E-commerce delivery market: patient players will win
E-commerce delivery firms usually make no profits in the first two or three years of operation. Though they have to spend big money, their revenue is modest.
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Thi made the statement in the context of the bustling ecommerce market. A report of the Vietnam Ecommerce Association said the high growth rate of over 30 % was predicted for this field.
In Vietnam, there are 300,000 operational fanpages and 9,400 registered sale websites. According to the Ministry of Industry and Trade, the ecommerce turnover reached $4.07 billion in 2015, or 2.8 % of the total goods and services retail turnover.
This explains why e-commerce firms and delivery service providers such as GHN still put high hopes on the market.
An analyst commented that Vietnam’s logistics make up 25 % of GDP, while in e-commerce, delivery costs account for 10 % of the value of a goods item worth VND400,000.
The high cost is the major reason which makes online sale channel less competitive. Forty % of polled clients said it is not cheaper to buy things online than through traditional channels.
In most cases, buyers only make payments when they get deliveries. This means that the main service delivery firms provide is COD (cash on delivery), i.e. collecting money for sellers. With COD, delivery firms have to take high responsibility, while the profit they can expect is modest.
This could be the reason why large firms such as VNPost, EMS, ViettelPost and DHL-VNPT and Kerry TTC entered the ecommerce delivery market later than others, and stayed less competitive than small firms in costs and speed.
However, analysts said that to offset the decreases in turnover from traditional services such as letter and document delivery, the firms may increase their investments in ecommerce and dominate the market with their large scale.
It is estimated that the firms like EMS and ViettelPost hold 14-15 % of the e-commerce delivery market. GHN, which only joined the market in 2012, holds 7 %.
A representative of EMS said the number of orders in the first three quarters of 2015 was 4-5 times higher than that of the same period of the year before.
A delivery firm estimated that it will break even if it has 50,000 orders a day. Every deliveryman has 20 orders a days, and the figure should be 40 to break even.
An analyst said that reaching out to the South East Asian market, Alibaba may continue using domestic logistics partners. If it wants to build up a logistics system of its own, it will have to spend 2-3 years to do so.
