The e-commerce landscape in Vietnam is experiencing unprecedented growth, as it is now worth about US$14.70 billion in 2024, according to InCorp Vietnam. A report by the International Trade Commission states that the main drivers of the country’s robust growth are the Vietnamese government’s progressive policies, increased middle-income class, and fast-growing Internet economy.
They also state that the Internet economy is due to smartphone penetration, with 97.5% of Internet users having mobile phones, almost all of these being smartphones, as researched by Statista.
As many consumers increasingly embrace online shopping, businesses are met with growing demands, such as rapid delivery, diverse product availability, and seamless customer experiences. Vietnamese e-commerce businesses must not only differentiate themselves from the competition but also continually innovate to enhance their operational efficiencies and meet these consumer demands. These improvements are crucial for managing the growing volume of transactions and maintaining high customer satisfaction in a competitive environment.
Challenges in e-commerce operations for Vietnamese businesses
While the Vietnamese e-commerce landscape is experiencing promising growth, businesses still have significant opportunities for improvement in their business operations to unlock their potential and achieve success.
1. Maintaining optimal inventory management
Having optimal inventory management to meet the demands of one’s consumer is essential for any business. Therefore, ensuring consistent supplier delivery and finding alternative sources of supply are key growth factors that e-commerce businesses in Vietnam may need to look into, as highlighted by research on the Vietnam Supply Chain. By addressing these and implementing effective strategies for optimal inventory management, companies can minimise supply chain disruption, missed sales opportunities and reduce storage costs, improving their bottom line. Moreover, efficient inventory management ensures product availability and timely delivery, leading to higher customer satisfaction.
2. Ensuring on-time deliveries
Proper management of supplier deliveries can improve supply chain efficiency and delivery lead times. As such, businesses should strive to develop stronger customer relationships with suppliers and implement better management practices. This proactive approach could enhance operational efficiency, ensure consistent deliveries and minimise shipment delays. Consequently, it could lead to improved customer trust and loyalty and a competitive edge in the market.
3. Development of technology infrastructure
Having access to advanced technology offers businesses an opportunity for growth and innovation. Many e-commerce businesses in Vietnam, particularly small and medium-sized enterprises, can benefit from investing in modern tools and systems. By automating processes, managing data effectively, and optimising supply chains, businesses can achieve faster response times, reduce errors, and lower operational costs. Overall, incorporating advanced technology into your business operations not only streamlines the process but also positions businesses for long-term success and competitiveness in the evolving e-commerce landscape.
4. Logistics improvements
Research from VIRAC found that while Vietnam is making significant strides in advancing its logistics sector, there are still opportunities for improvement that can unlock its full potential. Enhancing transport infrastructure and technology applications can significantly boost the efficient movement of goods and reduce costs. Currently, total logistics costs in Vietnam account for 25% of the gross domestic product, with transportation making up 30% to 40% of this cost. In contrast, countries with more efficient transportation and technology systems have rates around 15%.
One factor contributing to high transportation costs in Vietnam is the focus of logistics services solely on core offerings, without additional value-added services. For instance, some logistics providers typically only provide their clients with basic lifting and lowering equipment. When these clients need to ship heavy and bulky equipment, they often have to hire external partners, increasing logistics expenses and, consequently, the cost of goods.
Therefore, by partnering with logistics providers that have broad service offerings, like DHL Express Vietnam, businesses can get all-in-one logistics solutions at cost-effective rates.
5. Streamlining the customs process
For e-commerce businesses aiming to expand overseas, the customs process presents a significant opportunity to enhance operational efficiencies. By effectively navigating customs regulations, businesses can streamline international shipping and minimise delays. Although international shipping involves stringent customs procedures and compliance requirements, proactive management can mitigate potential hold-ups. Successfully addressing these challenges ensures timely deliveries, helping businesses maintain high customer satisfaction and a competitive advantage in the global market.
Strategies for improving efficiency in e-commerce operations
To address the challenges of operational efficiency, e-commerce business owners in Vietnam should consider implementing the following operations management strategies:
1. Optimise supplier relationships
Evaluating and maintaining strong relationships with suppliers is critical for ensuring timely deliveries. Businesses should:
- Manage supplier lead times: This approach involves setting clear expectations, negotiating favourable terms, and monitoring supplier performance consistently.
- Assess quality: Continuously monitor supplier performance to ensure high-quality standards. Establish quality benchmarks and perform regular audits to maintain product standards.
- Address supply chain disruptions: Develop contingency plans to mitigate the impact of supply chain disruptions. This could include diversifying the supplier base, holding safety stock, and having backup suppliers ready.
2. Implementing bulk ordering
Bulk ordering can streamline supply processes, reduce administrative overheads, and optimise cost structures. To effectively implement bulk ordering:
- Balance costs and storage: Consider storage costs and the shelf life of products when placing bulk orders. Efficient warehouse management and accurate demand forecasting are key to optimising bulk purchases.
- Leverage discounts: Take advantage of bulk purchase discounts to lower overall costs. Negotiate volume discounts with suppliers and consolidate orders to maximise savings.
3. Utilising inventory management software
Using inventory management software for your operations can be beneficial for enhancing operational efficiency by providing comprehensive solutions for managing stock.
- Monitoring stock levels: Use software to keep track of inventory in real-time, ensuring accurate stock counts and reducing instances of overstocking or stockouts.
- Forecasting demand: Employ historical sales data to predict future demand and adjust inventory levels accordingly. This helps maintain optimal stock levels and meet customer demand without delays.
- Automating reorder processes: Automate reorder processes to ensure timely replenishment and avoid stockouts. Set reorder points and use automated alerts to manage inventory efficiently.
4. Selecting reliable logistics partners
Choosing the right logistics partners is essential for efficient delivery operations. Businesses should:
- Evaluate delivery networks: Assess logistics partners based on their delivery networks and transit times. Ensure they have the capability to meet your delivery requirements and can provide timely and reliable service.
- Switch providers if necessary: Be willing to switch providers to improve shipping efficiency and customer satisfaction. Regularly review performance metrics and customer feedback to ensure your logistics partners are meeting expectations.
- Consider value-added services: Look for logistics providers that offer value-added services. Some logistics companies, like DHL Express Vietnam, have services that can help you streamline the delivery process, such as customs clearance facilitation, delivery management, and door-to-door courier delivery. These services could help with enhancing overall operational efficiency and reduce costs.
