VIR’s Thanh Van offers an insight into the robust e-commerce logistics market teeming with exciting new development.
Having just come home from work, 29-year-old marketer Nguyen Thi Thuy was preparing the evening meal for her family, waiting for a package delivery. Thuy has been shopping online for the second time this week.
“I can get all the packages delivered to my doorstep rather than going shopping and carrying several bags back on my motorcycle,” she said, noting that several e-commerce sites are now providing high-quality products with free shipping so she prefers shopping online, allowing her to save time as well as grab some bargains.
Thuy is among the many customers who have embraced the online shopping experience with its reliable and convenient delivery.
According to Kantar Worldpanel, the percentage of e-commerce shoppers grew from 5.4% to 8.8% of the four largest cities’ urban population, in the last year alone.
In light of this trend, many foreign logistics providers and e-commerce operators cannot afford to miss the opportunity to provide e-logistics to meet the increasingly sophisticated demand.
2017 in a nutshell
DHL eCommerce made a splash by rolling out its domestic delivery network in Vietnam in July 2017. Charles Brewer, CEO of DHL eCommerce, told VIR that the total value of logistics is around 10% of the e-commerce industry in Vietnam.
Given that the country’s e-commerce market is forecast to reach US$2.4 billion in the next couple of years, the value of e-logistics is thus estimated to reach US$200 million by 2020.
At the same time, online retail makes up only 1% of the total retail market, indicating that Vietnam is at the beginning of the cycle.
There is still a long way to go for the local e-commerce market to reach its peak, and so DHL eCommerce has invested in the country early to get ahead of the curve, according to Brewer.
“Indeed, the year 2017 was a turning point for the Vietnamese e-logistics sector,” said Fabian Wandt, country manager of Lazada eLogistics (LeL), who has watched the market develop over the past six years.
On the one hand, 2017 saw local players such as Giaohangnhanh (GHN), Vietnam Post, or LeL continue to increase investments in existing infrastructures, technologies, and fleet assets.
On the other hand, last year, more and more international players entered the local market and introduced new automation and technology capabilities to the sector.
“The combination of local and international expertise has created a tailored, unique solution for the Vietnamese e-logistic sector, paving the way for endless e-commerce growth,” added Wandt.
In fact, this past year has witnessed e-logistics developing hand-in-hand with e-commerce. This highlights the change since the early days of the market six years ago, when warehouse and delivery services were not yet developed to effectively serve e-commerce.
There were five or six last-mile delivery companies during that time, but now there are around 50 different delivery companies and startups such as Giaohangtietkiem.vn, Giaohanggiare.vn, AhaMove, Shipchung, and ShipS.
Nguyen Tran Thi, co-founder and CEO of GHN, is upbeat about the prospect of the delivery market reaching a three-fold increase annually, particularly with investments from both local and foreign players to enhance their technology, network, and offerings. GHN also plans to expand to more than double its operation this year.
Trends to watch in 2018
As e-commerce is growing at a robust pace, logistics providers have to come up with new business models to deal with a soaring number of frequent, small-size orders. They have to invest in technology and infrastructure to counter the numerous challenges from traffic congestion to failed deliveries, as well as the higher logistical costs in rural areas.
These dynamics will fuel some of 2018’s most important trends including customer collection points, designed for customers to receive an order from a designated collection point. Such collection points allow customers to pick up their orders at any time, without being required to wait at home.
DHL eCommerce launched a nationwide network of service points in Vietnam in November 2017, with a plan to expand to over 1,000 outlets by the end of next year. Similar to the concept of customer collection points, the firm uses the shop-in-shop model by opening DHL eCommerce counters in grocery stores, minimarts, and coffee shops.
GHN also plans to extend its network of customer collection points in local shops, convenience stores and buildings. The last-mile delivery startup plans to reach 1,500 outlets by the end of 2018.
Furthermore, investment into automation and related technologies will be the make or break for logistics companies in 2018, according to Wandt from LeL.
In the third quarter of 2017, Lazada launched its first automated sorting centre in Ho Chi Minh City – with their second centre to be launched in the first quarter of 2018 in Hanoi.
Lazada will also upgrade its existing sorting centre next year, tripling its sort capacity.
On a similar note, Thi from GHN said that the carrier will invest in technology such as automation to optimise operation and simplify its process, as well as developing warehouses and building fleets of shippers and vans.
This year, GHN aims to deliver parcels within two hours in urban cities, and within 24 hours across the country.