Ecommerce: Consequences of money-burning race

Viettel Post Corporation (VTP) has recently announced its ambition to step into two hot growing areas in Vietnam including e-commerce (e-commerce) and technology car call.

VTP’s introduction of this ambition does not seem to take into account the impact of the e-commerce market related to the “race to the bottom” of giants Lazada, Shopee and Tiki.

The race to “burn money”

Competition between e-commerce exchanges is increasingly fierce in order to position itself in the market, while businesses are investing heavily in advertising, warehousing infrastructure, human resources …

The promotion race originated from Lazada’s big sale promotion program up to 95% on May 9, 2018 on the occasion of the 6th anniversary of the establishment of this floor with the message “Great birthday discount party” Shopee immediately launched a competitive discount program with the message “What needs a birthday, the deal is still shocking, the price is still loading”.

Not to miss, Adayroi quickly joined the race with the discount, free shipping with the message “Happy Birthday to your neighbors” and Tiki even made a promotional video (TVC) for the program. My discount is in response to the rest of the exchanges with the title “Unlimited offers – even more fun than birthday”.

VNDIRECT Securities Joint Stock Company in the latest report said that this race is the cause of the consequences, all three e-commerce giants regularly reported losses annually.

The total accumulated loss value of Lazada, Shopee and Tiki in the period of 2015-18 is VND 9,400 billion. This creates a huge barrier for new players who want to enter this potential but fierce market, according to VNDIRECT.

VNDIRECT also estimates that a business will suffer a loss of about VND 142 billion per year if it wants to gain 1% market share from existing competitors in Vietnam.

Potential but fierce

VNDIRECT Securities Joint Stock Company in the latest report has estimated that a business will suffer a loss of about 142 billion VND per year if it wants to gain 1% of market share from existing competitors in Vietnam.

An enterprise is estimated to suffer a loss of about 142 billion dong per year if it wants to gain 1% market share from existing competitors in Vietnam.

This race, VNDIRECT is the cause of the consequence, all three “big companies” of e-commerce are reporting losses annually.

However, e-commerce in Vietnam still has the fastest growth rate in Southeast Asia. According to a Google-Temasek report in 2018, Vietnam’s e-commerce achieved a compound growth rate of 35% in the period of 2015-18 and was worth $ 2.8 billion, only calculating the value of the Enterprise channel to consumers- B2C.

The market is forecast to continue to boom in the period of 2018-25, with a double growth rate of 27% thanks to the popularity of the internet and smartphones along with a new generation of more tech-savvy consumers.

Millennials (Y generation) will be the driving force for the rapid development of e-commerce in Vietnam with the habit of spending time online rather than going to physical stores, while selling methods. Consumers to consumers (C2C) or on social networks are more and more popular.

C2C has the advantage of helping buyers and sellers interact directly to share information, photos, reviews and product tips thanks to the special features of social networks such as Facebook. , Instagram or Zalo.

The e-commerce game is being shaped by 4 big names, most of them use a combined model (B2C / C2C). Accordingly, Lazada and Shopee are two international brands while the remaining brands Tiki and Sendo are founded by domestic organizations.

In the first quarter of 2018, Lazada was the market leading e-commerce market in terms of both the number of website visits and the number of views on Facebook. However, only a year later, Shopee and Tiki rose to No. 1 and 2 in terms of website traffic, while Sendo ranked 4th thanks to its continuous development.

Among e-commerce sites, Shopee is the only unit that applies the Consumer-to-Consumer (C2C) model, while the remaining exchanges use B2C or B2C / C2C models. Tiki transformed the business-to-consumer (B2C)-to-enterprise-to-consumer (B2B2C) model in March 2017.

VNDIRECT said that, although the market was quite crowded, new brands still had room to develop, as long as they could overcome the aforementioned barriers. VNDIRECT even believes that VTP, a brand owned by the Ministry of Defense of Vietnam, has been fully equipped to participate in this war.

Van Nguyen
* Source: Investment bridge


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