A survey conducted by the Vietnam Logistics Enterprise Association (VLA) indicates that logistics firms are suffering from several bad effects from the COVID-19 epidemic, ultimately resulting in a 10% to 30% reduction in terms of sales in comparison to the same period from last year.
Most notably, approximately 15% of enterprises have seen their revenue drop by 50%, whilst over 50% of businesses have seen a drop of up to 30% in terms of the number of domestic and international logistics services.
As a result of the recent trade tensions between the United States and China, several importers have indicated their intentions to shift their location from China to the country, with the COVID-19 acting as a catalyst to accelerate the overall transformation process.
This serves as motivation for Vietnamese businesses as they strive to access e-commerce platforms. Despite this positive landscape for local companies within the sector, e-commerce giants such as Lazada, Tiki, Sendo, and Shopee are racing to pump money into technology and warehousing as a means of allowing their own delivery teams to serve outside customers and compete directly with traditional logistics firms from both at home and abroad, such as Viettel Post, VNPost, FedEx, UPS, and DHL, in addition to super applications like Grab, Go-Viet, and Be.
At present, the logistics market consists of more than 4,000 businesses, with the majority based in Hanoi and Ho Chi Minh City, including approximately 30 enterprises that provide transnational logistics services operating domestically, with major names such as DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics, and KMTC Logistics.
The country’s logistics industry is therefore being seen as an area of strong growth, especially following the outbreak of the COVID-19, an event which required traditional logistics firms to embark on a transformation process faster than had been anticipated.
According to Julien Brun, Consulting Partner Manager of CEL, the pandemic has prompted both the Government and local businesses to transform digitally at a faster rate than ever.
In addition to accessing potential markets through new agreements and actively striving to attract relocating factories from China, Vietnamese businesses must be quick to adapt to the impending digital transformation.
Indeed, the global supply chain shift has begun with the trend of seeking alternative supply sources within the domestic market and throughout the region in order to reduce dependence, with the logistics market showing a drastic change as a result. In particular, the US is considering setting up an Economic Prosperity Network, including Japan, the Republic of Korea, New Zealand, India, and Vietnam.
The requirements of this new market include having reliable supply chains and products that display a clear origin of goods.
According to the VLA, the biggest challenges faced by small and medium-sized businesses when conducting their respective digital transformation comes in the form of financial capacity. This indicates that, in addition to their determination, initiations, and efforts, local firms need the support of the State to fully implement the process.
First of all, the State must work towards improving the legal framework for digital transformation with regard to security, anti-sabotage co-operation, and digital governance issues.
Furthermore, there should also be policies in place to encourage digital transformation by offering concessional loans and interests for digital transformation businesses along with supporting digital technology solutions for start-ups. On that basis, if firms are not financially capable, then they can simply purchase relevant solutions or hire solutions from expert software suppliers.
Additionally, the Government must launch a review taxes and fees in order to devise solutions aimed at reducing transportation costs, shorten the time needed to grant specialized permits, and for customs clearance and goods inspection at ports to be handled in a swift manner whilst simultaneously avoiding warehousing charges.