Speaking with respect to a recent report on the development of e-commerce in the country, Michael Michalak of the US-ASEAN Business Council underscored the point that the number of citizens that don’t have regular bank accounts greatly hamper its development.
Many insightful and talented e-commerce experts point to Zalora as the online retailer in Vietnam that is leading the path to digitalization and suggest others follow in its footsteps in delivering high quality products and service.
Zalora is part of Berlin-based Rocket Internet, which operates online retail services in 10 countries in the Asia-Pacific Region.
Instead of brick-and-mortar, Zalora’s business motto is click-and-mortar at its showroom in Ho Chi Minh City. The company’s facilities have the look and feel of a classic retail establishment with one notable exception— customers can’t purchase anything physically at the store.
All orders must be made online and can be placed on one of the many computers at the company’s showroom or over the internet by using such devices as a smartphone or computer. Purchases initiated online are then filled by personnel working out of the company’s 5,000 square metre warehouse.
It’s a business model that is providing consumers and other retailers in Vietnam an up-close, first-hand perspective of just how e-commerce is supposed to work and the efficiencies that can be obtained.
During the first year of operations, more than half the calls to customer service were about the specific procedures to follow to place an order, says Ms Nguyen Phuong-Anh, the managing director of Zalora.
Most of the inquiries were very basic, simple to answer questions about the exact steps regarding such things as ordering, delivery and payment. Once customers got familiar with the process calls tapered off significantly to just a fraction of what they had been.
It has now been three years since Zalora opened its doors and Ms Anh is cautiously optimistic on the company’s and the future of e-commerce in the country. Presently, she says the biggest obstacle is that there are too many businesses that are trying to get into online sales but don’t have the requisite business savvy.
Online marketing in Vietnam is besieged with low quality service – everything from poor website design, products, and delivery to name just a few of the troublesome areas. Most notably, however, the whole area related to payment and the use of credit card is beset with a multitude of problems.
Echoing the concerns of Michael Michalak of the US-ASEAN Business Council, Ms Anh notes that the development of e-commerce in Vietnam is being impeded by the fact that consumers don’t have bank accounts and prefer to pay in cash.
It has been widely reported that as many as 80% of the consumers in Vietnam don’t have bank accounts and even fewer have credit cards, says Ms Anh, noting that as many as 90% of Zalora’s customers pay COD, cash on delivery.
This reluctance to use credit cards places a major stranglehold on the advancement of e-commerce in the country, especially high-dollar purchases, says Ryan Vaughan, managing director of Nielsen Vietnam.
Make no mistake about it, says Mr Vaughan, e-commerce in Vietnam is still in its infancy. The country’s retail remains in substantial part brick-and-mortar and has not arrived into the age of click-and-mortar.
E-commerce is still very new and is growing much too slowly, he says, adding that fortunately many in Vietnam are aware of the problem and are searching for better measures to stimulate its expansion.