Amid the accelerated growth of e-commerce in developed countries, e-commerce in Southeast Asia has just entered a new phase after COVID-19. SEA countries began to adapt and learn about e-commerce in the 2010s; from 2016 to 2021, the total value of e-commerce sales grew fivefold, or 40 percent annually. And the share of e-commerce in total retail sales increased from 5 percent to 20 percent.
According to McKinsey, using China as a reference point, Southeast Asian markets could see robust double-digit annual growth of 15 percent and 25 percent over the next five years (see sidebar, "The E-Commerce Market in China"). By 2026, the Southeast Asian market is expected to triple at a compound growth rate of 22 percent, reaching approximately $230 billion in gross merchandise volume.
Vietnam - the star of SEA in terms of both economic and digital growth - has already reached US$14 billion in the e-commerce market by 2022 and is expected to reach as high as US$32 billion by 2025. Vietnam is the only country in SEA expected to grow by more than 30% in all e-commerce categories from 2021 to 2025. The government's strategy is to increase the population's use of e-commerce to 55% by 2025 and increase per capita e-commerce spending to around US$600/year.
Unlikely some developed countries like the US while Amazon dominated 40% market share, Vietnam shows a trend of diversification in digital channels. We divide it into 2 types of e-commerce with traditional e-commerce stores such as Shopee, Lazada, and Tiki, and the 2nd is social e-commerce stores with the new appearance of TikTok Shop.
Customers will shop through more digital channels. Learning from China, more companies could set up their own B2C online channels to connect directly with Vietnamese customers through the top 5 marketplaces: Shopee, Lazada, TikTok Shop, Tiki, and Sendo. According to Metric's report on the e-commerce industry in 2022, Shopee is currently the most popular e-commerce platform in Vietnam, accounting for nearly 73% of the total sales of the four marketplaces, equivalent to approximately VND91 trillion. Lazada ranked second, accounting for 20 percent of the total with sales of VND26.5 trillion, Reputa's report highlighted.
Notable in this ranking is TikTok Shop. Although it was just launched at the end of April 2022, TikTok Shop has surpassed Tiki and reached the top 3 of the 2022 ranking with a total score of 13.56. However, the total score of TikTok Shop and Tiki is not a big difference, about 0.33 pt. According to Metric's report, TikTok Shop's 1-month revenue is now equivalent to 80% of Lazada's revenue in the same period, and 4 times higher than Tiki. Sendo is too small and declining every month, they can't compete with giant platforms with huge amounts of money and resources.
For the merchants, you can list your products in all marketplaces to maximize the presentation in digital channels. Still, decentralization often comes with risks when you can't allocate and focus your business resources to maximize the right channel. With the right direction, sometimes the top 1 marketplace is not a good choice if your customers were not in there, you have to think carefully pros and cons of choosing the right place to scale
Following metrics.vn, the top 3 categories of Shopee in 2022 is Beauty, Woman's fashion, House&Furniture with the price range:
Many companies - from apparel brands to consumer electronics companies - have been taking advantage of introducing their products to women audiences in Shopee, especially with the low prices. But it doesn’t mean Shopee is only suitable for cheap and non-brand products while Shopee Mall dominated 59.22% of the total revenue of Shopee. Shopee's best-selling products may be those priced below 100k VND, but the top-performing products are from renowned brands and have a price range exceeding 300k VND, available exclusively at Shopee Mall.
It is easy to see that non-specialist retailers will be left behind and gradually withdrawn from the market. You're entering the market through Shopee, you have 2 sides to choose from: The cheapest price under 200k VND or becoming a Shopee Mall. The criteria for Mall are very strict, you become a Shopee Mall which means you guarantee and follow all of the rules to protect both Shopee's brand and your brand in the customer's view.
So if you want to choose Shopee to expand your business in e-commerce, please be aware:
1. Your product price is <300k VND or you have to find a way to register Shopee Mall.
2. Your categories are beauty, fashion, and FMCG.
Unlike Shopee, the top 3 categories with the highest revenue in Lazada are Home&Lifestyle, Health&Beauty, and TV&Home Appliances. Based on Lazada Seller Center, the Total number of SKUs in 2 categories: Home&Lifestyle and Health&Beauty showed a significant impact with more than 35k SKUs per category and double the 3rd Groceries&Pets
While Shopee shows a significant impact in the beauty categories with more than 70% of total market revenue, in the Home&Lifestyle and Mom&Baby categories, Lazada shows good competitiveness. The average price of products in these 2 categories also shows the advantage for LazMall with 579k compared with 429k from Shopee Mall. Lazada and Shopee's business direction is kindly the same and Lazada was left behind Shopee by traffic and revenue. However, somehow Lazada still shows they can be a good choice in some niches especially when talking about family products like Home appliances and Mom&Baby.
In general, Lazada is suitable for women between the age of 25 -35 to find products for themselves and especially family. Many big family brands like Lock&Lock, Abbott, and Estee Lauder landing their leading e-commerce stores there.
TikTok Shop was born in April 2022 but has already surpassed Tiki, reaching the top 3 of the rankings in 2022. Besides that, TikTok Shop's 1-month revenue is now equivalent to 80% of Lazada's revenue in the same period and 4 times higher than Tiki's revenue. It was a significant achievement for TikTok to leverage its own system which Facebook didn’t do well with their Facebook shop last year.
Regarding price range, contrary to the thought of people selling cheap products on TikTok, following analysis in 2022, the best-selling products of TikTok are from 100k-200k VND and 200k-500k VND which is higher than both Lazada and Shopee. Significantly, the price range of 100k-200k VND dominated 39% of the total revenue of TikTok.
TikTok Shop has two advantages over traditional e-commerce channels. First, influencers, more widely known as Key Opinion Leaders (KOLs), have proved quicker and more effective at promoting new fashion brands and beauty products across their follower networks. Second, price isn’t the most important factor when consumers make buying decisions on social e-commerce; people often purchase based on how much they like and trust the KOL.
With its focus on social media and influencer marketing, TikTok Shop aims to appeal to customers in Gen Z and millennials who want to discover new products and brands through the recommendations of their favorite creators on foods, beauty, and technology. Leveraging TikTok's machine learning focusing on image, audio, and users' interest, TikTok can offer suitable ads to customers based on what they like to watch. But focusing on TikTok Shop means you have to focus on trends and invest in KOLs and video creativity to maximize your performance otherwise you will be left behind.
Tiki was one of the first e-commerce marketplaces in Vietnam, it was proud of Vietnam's products but lacked support from global markets like Shopee, Lazada, and TikTok Shop, Tiki decreased every year and lost the market.
According to the e-commerce Report for the first quarter of 2023 published by Metric, Tiki only recorded VND 846.5 billion in revenue, far behind Shopee's VND 24,700 billion, Lazada's VND 7,500 billion or VND 6,000 billion of rookie TikTok Shop.
Note:
Based on the report in 2022, Tiki may show degrowth compared with Lazada and Shopee but they are still showing good growth in the top 2 categories: Phone & Tablet and Home Appliances. Besides that, Books are still one of the fastest growing categories in Tiki, people refer to Tiki as the best channel to buy books like its central brand positioning initially.
So if your products are in 3 categories: Books, Phones & Tablets, and Home Appliances with premium prices. You can consider Tiki as one of the main channels to expand your business in Vietnam. If not, Lazada, Shopee, and TikTok Shops are recommended to choose.
10 years ago, you may not hear as many names in Vietnam e-commerce as you now. 5 years ago, Tiki also didn't have to think much about its threats as they are still one of the best e-commerce channels. That many years, we got Sendo, adayroi.com, vatgia.com, etc but it's all deleted. So maybe 5 years later we will hear about the new brand names in the market.
Choosing a good place for your potential customers to land in e-commerce is not easy. Besides analyzing the marketplace's data, and our competitors landing, we need to understand and analyze which marketplace is convenient for our customers. Maybe this year, our customers like Shopee but next year they will refer to TikTok Shop cause their KOLs promote something new they love or Lazada because of the Lazada music show. So to reduce the risk of changing in this digital era, diversification channels are a good choice, not only focusing on the best channel but also expanding to a new channel which is the potential for a new landing. For example, if you're in the cosmetics industry, Shopee may be your primary channel to focus on. Still, we encourage you to open TikTok Shop and leverage KOLs to promote your new products. These shop entertainment experiences will not only help you to expose the sales but also to increase brand awareness.
In conclusion, diversification and customer experience is the key to focus to maximizing your performance in Vietnam and SEA e-commerce. Don't diversify if you cannot control the good experience for customers (Review, delivery, response rate), to be good at both, analyze the data and try to make sure you understand your customers clearly.
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