E-commerce is the future, and retailers of all sizes are joining in

Japanese retail giant Aeon has officially joined the e-commerce bandwagon in Vietnam through its website on January 1.

The new website, AeonEshop.com, is designed as a business to consumer (B2C) platform, with the majority of products imported from Japan.

AeonEshop plans to start operation in Ho Chi Minh City and later expand its delivery reach throughout Vietnam in the future. The site is expected to develop an English version and mobile app by mid-2017.

Vietnam is the third market where Aeon has established online retail, after Japan and Malaysia.

Similarly, Lotte has selected Vietnam to expand its e-commerce business. The group recently launched its e-commerce platform, Lotte.vn.

In their first three years, Lotte will invest US$25 million per year in its online store. The group aims to become a dominant player in the local e-commerce scene by achieving a market share of 20% by 2020.

Meanwhile, Thailand’s Central Group has taken over fashion-focused e-commerce site, Zalora, in Vietnam while Chinese e-commerce giant, Alibaba, enters the market by acquiring a controlling stake in Southeast Asian online retailer, Lazada Group, for US$1 billion.

Gerald Glauerdt, COO and co-founder of Lazada Vietnam, is bullish about maintaining its leading position in the market. “We have invested a lot over the past five years to build our own delivery means. If other investors want to do the same, it might cost a lot of capital and experience.”

Lazada boasts extensive experience in e-commerce development with online presence in five Southeast Asian countries. Alibaba has gone through a similar learning curve over the past 10 years, which gives an edge for Lazada to increase penetration in the market.

Julien Brun, managing partner of CEL Consulting, said that competition is already becoming fierce in offline retail, so retailers should start looking at the online market as a complementary channel to reach consumers.

“Foreign retailers have been focusing on setting up stores, a supply chain, and developing their brand in Vietnam. It is time for them to initiate e-commerce activities to keep up with Vietnam’s growing online shopping trend,” he added.

Fabrice Carrasco, managing director of market researcher Kantar World-panel Vietnam, predicts that e-commerce in Vietnam will grow more than fivefold by 2020 on back of widespread smartphone usage and increasing demand for consumer convenience.

It could be the chance for the current retail giants in Vietnam to move their offer online and take advantage of their brand equity in the market today. With the colossal logistics cost of running an efficient service, a huge investment will be needed in order to be successful.

However, it may well be the only way for big companies to defend their current position by offering online ordering and home delivery.

On the other hand, convenience is forecast to be a critical factor for the future of modern trade. Many Vietnamese consumers often stop at grocery stores to make orders and have it delivered to their homes while sitting on their cars and motorbikes. This shopping habit helps them save time looking for parking and avoid carrying heavy packages.

“Supermarket chains like Big C and Metro should provide e-commerce options to deliver convenience and enhanced experience for customers,” Carrasco suggested.

According to Tran Van Trong, chief of the Vietnam E-Commerce Association’s (VECOM) office, many brick-and-mortar retailers are facing greater competition as e-commerce continues to grow in Vietnam. Therefore, they should start to pursue the omnichannel retailing, which combines online shopping and the brick-and-mortar store.

“Despite concerns that foreign retailers might take over the market, we believe there are still a lot of room for development. Vietnam’s potential for e-commerce development in the retail sector is predicted to achieve a revenue of US$10 billion by 2020, accounting for half of the country’s total retail sales,” Trong noted.

Major Vietnamese retailers have also ramped up their operations to jockey for market share. Vingroup JSC, Vietnam’s largest property developer and mall operator, has poured over US$31 million into its online store, Adayroi.com. The giant retailer hopes to be the biggest e-commerce player in Vietnam in the next five years.

Mobile World Investment Corporation (The Gioi Di Dong), traditionally known as an electronics retailer, is venturing into the e-commerce sector with its online store, Vuivui.com. The website will not make profit for the company in the short-term, but the firm expects it will contribute to 10% of the total revenue by 2020.

Vietnamese internet company VNG Corporation, one of Southeast Asia’s very few billion-dollar startups or unicorns, recently bought a 38% stake in e-commerce platform, Tiki.vn, for VND376.5 billion (US$16.7 million).

Tran Ngoc Thai Son, general director of Tiki, told VIR that Vietnam’s e-commerce is developing based on an ecosystem including delivery, payment, technology, warehousing, and skilled labour. The local market is less mature than other countries, so these factors remain barriers for both foreign and local investors.

Meanwhile, FPT and its online shopping unit, Sendo, launched V-FPT, an e-wallet aimed at providing an easy and reliable way to pay monthly bills and make-e-shopping purchases.