Alibaba and Shopee heading for e-commerce faceoff in Vietnam

is considered the fastest-growing digital economy in Southeast Asia, and the Vietnamese e-commerce market is emblematic of that tech-propelled growth. Even before the pandemic set in last year, Vietnam's e-commerce market was already set to reach US$15 billion in profits.

Vietnam has faced an accelerated digital transformation journey, being classified as a digital nation within just three years of aspiring towards that goal. The nation has quickly embraced a host of transformative initiatives, from exploring smart city implementation in its urban hubs to looking into sustainable energy output to already turning out commercial 5G applications.

Most of these goals have been driven by a supportive and innovation-driven government, which among its numerous digital objectives has also outlined a national e-commerce development plan, which will see the online marketplace sector growing by 25% each year to reach US$35 billion in sales by 2025.

SMEs and retailers have been inspired to enter the space, to the extent that the Vietnam e-commerce scene has become much more crowded than it was just two years ago. With so many competitors duking it out online, the Financial Times is reporting that two heavyweights in Asian e-commerce, and Shopee, are expected to emerge as frontrunners.

Shopee is owned by Singaporean, US-listed group SEA Ltd., and expanded rapidly in Vietnam during the pandemic by offering free deliveries and low fees. The virtual marketplace netted 62 million monthly visits in Vietnam in the third quarter of 2020, an over 80% rise from a year earlier.

The platform's rapid market share grab has elicited a response from Alibaba-backed Lazada, also a fixture in Southeast Asia's estimated US$100 billion digital economy. A major regional e-commerce player in its own right. Lazada has teamed with Grab, the region's leading ride-hailing and multiservice provider (as well as the most valuable unicorn in Southeast Asia) to boost its e-commerce profile in Vietnam.

Lazada will harness Grab's services to support its customer and driver networks, leading users to Grab's food delivery service. It will also use Grab's parcel delivery service to ship products and to complete last-mile deliveries, in a bid to enhance its fulfillment operations and to put it on-par with SEA's Shopee.

Grab Vietnam president Ming Maa told FT that the drive behind the collaboration is “partnering with some of our local services so that we can really integrate the customer experience and provide a much richer experience for our customers.”

There is a rising preference for online shopping among Vietnam's increasingly tech-savvy youth population, with a seventy percent mobile penetration rate providing better access to the internet, and recent upticks of online retail and social commerce trends among young consumers in both major cities and rural parts of the country.

E-commerce is projected to account for 10% of Vietnam's total retail sales of goods and services within the next five years, with administrative capital Hanoi and economic hub Ho Chi Minh City expected to account for up to 50% of the country's online B2C spending in that time frame.

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