Omnichannel retailing to deliver market win

A latecomer taking on established competitors, FPT Shop only started to strengthen its e-commerce channel in 2014. Within a single year, revenue from this business segment was only VND318 billion out of the total VND5.226 trillion ($13.98 million out of $229.91 million). FPT Shop’s website’s traffic reached a modest 100,000 visitors per day.

In 2015, the firm's e-commerce revenue posted VND568 billion ($24.98 million) and traffic doubled. In 2016, revenue from online sales grew by over 200 per cent, registering VND1.2 trillion ($52.79 million) and contributing approximately 10 per cent of its total revenue. Traffic was 800,000 visitors per day.

Although FPT Shop’s e-commerce revenue in 2016 was only half of its largest competitor The Gioi Di Dong, this is considered an optimistic sign of greater opportunities as FPT Shop enters the potential e-commerce playground.

According to Ngo Quoc Bao, director of business development of FPT Retail, FPT Shop has set a more ambitious target. “E-commerce revenue will double in 2017, crossing the VND2 trillion ($87.98 million) threshold,” said Bao. Such acceleration of growth shows FPT Shop’s intention toward professional omnichannel retailing. “We will continue the strong development of offline and online channels and the strategic partnership with companies like Google and Facebook to boost customer outreach,” remarked Bao.

In order to achieve this, FPT Shop implemented comprehensive HR restructuring at the e-Commerce Centre from upper management to business strategy. While it used to open 5-7 stores a month, now the rate is only 1-2 stores per month, with no plans for further physical store expansion in the near future. Its current store count is 430.

According to Bao, as FPT Shop entered the online arena later than its competitors, it has to reach one million customers this year. To achieve this, FPT Shop must boost traffic, optimise user experience to increase returning visitors, ensure confidentiality, convenience, and timeliness in online payments.

The Gioi Di Dong (MWG) is arguably the first entrant to the online retail realm. This major name is in possession of the largest market share, with 10 per cent, thanks to a formidable online presence that is considered superior to that of Lazada (mostly owned by Alibaba) and Zalora (wholly owned by Nguyen Kim and Central Group).

According to market research firm Euromonitor International, although market shares fluctuate year to year, MWG continues asserting its dominance among online retailers since 2011. MWG determined hefty targets for online retail as revenue from this source is set to double over-year to VND6.65 trillion ($292.55 million). The company’s total supermarket count will reach 1,207, of which thegioididong.com accounts for 951, Dien may XANH 256 for supermarkets and 40 for stores. Along with all this, Vuivui.com, a dedicated e-commerce site, will play a crucial role in the company’s strategy.

Nguyen Duc Tai, president of MWG, commented that middle and high-school students tend to make more and more online purchases. Vuivui.com is the company’s investment for this future consumer base. The platform may even become MWG’s growth driver by 2020. “But for now, physical stores remain MWG’s chief money maker,” said Tai.

Talks of the race to expand among the likes of FPT Shop and MWG cannot leave out Vien Thong A, a name ringing fewer bells, who is currently ranked third in the online retail arena. This retailer had an impressive year in 2016, where it opened 63 new supermarkets nationwide, boosting total count to nearly 300. Additionally, the retailer’s revenue went up by 30 per cent on-year.

Besides tackling the coverage target and growth at least of 30 per cent, this year Vien Thong A will expand its online sales activities, which in 2016 generated only 5 per cent of the revenue made through traditional channels.

Hoang Ngoc Vy, CEO of Vien Thong A, said the company is looking to expand its B2B online business in order to meet the ever-increasing demand. “The development of omnichannel tactics to offer services regardless of location and timing is our top priority,” remarked Vy.

In order to jumpstart this business segment, Vien Thong A has to meticulously identify a strategic investor as its partner in this race.

A game of speed

According to Euromonitor International, by 2020, online electronics retail will grow at 30.9 per cent CAGR, reaching VND20.985 trillion ($923.18 million). Meanwhile, purchasing behaviour is changing, shifting to more time spent online, leading the offline channel to saturation, with increasingly limited room for growth.

In reality, omnichannel retailing has been steadily gaining ground for the past three years in Vietnam as mini-scale online stores started mushrooming on Facebook with numerous online sales tactics.

Especially, Zalo (VNG) launched Zalo Shop to provide independent online merchants with a direct platform to 60 million customers without acquiring technical capabilities. Zalo users can conveniently “browse” thousands of stores on the uniform interface of Zalo Shop and easily make purchases without searching on Facebook or Google. Boasting these advantages, the online channel, more than ever before, has become considerably lucrative.

According to statistics by Google, Vietnam is second in the world in terms of the number of online retail merchants. Whether this form of retail can grow sustainably remains, however, a question as customers are hesitant to accept/trust these independent small-scale businesses.

Such prospects push retailers towards change. They admit the never-before-seen potential of omnichannel in awakening the market and capturing new customer segments.

Bao commented that FPT Shop must expand its coverage and get ahead of market demand. However the Vietnamese consumers are naturally sceptical. Online buyers would visit offline stores to browse the merchandise, compare the products and prices. Therefore, it is advisable that companies stay mindful of their physical chains.

Logistics above all

“Never coerce consumers to online channels, since physical visits are conducive to unintended additional purchases. It depends on geographic and taste factors that enterprises coordinate their channels, hence enhancing brand recognition,” said Bao.

In the race of omnichannel retailing, the essential survival tip is understanding, satisfying, and building trust with customers. To achieve this, retailers are responsible for guaranteeing the authenticity, quality, and timeliness of merchandise. Logistics, therefore, should be an investment priority.

The Gioi Di Dong used to outsource its logistics but has since developed its own delivery capabilities. FPT Shop utilises its own store staff for delivery.

“In that way, our delivery staff can directly consult the customers on product use and ensure our reputation,” commented Bao.

Regarding logistics, Luong Duy Hoai, CEO of Giao hang nhanh (GHN) said, in the future, a product from abroad can easily reach Vietnamese consumers. The same goes for Vietnamese goods sold to other countries.

Therefore, it is no longer a matter of speed but of agility to comprehend and lead the industry landscape by market shares. The challenge for modern retailing is the shipment of million, even tens of millions, of orders on a daily basis. The ultimate success factor lies in a delivery network that can address the complexities of increasingly customised demands. It is up to each retailer to rapidly transform its model according to the current technological trends.