Growth of Temu, Shein in Vietnam threatens local rivals

Coffee producer Meet More has been relying on foreign e-commerce platforms such as Shopee, Lazada and Tikok to sell its products, with 40% of its revenues coming from them.

But recently Chinese companies have been selling similar products at a lower price and offering free shipping.

"We have been lowering prices to compete, but that also means our profits are disappearing," Meet More says.

It is among half a million Vietnamese sellers on e-commerce platforms who are facing an increasing challenge from the expansion of Temu and Shein, as they bring more Chinese goods to Vietnam at low prices.

Though Temu has not registered in Vietnam, it has been offering free shipping to shoppers.

Shein, Taobao and 1688 are other Chinese platforms which have been increasing their presence on Vietnamese social media.

Marketing expert Nguyen Duy Vi says local businesses cannot keep bringing their prices down because they have higher manufacturing costs and taxes than their Chinese counterparts.

"This means there is a high risk they will lose their customers in the low- and middle-income ranges, who are sensitive to prices."

Temu’s parent company PDD Holdings has achieved strong success in China that is attributed to its steep discount strategy.

With advanced technologies, the company’s logistics system bypasses unnecessary intermediaries and allows products to go directly from manufacturer to consumer at minimum cost.

It seeks to repeat the same success story in foreign markets with Temu, which advertises with the motto "shop like a billionaire," implying that customers should not be concerned about prices.

"With this strategy the platform is able to sell products at a much lower price than local competitors," Vi says.

Thanks to China’s colossal manufacturing infrastructure, Temu is able to offer a huge number of options to Vietnamese consumers in all categories including clothes, cosmetics, household appliances, and tech gadgets, he adds.

Luan says Chinese platforms often offer incentives to Chinese sellers such as free shipping and vouchers, but not to Vietnamese companies, who also need to pay higher platform fees.

The influx of low-priced products is expected to hurt domestic consumers in the long run.

"Due to the large number of products, many items will be of low quality or sold without proper warranty," Vi warns.

Besides, with the sellers located overseas, customers might have trouble with post-sale issues such as making complaints and demanding refunds, he points out.

Vietnamese spent a whopping VND87 trillion (US$3.4 billion) in the second quarter alone shopping on four major e-commerce platforms.

Shopee led the market with a 71.4% market share, followed by TikTok Shop with 22%, Lazada with 5.9%, and Tiki, the only homegrown player, with 0.7%.

To survive, Vietnamese businesses have no choice but to rely on foreign platforms to sell their products.

But some of them remain optimistic and are trying different strategies to survive.

Huyen Trinh, a household appliance vendor in HCMC, has chosen not to compete with Chinese sellers on price and instead sells unique products of high quality to a niche market.

"Consumers at first might direct their focus on the new platforms due to curiosity, but in the long run they will see the disadvantages of buying from foreigners [based abroad]."

Coolmate, a large Vietnamese clothing brand for men, expects Temu and Shein to boost the online shopping market in Vietnam and attract more customers to e-commerce.

It is focusing on improving customer service and building its brand, which it believes are the two factors in retaining customers.

Nevertheless, in the larger context, local businesses want the government to limit the influx of low-quality goods to protect both consumers and sellers.

Luan says import taxes should imposed to protect local producers.

Lawmakers have proposed extending value-added tax also to goods priced at under VND1 million.

But Nguyen Quang Dong, head of the Institute for Policy Studies and Media Development, warns Vietnam will not be able to impose high import taxes due to its commitments under free trade agreements.

The government can instead strengthen measures to prevent unfair competition and review current policies to prevent tax losses, he adds.

Tran Lam, a trainer of online vendors, says Vietnamese companies need to increase their shipping speed by upgrading their logistics systems and sell unique products.

Vi advises local firms to take advantage of e-commerce platforms to export products such as agriculture produce, handicrafts and traditional clothes.

"By leveraging technology, improving production processes, increasing use of local inputs, and embracing sustainability, businesses can achieve unique competitive advantages."