Can you provide an overview of the Southeast Asia's e-commerce landscape?
Citi recently organized the eCommerce and Technology Summit 2024 in Ho Chi Minh City, focusing on eCommerce growth in Southeast Asia and Vietnam. Insights from a recent report, released in April in partnership with Citi, highlight that e-commerce in Southeast Asia has rapidly transitioned from its nascent stages to maturity.
Remarkably, online sales in the region are projected to reach a staggering US$190 billion in 2024, demonstrating over 20-fold growth in just a decade. Southeast Asia's e-commerce market grew at an impressive 45% compound annual rate between 2012 and 2021, primarily driven by a low starting base and shifting dynamics following the pandemic.
The e-commerce market in Southeast Asia is concentrated among four major players, collectively commanding more than 50% of the market share. However, we continue to witness substantial growth driven by increased consumer spending and innovative new business models.
Is Vietnam’s e-commerce market also experiencing a slowdown post-Covid?
Not at all. Vietnam has recorded impressive e-commerce growth, with a 34% increase in the first half of 2024, significantly surpassing the regional growth rate of 18%. This positions Vietnam as one of the fastest-growing e-commerce markets in Southeast Asia.
Ongoing growth is largely fueled by existing online consumers increasing their spending across the leading three platforms, which hold a combined market share of 55%. Projections indicate that 2024 will be another stellar year for e-commerce in Vietnam, with anticipated sales growth reaching up to 38%.
Vietnam's population of nearly 100 million presents a compelling market opportunity. While the country's heavy reliance on cash poses challenges for digital adoption, it also highlights the vast potential for further digitalization.
Thuy Lai, Country Head of Trade and Treasure Solutions at Citi Vietnam. Photo courtesy of Citi Vietnam |
What challenges do e-commerce businesses face regionally and locally?
Despite the rapid growth, 30% of surveyed e-commerce businesses in Southeast Asia reported not being profitable in 2023. Many are struggling with low EBITDA margins, with most seeing marginal profits of 0–5% at the EBITDA level. This scenario marks a shift from three to five years ago, when fewer businesses reported profitability.
The recent report, which conducted in-depth surveys with 51 e-commerce leaders in Southeast Asia, indicates increasing pressure from top management for profitable business growth. There is a clear demand for "quality growth," with brands elevating their expectations from e-commerce. As a result, e-commerce must not only deliver sales growth but also prioritize profitability and positively contribute to brand dynamics.
This quest for quality growth presents several hurdles that industry leaders must navigate, including soaring marketing costs, tightening budgets, and mounting competition. The upcoming phase of e-commerce growth in Southeast Asia and Vietnam promises to be both exciting and challenging. While the online market is projected to grow significantly to $95 billion by 2027, capturing this growth will be more demanding than ever.
What key strategies can e-commerce leaders adopt, according to recent research?
E-commerce has become an increasingly complex business area to manage, necessitating clear strategies across various fronts.
First, digital marketing remains a critical capability for e-commerce management. Brands and sellers are striving for efficiencies, including piloting new advertising channels.
Second is assortment planning. Approximately 46% of surveyed leaders identified assortment planning as a priority. They aim to streamline their online offerings to focus on high-value products that yield larger orders and higher lifetime value while minimizing markdown needs.
Third is channel diversification. Leaders are working across multiple complex channel environments. About 45% have at least one direct-to-consumer channel, such as a brand website or social commerce. Some diversify out of necessity, while others are driven by new, fast-growing opportunities.
Finally, cost efficiency is a major focus. e-commerce leaders are prioritizing cost reductions, with a strong push toward operational efficiency. An impressive 75% are currently partnering with service providers to enhance logistics, shop management, promotions, and marketing.
What solutions does Citi offer to strengthen the e-commerce market in Vietnam?
Looking at the bigger picture, Vietnam’s e-commerce ecosystem remains dynamic yet in its infancy compared to more mature markets. Citi leverages its global network and local expertise to enable clients to utilize non-resident accounts for local currency management and FX conversion. Our integrated payment solutions support clients throughout the entire digital commerce lifecycle, from payment acceptance to fund management.
Since 2020, we have been the main payment bank for leading marketplaces in Vietnam. In 2021, we became the first bank in Vietnam to provide cross-border payment solutions for overseas sellers and digital services players on marketplaces. In 2022 and 2023, Citi launched NRA solutions for e-commerce and the e-commerce and digital framework. In 2024, we implemented several payment system enhancements to support large volumes of domestic and cross-border payments.
As Citi celebrates its 30th anniversary in Vietnam, I’m proud to say we’ve supported e-commerce leaders in achieving their growth aspirations by providing best practices to facilitate their success.