“By investing in the logistics and transportation industry, multinational firms have positioned themselves to better facilitate the flow of goods throughout Vietnam’s consumer market,” said General Director Julien Brun of CEL Consulting Company.
A highly integrated supply chain network in Vietnam linking producers and consumers through multiple transportation modes – including air and express delivery services, freight rail, maritime transport, and truck transport is vital to the economic development of the nation.
In addition, he said statistics from the Trade and Investment Promotion Centre in HCM City show there are an estimated 1,200 transportation businesses in the country, mainly located in Hanoi and Ho Chi Minh City.
Notably 70% of these firms are very small domestic businesses that face big difficulties competing with foreign companies that have greater capital and better competiveness.
Citing a Nielsen report, Brun stressed there is a high correlation between convenience store growth and the logistics and transportation industry as strong development of convenience stores requires logistics services to develop.
“With a 90 million strong consumer market and the rapid growth of the nation’s 400 plus convenience stores, the industry will see rapid growth over the next few years,” Brun underscored.
The e-commerce market has also become a formidable force in Vietnam having reached US$2.97 billion last year.
Though, success in this rapidly growing market is not a given, logistics will be a challenge as e-commerce players attempt to reach more customers over wider geographic regions while improving the quality of their offerings.
The growth of domestic express delivery – most directly tied to the industry – will benefit from the global expertise of multinational companies, and should benefit domestic firms as it spreads to rural areas.
Logistics: The Key to E-success
The rapid growth of e-commerce and the subsequent logistics challenges mean e-commerce companies and logistics providers both have an opportunity to move quickly to address their problems.
The solutions are unlikely to come from in-house logistics since market growth makes this approach unsustainable but are more likely to be found in strategic partnerships between e-commerce firms and third-party logistics providers.
Indeed, within a few years, Vietnam can expect to see a transformation in the e-commerce logistics landscape, where e-commerce plus logistics providers will equal market success, Brun concluded.