors completing the checkout process on mobile is not as high as with PCs.

The conversion rate from online shop personal computers is much higher than mobile devices, while the average value of online shopping carts also differs between the two devices.

For example, the conversion rate among Vietnam’s online shoppers while using computers is 3.6 and the rate for mobile users is only 1.4. The average value of an online shopping cart on PCs is US$26 and US$23 on mobile devices.

The difference in shopping habits between mobile and computer shows that Vietnamese people often search and study products on their phones before completing the purchase of goods on computers.

Many e-commerce websites B2C like Lazada, Tiki, and Sendo have consistently had the highest traffic and posted constant growth.

A representative from Lazada Vietnam said that since the beginning of the year, the number of online shoppers using Lazada’s mobile applications has increased 60% and the quantity of orders through their mobile apps accounts for 70% of total orders.

However, the e-commerce industry faces a stumbling block on the path to sustainable development for a lack of consumer trust in the quality of online products. Up to 44% of consumers report being dissatisfied with the quality of goods purchased online. Low consumer confidence remains the biggest hindrance for buyers completing the checkout process. Feelings of security are the key factor in consumer’s willingness to buy online.

In addition, businesses are confused about ensuring the standard of design for mobile platforms which meets customer demands and will increase the rate of conversion for shopping.

Mr. Tran Trong Tuyen, CEO of DKT Technology —which has just launched Sapo X, the first multi-channel management and sales platform in Vietnam — said many businesses have lost revenue as they have neglected improvements to their online shopping apps in order to provide customers with new shopping experiences and maximize the mobile conversion.

To accomplish this, businesses need to research consumer behaviour and take advantage of applications and features to optimize the efficiency of advertising and selling goods on the now ubiquitous smartphone.

VOV

The HCM City tax department said it has served a tax notice and slapped a fine on an individual together amounting to VND4.1 billion (US$178,000) for failure to pay tax on incomes received from foreign companies in the last two years.

It said the person, whose gender or name it did not reveal, had received over VND41 billion ($1.78 million) from Google, Facebook and Youtube.

This is the first person ever in the country to pay tax on online income from abroad.

Authorities know of many other individuals and businesses getting incomes from Google, Facebook and others without filing tax returns.

“We asked four banks to review all money transactions and discovered huge amounts of money were received from Google, Facebook, Youtube without paying tax,” Nguyen Nam Binh, deputy head of the Department of Tax, was quoted as saying by Tuoi Tre (Youth) newspaper.

The tax department questioned the person about the VND4.1 billion back taxes who claimed to have forgotten to pay tax.

Binh revealed that another person with temporary residence in HCM City earned VND20-30 billion ($870,000 – 1.3 million) from Google, Facebook and Youtube, but moved out of his temporary address when tax officials tried to contact him.

“We have asked the tax department of Quang Nam Province, where he is registered as a permanent resident, to pursue the matter.”

The HCM City tax department said the number of people around the country earning large incomes from Google, Facebook and Youtube needs to be checked, and it would urge all banks and financial institutions to co-operate.

“We would like to inform all individuals and organisations who receive money from abroad but have not registered with tax authorities to do so immediately,” Binh said.

“The tax department has suggested creating a co-ordination mechanism between it and banks to monitor incomes, especially from non-traditional resources like creating apps and games and video clips on social network and the internet.”

Tax collection from people selling products on Facebook had made little progress either, he said.

He said the department had called on sellers on Facebook to discuss tax payments with it but the number of people who had done so was very small.

Tran Xoa, a lawyer and director of the Minh Dang Quang Legal Company, criticised banks for failing to report unusual money transactions.

“The State Bank of Viet Nam has a regulation that banks are responsible for reporting unusual actions, but money transfers by Google, Facebook, Youtube to individuals and organisations have been happening for a long time and we should reconsider the system.”

He also suggested that tax authorities should improve oversight of trans-border transactions and tax education of the public.

By checking with just four banks, the tax authorities discovered that Google, Facebook and Youtube have paid over VND500 billion ($21.75 million) to individuals and organisations, with the amounts ranging from tens of millions to several billion dong.

Everyone who received over VND100 million ($4,350) in a financial year have to pay 5 per cent valued added tax and 2 per income tax.

The department vowed to also collect taxes from organisations receiving incomes from Google, Facebook and Youtube. — VNS

Uber’s recent exit from Vietnam has prompted many local and regional companies to eye a larger slice of the ride-hailing market in the country. 

The latest to arrive is FastGo, developed over the last three years and officially launched on June 12 in Hanoi. Mr. Nguyen Huu Tuat, CEO and Founder of FastGo, said the first 500 registered drivers will operate for free. 

“Those following will be charged a maximum of VND30,000 ($1.30) per day for operating costs, which is much more competitive than Grab,” he said. 

Mr. Tuat targets launching FastGo in Ho Chi Minh City in July and in Da Nang in August. He will expand to eight large cities and provinces, approaching 5 million customers and 20,000 drivers, in 2019. Its target customer segment is young office workers, who are generally tech-savvy.

On the scene

The new players in the ride-hailing game have created serious competition, with any monopoly Grab may have held soon disappearing. Aber announced its entry into Vietnam on June 8, which was developed in 2015 by a group of young Vietnamese engineers studying in Europe. 

Business Development Director Mr. Huynh Le Phu Phong explained that it provides six services: Aber Car, Aber Bike, Aber Truck, Aber Travel, Aber Business, and Aber Express, but will focus on its two ride-sharing services, Aber Car and Aber Bike, for the time being. 

Users and drivers can look forward to attractive features from Aber. The company guarantees it will not charge higher prices during rush hour; a practice employed by both Grab and Uber that received a considerable amount of criticism from users. Drivers can also expect to benefit more from the app.

Traditional transport companies, meanwhile, are introducing their own new apps to meet passenger demand. The VATO app has actually been in the market for the last two years under the name VIVU, which changed to VATO and improved its system when the Phuong Trang Bus JSC (Futabus Lines) invested about $100 million. VATO launched its app in April, after Uber exited Vietnam.

Along with the appearance of local apps, GO-JEK from Indonesia is preparing to come to Vietnam soon. A GO-JEK spokesperson told VET that although it could not provide details on its plans or time of entry, it could confirm it will offer quality services with incentives for passengers and drivers. 

“We have had a positive impact on millions of people in Indonesia and we want to build on this by taking GO-JEK to countries where our impact will be felt the most,” the spokesperson said. 

“This is why we are looking at Vietnam, where there are similar challenges that drove us to found GO-JEK in Indonesia.” The company has already advertised for drivers in Vietnam using its app.

Rocky road

The appearance of more ride-hailing apps has brought greater choice to Vietnamese passengers and triggered major competition in the industry, according to Mr. Nguyen Hoa Binh, Chairman of the NextTech Group. 

Vietnamese ride-hailing companies, he went on, are in an imbalanced race with foreign apps such as Grab, which has a huge number of drivers and passengers in Vietnam’s large cities. 

Grab has held the upper hand in the market since Uber withdrew, as it has an extensive customer base, including a large number of former Uber customers. Limitations remain, however, such as inaccurate locations and unstable technology. 

“It’s difficult for Vietnamese enterprises to compete directly through similar promotions,” Mr. Binh said. “We should have reasonable policies and clear steps to attract passengers and create an ecosystem.” 

FastGo has also faced its share of challenges. The business of ride-hailing, Mr. Tuat said, is now more competitive than ever and this puts pressure on FastGo. “We need to change to become better and attract our target customers,” he said. 

“It’s hard to avoid the limitations of the app, which can only be detected when used. But we are improving every day.” 

As a modern technology, according to Mr. Vuong Minh Thai, a student at the Posts and Telecommunications Institute of Technology, Vietnamese ride-hailing apps have the same functions as Grab and Uber and user-friendly interfaces but the biggest problem is that they have a small number of drivers. It can therefore be difficult to order a ride, especially during rush hour, with the average waiting time being 5-10 minutes. 

“Many users aren’t willing to wait,” he added. So, increasing the number of cars and drivers is a pressing issue for local ride-hailing apps.

Growing market

Despite the obvious difficulties, the companies VET spoke to all believe the local market holds significant potential because the number of people using smartphones rises sharply every year. 

The share of smartphones in 2017 was 84 per cent, up 6 per cent against 2016, according to the “Smartphone User Behavior” report from market researchers Nielsen Vietnam. The percentage of smartphone users in major cities compared to feature phones has been on the rise for 15 years. 

Notably, the rapid development of technology from government policies provides advantageous conditions for these companies to flourish. Mr. Tuat firmly believes that Vietnam’s ride-hailing market could eventually reach into the billions of dollars. 

“With a clear development roadmap, superior technology platforms, and the support of Vietnamese authorities and administrators, we believe that FastGo will develop sustainably,” he said.

Mr. Khuat Viet Hung, Vice President of the National Traffic Safety Committee, said Uber’s exit presents an opportunity for Vietnamese apps. Grab has succeeded in Southeast Asia and taken market share away from Uber, which should inspire local apps to likewise take on Grab. 

“It is clear that opportunities go with challenges, but the opportunities are huge,” Mr. Hung believes.

GO-JEK, meanwhile, has also assessed Vietnam as being a fertile market. Its spokesperson told VET that Vietnamese consumers are happiest when they have choice. 

“We hope that as we arrive in new markets, we will quickly become everyone’s lifestyle app,” the spokesperson said. It was hinted that their expansion strategy in Vietnam may start with ride-hailing but it ultimately aims to replicate the multiple-service business model that has made GO-JEK the market leader in Indonesia.

VIR

Chinese companies may pour large investments into Vietnam so that their products can bear made-in-Vietnam labels. This could be detrimental to Vietnamese exporters, especially those in the wood processing and textile-garments industries, said experts.

Workers are seen at a wood processing factory. Wood and wooden products are one of the main product groups that Vietnam imports from China

Vietnam purchases intermediate products and raw materials from the northern neighbor, according to the Development and Policies Research Center.

Wood and wooden products are one of the main product groups that Vietnam imports from China.

To Xuan Phuc, a senior policy analyst at U.S.-based Forest Trends, told the Saigon Times that the depreciation of the Chinese yuan (or renminbi) would give China an advantage in its exports but place its imports at a disadvantage.

On an annual basis, Vietnam sells wood and wooden products to China with total revenue of about US$1 billion while its import bill for these items from the neighboring country is roughly US$400 million. As such, the trade surplus of the Vietnamese wood industry from China is some US$600 million per year.

“The depreciation of the yuan will be detrimental to the Vietnamese wood sector in exporting its products to the Chinese market,” Phu said. However, this is also a favorable condition for Vietnam in buying wood and wooden products from China.

Vietnam mainly exports wooden materials such as wooden lathe chips, sawn timber, wooden planks and woodworking tools to China.

“China’s market suffers less impact than its export markets,” Phuc said, adding that the Chinese market is more stable, while its level of vulnerability, due to external factors such as trade war, is lower than that of other markets.

Overall, the export growth of Vietnam’s wood and wooden products to the Northeast Asian nation this year may not be as high as in previous years. However, it is unlikely that there will be sharp declines in Vietnam’s exports of wood products to this market.

Regarding the textile and garments sector, the majority of Vietnam’s materials are imported from China, so it will suffer no impact when the yuan depreciates in value, according to Nguyen Xuan Duong, chairman of Hung Yen Garment Corporation, who is also vice president of the Vietnam Textile and Apparel Association (VITAS).

The fall of the yuan will stimulate China’s exports. Duong expressed concern that if Chinese textiles and garments are not easily shipped to the United States over the long term, these products could find their way to the U.S. market through ASEAN countries, including Vietnam. Chinese products are also subject to zero tariffs given the free trade agreement between the ASEAN and China.

The United States has imposed 25% tariffs on Chinese textiles and garments. However, China also ships its products to Japan, Europe and other major markets.

VITAS President Vu Duc Giang said that if Vietnam maintains its current exchange rate, Vietnamese textiles and garments would not be able to compete with Chinese equivalents in terms of prices. But the rapid adjustment of the exchange rate could have positive effects on Vietnamese textile and garment companies.

“What worries me most is that China will further depreciate the yuan so that the prices of its products become more  competitive than those of other exporting countries, including Vietnam,” Giang said, suggesting that the U.S. dollar-Vietnam dong exchange rate be adjusted up to VND24,000-25,000 per dollar so that Vietnamese textiles and garments could be more competitive.

He also expressed concern over the large Chinese capital inflows headed for Vietnam, allowing Chinese products to claim Vietnamese origins, so they can be shipped to other countries at lower tariffs.

China’s investment in the wood processing industry in the southern provinces of Dong Nai and Binh Duong has been substantial. Chinese companies compete for Vietnam’s labor and wood material resources, and then export their products to the U.S.

Sudden increases in wood exports to the world’s largest economy could lead to the U.S. imposition of antidumping duties on Vietnam.

Given the yuan devaluation, the situation may expand to the Vietnamese textile and garment sector.

“I have advised local governments to be cautious with foreign investment flows,” Giang said, explaining that foreign clothing products could be shipped to Vietnam and may later bear made-in-Vietnam labels. Foreign investors will be likely to invest in the final production stage in Vietnam, while other stages are executed in their home countries.

Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research, said the Vietnamese dong should be weakened to match the recent decline of the yuan.

“Devaluing the dong by 2-3% is still acceptable,” he noted, pointing out that Vietnam primarily imports raw materials from China. Thus, the devaluation of the yuan will make raw materials originally from China cheaper. Products made from Chinese materials will be shipped abroad, and if the exchange rate rises slightly, Vietnamese companies will still  benefit.

SGT