Alibaba and Goldman want a piece of Vietnam’s booming online economy

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Sneaking through crowded Ho Chi Minh City on his Honda motorbike, Ho Duc Quang walks past a statue of the city’s namesake revolutionary leader and the warren-shaped Ben Thanh market to drop off toys, books and other parcels. to the customers of the online retailer Tiki.vn.

Quang, 25, has to be quick because Tiki guarantees two-hour delivery to its express service customers in the Vietnamese metropolis. He uses AirPods to let customers know he’s about to arrive, but there’s one thing that’s slowing him down: Quang has to wait for customers to open packages and confirm everything is okay before speeding up his next one. delivery. This is a must see for many Vietnamese who are still unsure if they can be trusted online traders.

Quang’s run through the city of nine million people is part of a campaign to win over reluctant Vietnamese, many of whom are trying online shopping for the first time during the pandemic. It’s not an easy sale in a cash-based society where only about a third of adults have bank accounts, less than 5% have credit cards, and most shop at mom-and-dad stores. -pop and traditional wet markets.

A Tiki courier delivers items to a customer in Ho Chi Minh City on May 24.

Photographer: Yen Duong / Bloomberg

Although Euromonitor International estimates that e-commerce accounted for just 3% of the country’s retail market last year – the smallest amount in Southeast Asia – the growth potential is attractive. Vietnam’s digital economy is expected to reach $ 52 billion by 2025, an annual increase of 29% from 2020, according to a study by Alphabet Inc.’s Google, Temasek Holdings Pte and Bain & Co.

Contests for clients

Startups supported by Warburg Pincus LLC, Goldman Sachs Group Inc. and JD.com Inc., regional players including Singapore Shopee from Sea Ltd. and even Amazon.com Inc. is also targeting the country’s growing middle class. Between 2016 and the first half of 2020, investors injected $ 1.9 billion into Vietnam’s online sector, according to research from Google, Temasek and Bain showed.

“Vietnam is becoming a digital society with a young population who love technology,” said Ralf Matthaes, managing director of Ho Chi Minh City-based Infocus Mekong Research. “So all of these companies are jostling to provide these services.”

The government aims for online shopping to account for 10% of retail sales in Vietnam – and up to 50% in Hanoi and Ho Chi Minh City – by 2025. Authorities want to reduce cash payments for create a more transparent modern economy by increasing cashless payments. payments for public services; and improving the regulatory framework for electronic payments.

Retail clicks

Share of online shopping in total retail trade in Southeast Asia in 2020

Source: Euromonitor International


A consortium led by Alibaba Group Holding Ltd. and Baring Private Equity Asia invest $ 400 million for a 5.5% stake in the Vietnamese conglomerate The retail arm of Masan Group Corp. As a member of The deal was announced on May 18, Masan will team up with Lazada, Alibaba’s e-commerce unit in Southeast Asia. “The combination of Alibaba’s online retail expertise, Lazada’s Vietnam e-commerce platform, and Masan’s main offline network will be a powerful catalyst to modernize the retail landscape. retail in Vietnam, ”Kenny Ho, Alibaba’s investment manager for Southeast Asia, said in a statement.

M-Service JSC, a Vietnamese startup backed by Goldman Sachs Group Inc. which operates the MoMo payment app, in January has raised more than $ 100 million from a group of investors including Warburg Pincus.

For the first time in their shopping lifetimes, Vietnamese are enamored with the customer-centric retail trade common in developed economies, as dozens of e-commerce companies retain the country’s growing middle class.

Retail startups attract customers to $ 52 billion market

A worker scans and checks items on the shelves of a Tiki warehouse in Ho Chi Minh City.

Photographer: Yen Duong / Bloomberg

Consumer distrust

Digital retailers are in a court of law with shoppers wary of fraud and stores traditionally avoiding return policies. “Vietnamese are wary of what they cannot see,” Hanoi-based economist Nguyen Tri Hieu said. “Ordinary people need to see what they are buying. They need to feel it, to touch it.

So e-commerce sites run promotions – Shopee calls them “hunting hours” – with price cuts on everything from AirPods to Samsung washing machines. E-wallet startups provide vouchers. Tiki has a 30 day return policy.

Hanoi client Nguyen Thi Kim Chi, 31, who works at an entertainment media website, said e-commerce customer focus and 70% flash sales convinced her. Online reviews of products and services empower consumers, she said.

“Usually, customers have to go to stores to complain about shoddy products, sometimes even have arguments,” Chi said, “but still they can’t get anything fixed.”

Vietnam wants to switch from gold bars to credit cards

The pandemic has given digital retailing a boost with 30% more Vietnamese buying everything from food to electronics online last year, Matthaes said. New wave of viruses sweeping the country could further improve e-commerce as Ho Chi Minh City, Hanoi and other regions experience virtual experience blockages.

Changing retail

The retail landscape in Vietnam is changing faster than mature markets, said Jeffrey Perlman, managing director of Warburg Pincus in Singapore, which works for Southeast Asia and Asia Pacific real estate. Its shift to modern retail has ignored catalog shopping and standalone department stores, as shopping malls have started to flourish in large part in the past decade.

Vietnamese Warburg-backed e-wallet set to raise $ 100 million

Retail startups attract customers to $ 52 billion market

The workers register the products in the system.

Photographer: Yen Duong / Bloomberg

Tiki is the country’s largest e-commerce site among dozens of local online shopping platforms, some of which are operated by retailers who have created their own websites. Software engineer Tran Ngoc Thai Son started Tiki in 2010 with $ 5,000. He wrote the code, bought 100 English books on Amazon, then delivered them on his motorbike.

Tiki now has 3,100 employees and a state-of-the-art warehouse management system overseen by Henry Low, a former Amazon and Executive of Coupang Corp.

As his business grew, so did the efforts to attract consumers. Son has deployed a system to eliminate counterfeit products and says Tiki will support legitimate customer complaints. “If there is a defect, for example, a new phone and the customer wants to return it, we stand behind the customer 100%,” he said. “If the seller does not agree with this, we will deactivate the seller.”

From diapers to beer

Investors including Sumitomo Corp. and JD.com has supported the startup with $ 192.5 million, according to Crunchbase. Son said he expects more rounds and plans for a possible IPO.

The startup processes just under two million orders per month, Low said, as workers stacked pallets with everything from boxes of diapers to cases of Corona beer at a 10,000-square-foot distribution center an after- recent midday. Tiki deploys artificial intelligence and robots capable of moving 800 kilograms of product to speed things up.

“It’s so fast,” Son said of its logistics system, which seeks to offer 500,000 products for two-hour delivery compared to 200,000 now, helping Tiki achieve profitability. “Customers don’t have the opportunity to change their mind. “

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