Nguyen Dinh Quyet
Communist Review
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| Selling goods on the TikTok Shop e-commerce platform__Photo: Huong Giang/VNA |
Over the recent years, e-commerce has affirmed its role as a pillar of Vietnam’s digital economy. During 2016-20, e-commerce grew at an annual average rate of 24 percent, earning a revenue of USD 11.8 billion (making up 5.5 percent of the total retail sales). In 2024, despite the impacts of the COVID-19 pandemic, this sector maintained a double-digit growth rate, reaching USD 25 billion, making Vietnam rank third in Southeast Asia, with online retail accounting for 9 percent of the total retail sales.
The proportion of the population participating in e-commerce surpassed 60 percent, with an average purchase value of around USD 400 per person per year. Vietnam is currently among top 10 countries with the fastest e-commerce growth in the world. The number of e-commerce websites and applications has increased sharply, from 3,470 in 2014 to nearly 54,000 in 2024. Shopee, Lazada, TikTok Shop, Tiki and Sendo lead the market with total revenues in 2024 reaching VND 318.9 trillion, an increase of over 37 percent compared to 2023.
Cross-border e-commerce is also developing rapidly, with more and more Vietnamese goods being sold on Amazon, Alibaba, Timo, etc. From 2019 to 2023, the number of Vietnamese products on Amazon increased by more than 300 percent.
With support from the State’s policies and foreign trade agreements (FTAs) like CPTPP, EVFTA and RCEP, Vietnamese businesses can now easily export their goods with lower risks, and promote their brands globally. Cross-border e-commerce has become a launchpad for Vietnamese enterprises to reach large markets like China, the United States and Japan, and emerging markets in Europe and East Asia.
Opportunities and challenges for e-commerce development in Vietnam
Opportunities
In addition to opportunities brought about by the Government’s policies that contribute to promoting digital economy and facilitating e-commerce development, Vietnam has great potential to develop this sector.
Over the recent years, e-commerce’s market share in Vietnam’s total retail sales has gradually increased, especially after the COVID-19 pandemic. This shows that e-commerce is gradually taking over the market share of traditional commerce, especially in large cities and for such commodities as fashion, cosmetics, household goods, etc. As revealed by statistics of the Ministry of Information and Communications, the country has some 1.4 million grocery stores and 9,000 traditional marketplaces, accounting for 75 percent of the total market share. Grocery stores and traditional marketplaces currently meet up to 85 percent of the people’s consumption demand, but the e-commerce growth rate at 35-45 percent per annum is quickly reshaping the consumer habits.
According to research by DataReportal (a global data platform) and We Are Social (a global socially-led creative agency), as of early 2024, there were 78.44 million Internet users in Vietnam, with an Internet access rate of 79.1 percent, which is expected to continue increasing over the years to come. Thanks to mobile connectivity, e-commerce can now expand to most of urban and rural areas. Meanwhile, Vietnam’s per-capita income is forecasted to grow at an annual average of 7 percent during 2023-30 period, a relatively high level in the region and worldwide.
The online payment market reached USD 149 billion in 2024, an increase by 18 percent compared to the previous year, and is expected to reach USD 350 billion by 2030. The increasing number of digital payment platforms has facilitated smoother transactions, making it easier for customers to shop online. The shift to cashless payment is an indispensable part of e-commerce development, providing safe and efficient options to consumers.
With a rapidly growing community of tech-savvy workers and Internet users, Vietnam is not only catching up with the digital transformation process but also emerging as a leading country in Southeast Asia’s Internet-based economy. Vietnam’s strategic position and its participation in FTAs such as CPTPP, EVFTA and RCEP have positioned the country as a center for cross-border e-commerce, thereby bringing about more export opportunities. As the country has strengths in such sectors as textiles, footwear, rice, agricultural products, etc., there is always a great potential for cross-border e-commerce, especially in the business-to-consumer (B2C) model. The growth of this model has not only helped increase export revenues but also opened up opportunities for promoting Vietnamese brands globally. It is estimated that the scale of cross-border e-commerce exports will exceed USD 13 billion in 2027.
The integration of social e-commerce platforms like TikTok Shop and Shopee is reshaping how businesses interact with the young, tech-savvy population. The country aims to become a leading e-commerce hub in Southeast Asia, and an attractive destination for e-commerce businesses to thrive. According to assessments of Google, Temasek, and Bain & Company, in the coming time, Vietnam will continue to maintain an annual e-commerce growth rate of 18-20 percent, and its e-commerce market size will reach USD 63 billion by 2030, rising to the second place in Southeast Asia.
Challenges
Alongside opportunities, the operation of the domestic e-commerce market is still facing numerous challenges.
Firstly, managing e-commerce activities is becoming increasingly difficult and complex.
Along with the growing e-commerce scale, the state management of this field becomes more complicated due to the lack of a separate legal framework. State management agencies still confront challenges in managing and supervising business activities with cross-border e-commerce platforms. Many of these platforms (such as Temu, Shein), though having not been licensed or undergoing licensing procedures, are actually providing e-commerce services in Vietnam, selling products and goods into the Vietnamese market at low prices, negatively affecting the domestic consumption market, imposing a competitive pressure on domestic e-commerce platforms, and significantly impacting consumers’ purchasing behavior. There are no specific regulations governing live streamers, essential information fields required to be provided to viewers, qualifications of livestreamers and their account owner identification, and control of information during livestreaming.
Another challenge is tax-related state management. According to the Ministry of Finance, the total tax revenue from e-commerce activities of domestic enterprises and business households and foreign suppliers without Vietnam-based permanent establishments accounts for only 20 percent of the e-commerce market’s total turnover. Many business entities have failed to declare and pay taxes for their revenues from e-commerce activities in accordance with the tax laws.
The control of counterfeit and imitate goods, banned goods, goods infringing upon intellectual property rights and inferior-quality goods also poses problems for state management agencies. In 2024, functional forces detected many cases showing signs of taking advantage of e-commerce to trade in smuggled goods in large quantities such as cosmetics, functional foods, household items, footwear, etc..
Secondly, the logistics system remains incomplete.
Though logistics operations have improved in the urban areas, goods delivery in remote and rural areas has yet to meet the demand for e-commerce expansion, mainly attributing to underdeveloped transportation infrastructure and digital infrastructure. This lengthens the delivery time and increases operating costs in these areas. Vietnam’s Logistics Performance Index (LPI) is still low compared to the most developed economies in Southeast Asia.
Thirdly, cash payment methods still account for a high proportion.
Vietnam’s e-payment system has made great strides over the recent years. E-wallets such as MoMo, ZaloPay, ViettelPay, and digital banking applications are becoming increasingly popular, proving their convenience and security to users. The rate of cashless payments in e-commerce has increased significantly, especially in the major cities. However, cash payments and cash on delivery (COD) still account for a high rate in rural areas. This is an enormous challenge that needs to be addressed by improving public awareness and strengthening security measures.
Fourthly, there is a shortage of high-quality human resources in the e-commerce sector.
According to a survey by AccessTrade (a Japanese affiliate marketing network) of 200 small- and medium-sized enterprises, 95 percent of respondents said they faced difficulties due to a lack of skilled workers. The working positions with the highest demand include e-commerce software developers (67 percent), digital marketing experts (63 percent), supply chain and logistics experts (62 percent), and multilingual customer service representatives (49 percent). This shortage has greatly affected the ability to meet the operational needs and maintain growth for e-commerce businesses.
Fifthly, e-commerce exerts adverse impacts on the environment.
According to the Vietnam E-commerce Association (VECOM), the rapid development of e-commerce reveals many unsustainable factors, adversely impacting the environment, such as emissions and wastes from packaging, delivery and online food ordering. In 2023, Vietnam’s online business and food delivery activities were earned over USD 20 billion and consumed up to 332,000 tons of packaging materials, of which 171,000 tons were plastic packaging. Online consumers are increasingly concerned about e-commerce’s environmental impacts. However, the choice of environmentally friendly solutions is currently limited, mainly because consumers worry about paying additional costs.
Solutions to sustainably develop e-commerce in Vietnam in the coming time
To develop e-commerce in the time to come, the country should focus on the solutions below.
First, the legal corridor, mechanisms and policies should be quickly improved for creating a favorable environment for e-commerce development. Vietnam should enact as soon as possible the E-Commerce Law to enhance the effectiveness of state management of e-commerce, and facilitate sustainable e-commerce development, serving as a driving force for development of the digital economy.
It is necessary to review and comprehensively evaluate the existing mechanisms, policies and legal framework on e-commerce before revising existing policies and legal documents and issuing new ones toward creating conditions for, and promoting e-commerce application activities and new business models on digital technology platforms in conformity with the e-commerce development situation in Vietnam. Coordination should be intensified between e-commerce management agencies and tax agencies in improving the management effectiveness, and enhancing the control and verification of information of merchants, business organizations and taxpayers.
Second, a complete logistics system needs to be established. The increasingly developing retail market and e-commerce trends, along with changing consumer needs, especially requirements for instant and fast services, will continue to bring great development opportunities for the logistics sector from urban to rural areas. In order to keep up with rapid changes in the business environment, in addition to increasing investment in infrastructure development, the State should continue to adopt policies to support retailers and logistics companies in improving their smart logistics capabilities and expanding networks based on the application of advanced technologies. It is also suggested to adopt mechanisms and policies to promote postal services serving as infrastructure for delivery and logistics for e-commerce. At the same time, legal documents on post should be revised to facilitate market development through reviewing and removing difficulties and barriers for enterprises.
Third, safety of e-commerce transactions should be better guaranteed. E-commerce has many positive impacts but is also vulnerable to hacker attacks, malwares, spam emails and messages, etc., and may be abused for illegal transactions such as drug dealing, smuggling, and counterfeit goods trading. Therefore, e-commerce platforms should be required to strengthen their product quality control processes, take measures to prevent and sanction businesses selling counterfeit and imitate goods, and enhance cyber security, confidentiality and safety solutions for e-payment information.
Fourth, it is a need to diversify electronic sale channels. Authorities should apply measures to encourage enterprises to invest in research and development activities to expand core e-commerce platforms. A competitive environment should be created for the e-commerce ecosystem and for domestic enterprises increase investment in market research, improve their technology and management approaches so as to intensively develop e-commerce, thereby improving the quality and competitiveness of the domestic e-commerce market. This is considered a motivation for development of the digital economy in the coming time. Enterprises, in addition to familiar electronic sale channels, should build their own brands and e-commerce ecosystems centered on their websites. This helps enterprises not only save costs and retain customers but also reduce their dependence on e-commerce platforms.
Fifth, Vietnam should proactively cooperate with foreign countries and international organizations in promoting cross-border e-commerce and paperless trade. Particularly, the country should coordinate with APEC members in completing and harmonizing the legal framework on e-commerce of APEC economies in order to facilitate cross-border e-commerce in the region, intensify the capacity building so that APEC economies can support small- and medium-sized enterprises and micro-enterprises to participate in the cross-border e-commerce market in the region and the world. This solution also helps address emerging and multi-stakeholder issues in cross-border e-commerce, simplify administrative procedures for customs clearance with a view to cross-border e-commerce transactions, aiming to bring “Made in Vietnam” products to the international market.
Sixth, it is recommended to promote human resource training and development. To develop e-commerce, it is required to have a contingent of IT experts who can keep up with new IT advances and are capable of designing software to meet the needs of digital economy. In addition, each e-commerce participant must be able to use technology, exchange information proficiently via the network, and have necessary knowledge about commerce and law. Therefore, developing human resources will serve as an effective solution to enhance e-commerce in localities, striving for a more equal access to e-commerce between rural areas and urban centers.
Finally, for sustainable development of Vietnam’s e-commerce sector as an important driving force for the national economy, it is necessary to focus on addressing environmental issues, and ensuring the harmony between economic growth and natural resource protection. This is the shared responsibility of enterprises, consumers and state management agencies. Accordingly, state management agencies in charge of e-commerce, digital economy, logistics and post should consider issuing regulations on environmental protection in e-commerce, encouraging enterprises to declare eco-friendly products on e-commerce platforms for consumers to make easy choice, apply science and technology, and prioritize the preservation of environmentally friendly products. It is also a need to promote public communication for improving the awareness about environmental protection among online shoppers.-
[1] The Vietnamese version of this article is accessible at https://www.tapchicongsan.org.vn/web/guest/kinh-te/-2018/1134503/phat-trien-thuong-mai-dien-tu-o-viet-nam-trong-ky-nguyen-so.aspx.
