KiotViet talks about e-commerce retail in Vietnam and how Covid-19 has shaken up the scene

Vietnamese business solutions startup KiotViet, which was set up in 2014, provides small and medium-sized enterprises (SMEs) with software for inventory, sales and other functions. It claims to have 100,000 stores under its belt so far, with a target of 200,000 more by 2022.

A US$6 million Series A funding round, which closed in mid-2019, was led by Singapore's Jungle Ventures and Indonesia's Traveloka. Tri Cao, deputy general director of KiotViet, tells Asean Business about the e-commerce retail landscape in Vietnam and how the coronavirus outbreak has shaken up the scene.

Q: What are the ongoing e-commerce trends in Vietnam, and how are retailers responding?

A: Vietnam boasts an increasingly tech-savvy Internet population, with a 70 per cent mobile penetration rate. This has allowed for a shift in consumer behaviour as online retail and e-commerce continues to grow exponentially in Vietnam. ... Vietnam's modern retail industry has the potential for significant growth as shops start to integrate technology into daily operations. Modern retail channels such as mini-marts and convenience stores have grown rapidly in the last five years, and will continue to do so. We have observed a growing interest in going digital, driven mostly by the next wave of young and hungry entrepreneurs, and digital-native consumers.

Q: Which retail segments have higher take-up of e-commerce, and why?

A: KiotViet works with SMEs across industries, including clothing and apparel, food and beverage (F&B), electronics, mini-marts and convenience stores. We have seen a higher take up of e-commerce within the clothing and apparel, groceries, F&B and electronics segments. The majority are small shops with three to 10 employees. Access to smartphones, accelerating internet penetration and social commerce in Vietnam are reshaping retail in Vietnam. These factors, along with the entry of foreign players in the retail sector are pushing local businesses to digitise to remain competitive.

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Q: How much traction do bricks-and-mortar retailers have in Vietnam?

A: Less than 10 per cent of Vietnam's retail landscape is in modern trade - that is, trade that involves larger players such as supermarket chains, hypermarkets, and so forth - and 65 per cent of the country is rural. So the 1.9 million traditional bricks-and-mortar retail companies will still be the foundation of Vietnam retail for a long long time. However, SMEs need to digitise faster, to keep up with the changing trends, or else they will lose out to larger players. There is a rising preference for online retail and social commerce among young consumers in both the major cities as well as rural areas, from apparel to electronics, and SMEs have to keep up. There are the big e-commerce players - Lazada, Shopee, Tiki - but we will increasingly see more independent stores leverage social commerce to go online. Bricks and mortar will stay, and as they go online, they will be more likely to leverage the big e-commerce warehouses and logistics services, rather than completely be absorbed by the big e-commerce players.

Q: How has the Covid-19 pandemic affected the pace of digitalisation?

A: Covid-19 has increased the number of consumers turning to online platforms for their needs, and has made digital transformation a priority for businesses - mostly SMEs. We are seeing companies and consumers leapfrogging ahead in many aspects of digital transformation in Vietnam. Change is being driven by consumer behaviour, business behaviour and the mindsets of governments. Suddenly, nice-to-haves - like being able to buy groceries online or even supply chain digitisation - have become must-haves. ... Covid-19 demonstrates that Vietnamese companies are able to adapt quickly, and there is no stopping them!