In the cross-hairs

Every two or three days each week, the 33-year-old owner of the Tokyo Baby store, Ms. Nguyen Thi Thanh Phung, goes online to introduce new products.

in the cross-hairs hinh 0

Her live streams on Facebook have up to 30,000 views, hundreds of comments, and customers seeking consultancy on products, of which more than a half then decide to buy. 

Since starting to do business in mother and baby products from home via Facebook in 2012, her shop’s fanpage “likes” have increased daily, reaching 110,000, with 14,000 on her private page. 

Like many other Vietnamese doing business online nowadays, Ms. Phuong has taken full advantage of Facebook to promote her shop and offer products. 

Early on she used her private page to sell products, then when the number of followers increased rapidly she set up a fanpage for the store and also began using Facebook’s other advertising features to optimize sales. 

“More than 80 per cent of Tokyo Baby’s customers have come from social networks like Facebook, Zalo, and Instagram, but we still only have two outlets, in Hanoi and Ho Chi Minh City,” she said. 

Trendy online business

Short of capital, Ms. Nguyen Thu Huong, a 27-year-old office worker, is interested in the food business so uses Facebook as a channel to introduce her dishes to customers. 

“Food is a business where it’s easy to turn a profit, as you don’t need a physical outlet,” she said. Each day she earns about VND500,000 (US$22.2) in profit. 

It was quite difficult in the early days, she said, to pick up new customers, but numbers are increasing every day. 

“My friends often introduce my page to their friends, but in order to have regular customers I must buy subscribers, at about VND30,000 (US$1.33) each,” she explained. 

Indeed, the most favorable condition Facebook offers is not needing a bricks and mortar establishment. Facebook recently launched its live stream function, which helps vendors more easily reach people. 

But according to most online vendors, customers are wiser now. In regard to clothing, they want to try them on and feel them, to gauge the quality. After seeing images on Facebook, they may want to visit the vendor’s home to check. 

“Selling products via Facebook was easy in the initial days, but now there are too many people doing it and it’s become more difficult,” according to Ms. Lan Nguyen, a final-year student at the Academy of Finance. “Those who can differentate will be successful in selling via Facebook.” 

Customers are also now keen to experience products from many different channels, from offline (stores) to social networks like Facebook, Instagram and Zalo, known as “omni-channel”. It’s clear to see why online vendors face increasing difficulties. 

The latest report from Nielsen, Omni Shopper Trends 2017, showed that 57% of omni-channel shoppers want to make use of promotions when shopping. 

It also found that Vietnam’s e-commerce market has been developing in recent years due to the changing behavior of Vietnamese shoppers, the widespread adoption and increased ownership of smartphones, laptops and tablet devices, and the readiness of the market. 

An example of a successful online vendor via Facebook, Ms. Nguyen Thuy Linh, a 34-year-old Facebook user working for a bank in Hanoi, recognized the potential of doing business online via social networks, especially Facebook, in 2013. 

She connected with close friends living overseas to help her buy fragrances and cosmetics from countries famous for producing such products, including the US and France. She then worked with shippers to arrange delivery. 

Two years after first selling cosmetics on her private page, she began to receive orders from popular global fashion and jewelry brands such as Zara, H&M, and Swarovski, and even luxury brands like Burberry and Salvatore from Spain and the UK. 

“Making products available might bring more profit than acting on orders from customers, but it costs more in capital,” she said. 

She has been entirely focused on receiving orders for fashion products from online customers and so decided to quit her stable job at a bank in order to spend time and resources on her online business. 

Her private page has nearly 10,000 followers and profits have increased a great deal over the last two years. 

“From turnover of around US$15,000 a few years ago, Ms. Linh’s online shop has now reached more than US$100,000 a month, especially during sale seasons, when her revenue may be up to US$150,000 a month,” a friend of hers said. “The average profit margin is from 15% to 20%.”  

Unforeseeable future 

In the long term, Ms. Linh believes she won’t open a store because she doesn’t need to display her products. “Opening an outlet would cost me a lot of money, in rentals, business registration fees, and staff wages,” she said. 

She continues to use her private page to conduct business, without a fan page. She insists she is yet to receive any message or official documents from local taxation authorities about paying online business taxes. 

“If I was requested to detail my business revenue with State authorities, I would do so but not list everything,” she said. 

According to Ms. Huong, people like her doing business in food on Facebook do so because opening a restaurant or an e-commerce site presents financial issues. 

She would agree to pay taxes if her business was profitable, but she believes not all business done on Facebook is for profit-making, so it would be necessary to evaluate each vendor before imposing taxes. 

“Those who use Facebook as a major sales channel should pay tax,” she said. “It would fair to say, though, that authorities would have difficulty in controlling all business done on Facebook if vendors deliberately don’t declare full information.”  

Meanwhile, Ms. Phuong, the owner of the Tokyo Baby shop, which earns relatively high revenue, said that in order to be successful she incurs high costs for advertising on Facebook or holding promotions. 

If the State were to collect taxes from Facebook businesses, she would change to a new business form or would reconsider her overall strategy, as the advantage of selling via Facebook would diminish. 

The latest move from the government expresses its determination to control the business activities of online vendors, especially those using Facebook and similar social platforms. 

Vien Viet Hung, Deputy Director of the Hanoi Department of Taxation, said it has sent messages to 13,422 Facebook account holders seeking information for registration and tax declarations.

Authorities have determined that, in order to manage online selling, vendors need to be educated about their responsibilities, so the department has focused on providing guidance and support to encourage them to register and meet their legal obligations. 

It will conduct supervision over those who don’t willingly complete tax registration and implement solutions to collect and verify information in accordance with the law. 

In early June, the Ho Chi Minh City Department of Taxation also officially announced tax collection plans for online business based on social platforms, including the sale of goods and services via the internet, Facebook, and other social media. 

According to Mr. Nguyen Nam Binh, Deputy Director of the Ho Chi Minh City Department of Taxation, 13,469 Facebook account holders have been contacted about tax declarations, 35% of which sell via social networks. There are millions of individuals and businesses selling goods on Facebook and earning handy revenue but not paying tax. 

This, according to many experts, is not fair on other taxpayers. 

According to Mr. Pham Thanh Kien, Deputy Director of the Ho Chi Minh City Department of Industry and Trade, e-commerce business management belongs is a task for his department but it can only manage active websites and not revenue. 

“With more than 80,000 registered websites, more than half of which have been in existence for more than two years, getting to know their business conditions would help regulators figure out their role and contribution to the economy, then prepare a proper development plan for the e-commerce model,” he said. 

Mr. Nguyen Thanh Hung, Chairman of the Vietnam E-commerce Association (Vecom), meanwhile, thinks there should be a way to tailor the online environment, because it is different from traditional business, and if care is not taken, the cost of collecting taxes will exceed the amount collected, because the number of businesses on Facebook runs into the millions. 

Facebook users and many experts believe that taxing business on social networks would greatly affect everyone, even authorities. It would create confusion within the online business community. 

But from a business management perspective, it must be done, not only to increase collections but also to create an equal and open business environment between different retail models.

VN Economic Times

Related news