Citi’s recent eCommerce and Technology Summit 2024 in Ho Chi Minh City spotlighted the rapid evolution of the e-commerce landscape in Southeast Asia, with a keen focus on Vietnam. Thuy Lai, Citi’s Country Head of Trade and Treasury Solutions in Vietnam, shared pivotal insights on the region’s e-commerce growth and the challenges and strategies shaping this dynamic sector.
The Surge of E-Commerce in Southeast Asia
Southeast Asia’s e-commerce market has experienced an astonishing transformation over the past decade. The region’s online sales are projected to hit an impressive US$190 billion in 2024, showcasing over 20-fold growth since 2012. This meteoric rise represents a 45% compound annual growth rate from 2012 to 2021.
Key Factors Driving Growth:
- Pandemic Acceleration: The COVID-19 pandemic significantly accelerated the shift to online shopping.
- Consumer Spending: Increased consumer spending and evolving business models have driven market expansion.
- Major Players: Four key players dominate the market, capturing over 50% of the share, yet new innovations continue to spur growth.
Vietnam’s E-Commerce Boom
Vietnam is outpacing regional growth rates in e-commerce. The country saw a 34% increase in e-commerce activity during the first half of 2024, well above Southeast Asia’s average growth rate of 18%. This robust growth positions Vietnam as a standout performer in the region.
Growth Drivers in Vietnam:
- Consumer Spending: Existing online shoppers are spending more across leading platforms.
- Market Opportunity: With a population nearing 100 million, Vietnam presents a significant opportunity for digital expansion.
- Challenges and Potential: While cash transactions are prevalent, they highlight the substantial potential for digital adoption and growth.
Challenges Facing E-Commerce Businesses
Despite rapid growth, e-commerce businesses in Southeast Asia face several challenges. A recent survey revealed that 30% of e-commerce businesses reported lack of profitability in 2023. This shift highlights the need for a focus on “quality growth,” prioritising both sales and profitability.
Key Challenges:
- Profit Margins: Many businesses struggle with low EBITDA margins, with profits often in the 0-5% range.
- Rising Costs: Increased marketing costs and fierce competition are significant hurdles.
- Growth Pressures: Companies must balance rapid growth with the need for sustainable, profitable operations.
Strategies for E-Commerce Success
To navigate these challenges, e-commerce leaders are adopting several key strategies:
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Digital Marketing Efficiency: Brands are exploring new advertising channels to optimise digital marketing efforts.
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Assortment Planning: Streamlining product offerings to focus on high-value items can increase order sizes and customer lifetime value.
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Channel Diversification: Operating across multiple channels, including direct-to-consumer and social commerce, helps capture diverse market segments.
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Cost Efficiency: Partnering with service providers to enhance logistics, shop management, and marketing is crucial for operational efficiency.
Citi’s Role in Strengthening E-Commerce in Vietnam
Citi is committed to supporting Vietnam’s burgeoning e-commerce sector through innovative solutions and strategic partnerships. Our global network and local expertise enable businesses to manage currency and foreign exchange efficiently.
Key Citi Initiatives:
- Payment Solutions: Citi provides comprehensive payment solutions, supporting the entire digital commerce lifecycle from payment acceptance to fund management.
- Cross-Border Payments: As the first bank in Vietnam to offer cross-border payment solutions for e-commerce, Citi has been instrumental in facilitating international transactions.
- NRA Solutions: Our Non-Resident Account (NRA) solutions and e-commerce framework, launched in 2022 and 2023, further support digital and cross-border payments.
- 30 Years of Service: Celebrating three decades in Vietnam, Citi continues to offer best practices and solutions to help e-commerce leaders achieve their growth aspirations.
Looking Ahead
The e-commerce landscape in Southeast Asia, particularly in Vietnam, is poised for remarkable growth. While the sector faces challenges, such as profitability pressures and rising costs, the opportunities for innovation and expansion are vast. By leveraging effective strategies and strategic partnerships, businesses can navigate these hurdles and capitalise on the region’s dynamic market.
Citi remains dedicated to supporting this growth, providing essential tools and solutions to ensure that e-commerce businesses thrive in an increasingly competitive environment.
