Vietnam's e-commerce sector is experiencing remarkable expansion, driven by digital transformation efforts and increasing consumer demand. With the market projected to reach significant milestones in terms of revenue and user base, the country’s e-commerce sector is poised to possibly become one of the fastest-growing markets in the region.
This growing demand presents local small businesses with a great opportunity for expansion and increased profitability. With the right partner and resources, small and medium-sized enterprises (SMEs) can smoothly navigate both local and international shipping processes to reduce shipping costs and overcome any challenges in the logistics industry along the way.
Current landscape of e-commerce in Vietnam
Vietnam's e-commerce market is experiencing significant growth, with revenue projected to reach US$13.90 billion in 2024, according to Statista. Market insight from Statista also reports that by 2029, the number of users is expected to hit 24.61 million, with user penetration reaching 24.6%. Among urban digital users, adoption levels are highest for e-commerce (96%), food delivery services (85%), and online groceries (85%), as reported by Open Gov Asia.
Furthermore, the Việt Nam News reported that Vietnamese sellers on Amazon collectively sold over 17 million products with a 50% year-on-year export value growth during the 12 months ending on 31 August 2023, as reflected in the "Vietnam's SMEs Empowerment" report. This growth indicates a burgeoning demand that will only continue to rise, driven by increasing e-commerce integration and consumer confidence in online shopping.
Open Gov Asia also notes that if micro, small, and medium enterprises (MSMEs) accelerate their adoption of e-commerce for exporting products and services, e-commerce export revenues could potentially increase to US$5.5 billion by 2027, with an annual growth rate of 7%. This highlights the vast opportunities currently available for small businesses in Vietnam.
However, as more consumers turn to online platforms for their purchasing needs, the demand for reliable and efficient e-commerce services is expected to escalate. For local SMEs to capitalise on this growth and demand, they need efficient shipping solutions and logistics to handle the surge in online orders, ensuring timely and cost-effective delivery.
What are the challenges of logistics in Vietnam?
With the great opportunities forecasted, small businesses must first overcome the current problems they face regarding logistics, particularly the high shipping and logistics costs. As reported by Precious Prestige Logistics, the Vietnam Logistics Business Association (VLA) has reported that logistics costs are 16.8% of Vietnam's GDP, compared to the global average of 10.7%. Within ASEAN, Vietnam's logistics costs surpass those of Singapore (8.5%), Malaysia (13%), and Thailand (15.5%). These elevated costs impact the competitiveness and sustainability of local SMEs in the e-commerce market as they struggle to maintain profitability while keeping shipping costs reasonable for customers.
Additionally, inadequate transport infrastructure and connectivity, coupled with domestic enterprises' low capacity and slow adoption of technology and digital transformation, hinder the growth of the country’s logistics industry. According to a report by the Ministry of Transport, only about 20% of seaports in Vietnam meet the logistics industry requirements, while more than 50% of seaports suffer from overload and lack of facilities. Currently, only about 30% of local airports meet the requirements of the logistics industry, while more than 40% of airports suffer from overload and lack of logistics facilities, as reported by Customs News.
Addressing these issues is crucial as they make it difficult for small businesses to efficiently manage shipping solutions. This, in turn, affects their ability to compete both locally and internationally. Furthermore, as markets become more competitive, having effective logistics and shipping strategies will only grow in importance, making it essential for SMEs to adopt sustainable solutions as early as possible.
How to reduce shipping costs for local small businesses
With the high cost of shipping being a significant issue, SMEs need to adopt smart shipping solutions to reduce expenditure while simultaneously increasing profit margins. Here are some ways small businesses can achieve this:
1. Diversifying shipping options
There are various shipping types available for small businesses to utilise, each suited to different needs and delivery timelines. By offering different shipping types, businesses can not only meet customers' needs but also save costs by selecting the most efficient method for each situation. Here are examples of shipping methods that small businesses can choose from:
- Flat-rate shipping: A shipping price that does not depend on the weight or size of the package.
- Free shipping: This shipping type requires the vendor to cover the overall shipping costs as part of the purchase.
- Domestic shipping: This type of shipping is used only when the recipient is located within a certain radius of the sender.
- International shipping: This method is used to ship a package to another location outside the sender's country and is often done by air freight or freight shipping.
- Same-day delivery: With this mode of delivery, the package will arrive at the customer’s doorstep on the same day the purchase is made. However, it is more expensive than regular shipping.
- Next-day delivery: This method is more costly, but it ensures that the package arrives the day after the customer makes their purchase.
- Express shipping: While typically more expensive, this method allows packages to arrive at their destination faster than regular delivery methods.
2. Partnering with trusted logistics providers
Partnering with reliable logistics companies, like DHL Express Vietnam, is essential for local SMEs to negotiate lower shipping rates and ensure efficient delivery services. Experienced logistics partners offer several benefits, including bulk shipping discounts, streamlined processes, and better handling of packages, which can significantly reduce costs and improve customer satisfaction.
When selecting a logistics partner, small businesses should research beforehand and request quotes from multiple providers. Businesses should also negotiate terms with logistics providers to ensure they get the best possible rates and service levels. It’s also important to check for any hidden costs, especially when it comes to international shipping prices, to avoid unexpected expenses that could impact the overall cost-effectiveness of the shipping process.
3. Leveraging integrated e-commerce platforms
Integrated e-commerce platforms can play a significant role in optimising operations and reducing shipping costs for Vietnamese SMEs. These platforms streamline various aspects of online business, such as inventory management, order processing and shipping, making it easier for e-commerce businesses to fulfil orders.
One such platform that local businesses can consider is Shopify. With Shopify's various integrated features and additional plugins, small businesses can access pre-set shipping prices and discounts on shipping rates. This makes it easier and potentially less costly for them to offer free or flat-rate shipping to customers at checkout.
