My name is Lam Tran and I am the founder and CEO of WisePass. It is a company I launched in October 2014 enabling brands build better relationships with their consumers. Today, this article is about the future of e-commerce in Vietnam and what is likely to change based on my personal opinion. I’ll take a look at three critical factors I believe may change the landscape.
Competition landscape
The e-commerce landscape is dominated by three large companies: Shopee, Lazada and Tiki. Shopee is clearly winning in every metrics at the moment if we take a look at Similar Web. With a higher monthly traffic count, Shopee seems to be the clear winner at the moment but when I look at the potential entrants, I am looking at a couple serious competitors that will likely change the game.
The first competitor is Amazon that already entered Vietnam. They already set up their legal entity and they can decide in the coming years to enter the market officially and compete with the current players. Currently, the focus is just to get sellers and increase transactions for the global market.
It’s understandable as the Vietnamese may remain small for Amazon. I believe the market will grow big enough for them to start within the next 60 months.
The second competitor coming in the market might be likelier as I believe Grab is set for e-commerce. There is a great fit for the super app strategy as they have e-commerce capabilities, strong funding and most importantly, e-commerce is a great revenue growth opportunity across Southeast Asia, including Vietnam.
Currently, Grab is busy to finish its listing with the SPAC in the US and it shall take at least a whole year to complete the process. The question is more when they’ll decide to go with e-commerce across Southeast Asia. My personal prediction is that they will have to do it within 36 months.
Operational profitability
If you’re looking for operational profitability in the e-commerce landscape, I suggest you pass as a founder or investor. The game is all about revenue growth and that’s how valuation is determined.
The e-commerce platform is a cash burner and that’s the reason why you see several rounds happening for Tiki as Lazada is owned by Alibaba now and Shopee belongs to the SEA group. Here is what a P&L looks like in the early days :
This is a snapshot of the financials of Lazada group reported by Techcrunch giving you an idea of what to expect when you’re running an e-commerce platform. Bottom line the cash position was driven down while net revenue was going up. To keep growing up, you need serious financial backers to play the game.
To become profitable, you need a serious amount of orders monthly to cover all your fixed costs and ensure you have enough organic traffic to generate orders more cost effectively. This is not happening anytime soon as the financials of Shopee can show for Q1 2021
Shopee Southeast Asia EBITDA was negative US$412 million during Q1 2021 but the whole group is positive. For more information you can click here. Since running an e-commerce platform burns cash on the long term, you’ll need serious financial backers behind you.
Also Read: Everyday e-commerce: New ways of paying, new ways of buying
Financial backing of e-commerce giants
Back to Vietnam, we have Lazada, Shopee and Tiki. Let’s get started with Shopee.
They currently release on quarterly basis their financials as they’re listed on the New York Stock Exchange. Here’s what you can find about the group in Q1 2021.
The group is actually now making money and and it’s likely to grow bigger. Bottom line, the SEA group is healthy operationally and have US$5 billion in cash on their balance sheet. The SEA group is set to stay in the e-commerce for some time and Shopee is likely to grow even bigger.
For Lazada, the e-commerce platform belongs to the Alibaba group and it generates billion of dollars in EBITDA yearly.
The Alibaba group is going to be able to keep pumping in a few billion dollars when necessary and shall be supporting this Southeast Asian initiative as that is the largest population they have nearby China. Another big piece of e-commerce in Asia would be India but I do not think Alibaba has any plans to enter the market anytime soon.
For Tiki, it’s slightly different as it still relies on venture capital and keep raising more capital on a regular basis in order to keep growing their revenue.
Hopefully the company is able to maintain a low enough cost structure to have a lighter cash burn compared to its two other counterparts. If the company is able to keep raising successfully capital in the next coming years, the company shall be fine.
From the latest news, Tiki shall raise another round of US$200 million and may end up going to a local stock exchange to start trading its shares.
E-commerce is more than just these three factors. However, if competition heats up, players keep losing more money as they grow and if these players do not get capital injection with certainty, it’s really likely to see a big shift in the landscape in the coming years.
At the moment I don’t think this is happening anytime soon for any of them.
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