E-commerce: exorbitant losses for a single per cent
Each e-commerce platform needs to spend millions of US dollars to gain a single per cent of market share from competitors, showing just how serious the competition is.
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| E-commerce platforms are playing a game of chicken, throwing millions of dollars around to remain the last one standing. (Source: VIR) |
According to the latest statistics of security company VNDIRECT, each e-commerce company has to suffer a loss of VND124 billion ($5.4 million) to gain 1 per cent of market share from any competitor. This raises concerns whether newcomers like Viettel Post have the finances to challenge the current kings of the hill Lazada, Tiki, and Shopee.
E-commerce in Vietnam is still a new sector, so businesses have to pour tremendous amounts of capital into advertisements, personnel, and warehouse infrastructure toset a solid foothold on the market.
One evidence for the fierce competition is their race in promotions, which originated in Lazada’s 95 per cent discount promotion last year titled “Birthday discount party”. Accordingly, as soon as Lazada launched its promotion programme, Shopee immediately came out with its “Shocking deals and hot prices not only for birthday” programme and an unveiled jab at Lazada.
Since then, the e-commerce platforms have been suffering huge losses. Specifically, the total accumulated losses of the three giants – Lazada, Shopee, and Tiki – in 2015-2018 were VND9.4 trillion ($408.7 million). This may baffle newcomers in the sector.
In 2016 and 2017, Tiki posted VND179 billion ($7.78 million) and VND282 billion ($12.26 million) in losses. This resulted in VNG, which currently owns 28.8 per cent of Tiki's shares, also reporting losses of VND93 billion ($4 million) and VND126 billion ($5.4 million) in the same years. In 2018, VNG posted a loss of VND254 billion ($11 million). As of the end of the first quarter of 2019, VNG's losses from Tiki have reached the value of its VND506 billion ($22 million) capital contribution in the company.
Similarly, Lazada reported a loss of VND1 trillion ($43.39 million) in 2015-2016, increasing its accumulated losses to VND2.7 trillion ($117.1 million) by the end of 2016. Due to the fierce competition, Lazada’s losses in 2017 alone were estimated at VND1 trillion ($43.39 million).
Shopee was officially launched in August 2016, however, by the end of the same year, the firm reported a loss of VND164 billion ($7.1 million), which increased to VND600 billion ($26.03 million) in 2017, twice as much as the loss of Tiki.
