Potential new contender to challenge e-commerce

The week-long Online Friday 2018, a promotional retail event highlighting authentic goods concentrating on Friday December 7, generated a total expected revenue of VND1.5 trillion (US$65.2 million). The promotion was ­organised by the Ministry of Industry and Trade (MoIT) to popularise the sales of ­authentic items on e-commerce platforms.

According to the ministry, as many as 3,000 firms joined this campaign with 5,000 discounted items, a lot of them reducing prices to zero. The MoIT targeted two million orders to be transacted in this event.

Dang Hoang Hai, director general of the Ministry of Industry and Trade’s E-Commerce and Digital Economy Department, said that this campaign focused on improving the quality of goods. One hundred per cent discounted items are authenticated and clear of origin.

“The organiser uses keywords to detect fake items being sold at the event. If any violation is detected, the store will be immediately kicked out,” said Hai.

However, according to the MoIT, about 160 complaints were submitted on account of the last Online Friday about the quality of goods and fake discounts. About 118 of the violating vendors were removed from the event, while the year before that, authorities removed 6,000 offending items.

“Counterfeit goods on e-commerce sites caused a lot of damage because the cost of returning an article is equal to the profit gained from 100 items sold. Therefore, sellers selling substandard products will damage consumers as well as e-commerce sites,” said Vu Quoc Tuan, representative of Lazada.vn. “At the same time, it is very complicated to identify and remove vendors who sell counterfeit goods.”

In fact, many global brands, including H&M, Zara, Adidas, and others, despite being present in Vietnam for a long time now, stick to selling goods at offline physical stores and have not entered into co-operation with any e-commerce giants.

Due to bad reputation of some e-commerce businesses for fake goods and discounts, big global brands see the local e-commerce environment as unsafe. Along with fake and low-quality goods spreading on e-commerce platforms, Tiki, Shopee, Lazada, and other e-commerce firms are believed to violate Decree No.81/2018/ND-CP stipulating the specific circumstances as these firms are allowed to apply discounts of over 50%, and under 50% during nonholidays.

Meanwhile, during the nonholidays like Single Day and Black Friday, these firms have applied the rate of up to 91%.

Furthermore, a number of e-commerce platforms commonly use fake discounts to make it seem like they sharply reduced prices.

Discussing the issue with VIR, Toh See Kiat, chairman of Singapore-based Goodwins Law Corporation, said, “Fake discounts are not ‘cheating’ per se because they are actually using a real base price. They are hard to catch without a baseline set by legislation, that is, ‘discounters’ should be able to show that they had been selling the same goods for the “original undiscounted” price for at least the last 30 days in the same place or platform.”

Keeping track of the original prices on e-commerce platforms is a headache for local authorities. As a result, the scandals and rampant violations have contributed to making global brands reluctant to open official online stores on local e-commerce platforms.

BRANDED SITES INEVITABLE?

Opening their own online shopping website is on an uptrend for firms to run business in Vietnam, thanks to the rising demand for original goods which pushes customers to place purchases on the businesses’ official websites.

It is quite common for businesses around the world to maintain their own websites or apps where they can sell their products. Global sports clothing brand Adidas, fashion brands H&M and Zara, and others also have websites and applications in place in the US, European countries, and major Asian markets. Vietnam is one of the few markets where no such sales channels have been deployed yet.

However, according to market research firm Euromonitor, with a promising market like Vietnam whose e-commerce market value will reach VND106 trillion (US$4.6 billion) by 2022 via the average annual growth rate of 33 per cent, firms are more than likely to deploy their own websites or applications to sell goods.

Talking with VIR about these prospects, Huyen Tran, representative of Swedish fashion brand H&M in Vietnam, said, “Along with increasing the number of our stores in Vietnam, online sales are also included in our business expansion strategy in the country.”

To clarify the trend, Nguyen The Tan, CEO of Vietnam Communication Corporation (VCCorp), a local leading technology firm and the owner of several local e-commerce platforms, including Rongbay.com, Enbac.com, and Muachung.vn, told VIR that: “There are so many ways to sell goods, such as online, offline, directly or indirectly – it really comes down to the strategy of the individual business.”

Tan claims the local e-commerce environment is stuck in the muck with its many problems related to security and the quality of goods.

However, more importantly, major brands are strong enough to build their online sales systems without depending on e-commerce platforms. As a result, sooner or later, they are bound to establish their own online shopping system, creating new competition for current e-commerce platform operations like Tan’s.

A WARNING FOR E-COMMERCE

Branded websites may break the domination of e-commerce firms in the future – at least among customers looking for assured quality who do not flinch at the sight of the price tag. What chances are there for Lazada, Tiki, Shopee, Sendo, and others in this future battle?

Tuan from Lazada believed that branded websites and e-commerce platforms are quite capable of operating in peace and harmony.

“While companies may have their own websites, so many firms register on e-commerce sites due to the convenient tools. A normal website will need human resources and money to maintain and integrate a variety of tools in one website – from payment tools and receiving orders to logistics and so on – while maintaining a store on an e-commerce platform is far easier,” Tuan said.

However, the numerous scandals over cheating customers keep plaguing e-commerce firms, and will likely be a sizeable disadvantage in any competition. Meanwhile, it is no longer difficult for firms to open their own online sales systems.

According to Tan, the maintenance of a branded website used to be rather ­expensive, as companies needed large teams and capital for the website, shipping, customer care, and e-payment. However, currently, this can be far cheaper as firms can just hire these ­services.

“Small- and medium-sized businesses need only spend VND20-100 million (US$869-4,347) on developing ­websites to sell their goods, and there is an abundance of cheap delivery companies. Thus, the cost of a website is only a fraction of what it used to be,” Tan explained to VIR.

As deploying websites is becoming easier, e-commerce firms may have to improve their customer service and seller management systems, and improve legal compliance with regulations on the ­quality of goods and business activities or risk losing ­market share to more reliable individual businesses.