E-commerce booms in Vietnam but top firms stay in the red

Vietnam’s e-commerce sector grew by more than 25 percent last year and can preserve this growth rate in the next 2 or 3 years, inning accordance with the Vietnam E-Commerce Association (VECOM).

It states online sales is set to strike $10 billion by 2020, representing five percent of the nation’s total retail sales.Yet the four top

firms that have actually developed the country’s e-commerce up until now, Lazada, Tiki, Shopee and Sendo, have actually repeatedly reported built up losses.Market observers describe that in a “primitive market with high development rates,” leading business are not scared to build up losses in order to entrench themselves in positions of strength by concentrating on broadening their market share at “at all expenses.”

Singapore-based Lazada entered Vietnam in 2012 when it was still owned by Germany’s Rocket Internet.In April 2016

, China’s Alibaba Group Holding Ltd bought a managing stake in Lazada for about $1 billion to support its expansion strategies in Southeast Asia.In June 2017, Alibaba Group increased its investment in Lazada by an extra $1 billion, raising its stake from 51 percent to 83 percent.Lazada Vietnam reported a loss of VND977 billion( $ 42.2 million)in 2015 and over VND1 trillion ($ 43.3 million) in 2016. It attributed losses to huge costs on management and sales promotions.By late 2016, its charter capital remained at just VND15

billion and loans represented many of the working capital it was using.However, Lazada is still an attractive investment option, with Alibaba announcing in March

that it would double its financial investment in the e-commerce company to$4 billion.A project of Garena, a customer Web platform supplier based in Singapore, Shopee is second in the list of e-commerce firms suffering huge losses in Vietnam.In 2016 when it initially entered Vietnam, Shopee posted losses of VND160 billion, however this had actually risen to more than VND600 billion last year.By completion of 2017, the total asset value of Shopee had actually risen ten times to more than VND730 billion as its parent firm raised its total capital by VND30 billion

to more than VND1.14 trillion.Compared to Lazada and Shopee, which have huge companies backing them, Tiki and Sendo are quite modest, implying they had actually made smaller sized losses.Tiki began as an online book shop in

2010 prior to venturing into e-commerce. Just 6 years later on, the company was valued at $45 million, following domestic tech company VNG injecting some$17 million in a 38 percent stake acquisition deal.Tiki had actually published profits of almost VND62.4 billion ($2.71 million) in 2016, a six-fold boost over 2015. This was accompanied by a loss of around VND179 billion ($ 7.78 million )due to the fact that of high operational costs.In its annual report for 2017, VNG showed Tiki making a loss of VND282 billion ($12.26 million)for the year.Despite its losses, Tiki has actually remained attractive to investors as a prominent brand in the market. In mid-January this year, JD.com Inc., a huge retailer

in China, injected an undefined sum into Tiki. The Chinese company had revealed last November that it would pump$ 44 million

into the Vietnamese e-commerce platform, making it Tiki’s biggest shareholder.The last of the top 4 is Sendo owned by Vietnamese tech giant FPT.Sendo raised more than VND400 billion in the two years of 2015 and 2016 and the business reported losses of VND60 billion in 2015 and VND136 billion in 2016. Nevertheless, there its equity stands at more than VND227 billion thanks to a stock concern in 2016. In areport last April pointed out Bain, a U.S.-based worldwide management consulting

firm as stating online companies were flourishing in Southeast Asia.Bain approximated that the region had 200 million digital customers, or people who purchased items or services online, out of an adult population of 405 million. Vietnam, with a population of 93.7 million, represented 35 million of these consumers.Vietnam’s youthful population is among the keenest users of mobile gadgets in the area, while the nation’s customers invest more time online than most of their next-door neighbors, several studies have pointed out.Research firm Nikkei estimated that Vietnamese people invest nearly 25 hours online weekly, on a par with or just behind Singapore and the Philippines.

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