Transcript: East Asia Market Realities - Viet Nam

Giang Nguyen, NZTE Business Development Manger, Viet Nam: Good morning. If you would like to export your product directly from New Zealand to Viet Nam and you’re struggling to find the right distributor, if you have a developed distributor in Viet Nam and you would like to explore the option of selling on e-commerce, or simply you would like to consider e-commerce as a channel to selling your product to, then please pay attention because for the next 15 minutes I’m going to present to you about the market landscape in Viet Nam and in e-commerce, the opportunity and challenges, and why and how you could enter e-commerce in Viet Nam.

Now, first of all, on market landscape, Viet Nam is a country of over 95 million people with a very young median age. We have, on an average, one million maybe born a year in comparison to about 61,000 in New Zealand. On an average we have 20 babies born, one baby born every 20 seconds. While I have been speaking, there have been three babies born already.

So according to a senior [unintelligible] [research], Viet Nam had 29 million connected spender who spend on an average 25 hours per week online. Let me repeat that: the Vietnamese consumer spends on an average a day per week online and that's what makes e-commerce one of the best places to meet the Viet Nam consumer. These are the shop of the future. 

It is very interesting to learn also that per basket size on e-commerce is four time than that of the people who shop in the supermarket. Online spend is four times per grocery basket than offline spend and in the four key urban cities of Viet Nam, of Hanoi, Ho Chi Minh City, Da Nang and Haiphong. Year-on-year, online grocery spend grew 33 percent compared to only 4.4 percent offline. Now looking at this figure and comparing our market to China, for example, I guess that by the time my children grow up they will not be bothered going grocery shopping in a supermarket anymore. 

Viet Nam has a free trade agreement with New Zealand, like many other markets that my colleague has presented to you and this means that a lot of New Zealand food and beverage products are tariff-free to Viet Nam, for example, infant formula, fresh produce, UAT milk and many, many more. It’s relatively fast to gain access to Viet Nam market especially for F&B product, dairy included. On an average it takes 30-60 days to register an F&B product in Viet Nam if your distributor is professional and knows what they’re doing, of course. It takes 14-21 days for shipment transit to Viet Nam, half of the time from Europe to Viet Nam so if you are trading, exporting in the fresh produce product this is definitely a good selling point for us. 

In terms of geography, Viet Nam, as some of you already know it, already visited it, is a long country. It looks a little bit like New Zealand with our capital, Hanoi in the north and our commercial centre, Ho Chi Minh City in the south. What this means is that makes our logistics very costly. In fact, to make an effective nationwide distribution [cover it] in Viet Nam costs much more than other markets in East Asia. This makes an opportunity, creates an opportunity in e-commerce.The F&B distributor is only focused in the main cities of Viet Nam and e-commerce can allow any brand direct access to the nationwide distribution overnight. 

To the Nielsen Report, we also learn that total e-commerce will likely double from 2.2 billion to 4.4 billion by 2021, and F&B e-commerce is going to double from 75 million to 159 million in four years’ time. Currently, and this is driven, this huge figure is driven, by the consumer behaviour chain. Your consumer is moving online for purchases and currently the F&B revenue from e-commerce, even though it represents only 3.4 percent of the total e-commerce market but F&B growth rate on e-commerce is 16 percent per annum like Claire had mentioned. F&B sales growth on e-commerce is higher than in any of the other distribution channels in the market. 

In terms of opportunity, in 2017, in Viet Nam, we experienced the evolving of Lazada. Later on you will hear from Ali Baba who just purchased Lazada in Viet Nam. Lazada is a big e-commerce platform in Viet Nam and is a B2C marketplace platform, and another B2C platform is called [unintelligible]. It specialises in F&B products that include [unintelligible] and frozen product, [Aderoy] business is very interesting is that it has access to an offline business owned by the same group called [Winmark] and Winmark have 85 supermarket and 500 convenience store. 

Now why is it interesting? Because it allows our F&B products an opportunity to link online activity to offline activity and is very interesting for e-commerce. We also have new regional and international player who recently entered the market which includes [Sophie] from Singapore and [Lofthan] from Korea. 

So why invest in e-commerce? F&B company face the challenges within market distributor and going online can benefit you and them to gain access to a nationwide distribution. To effectively build your brand awareness and to obtain in-depth consumer insight, more and more global and international F&B companies potentially will be your competitor in the future, and looking into the potential of more advanced business model, such as 3PL, 4PL, cross-border B2B and B2C. If you have more questions on this business model please come and catch up after the presentation, which are not yet available in Viet Nam.

The objective of this business looking into this [event] business model and to ease their local distribution challenge, and talking about challenge there’s a lot of challenge with the local distribution. You know a lot of them already so I would like to highlight here a few. For example, to manage the retail selling price is volume versus price issue to take control over the sale and marketing element and to get closer and feel the gap of the consumer need. So e-commerce is, however, not without its challenges.

Recently, New Zealand Trade Enterprise in Viet Nam invested in the pilot project with Lazada in Viet Nam, the biggest e-commerce platform that I mentioned to you. And from this platform we learned that first you must have your product in Viet Nam to an importer or distributor before entering e-commerce in Viet Nam. These are the marketplace platforms. 

In general, Lazada is recommended for [rye] ambient food if you are trading in this area, while [Raroy] is recommended for fresh produce. The cost of e-commerce for a few months means when you get the order online and to fulfil the order, to complete the order, to deliver it to the end-user in Viet Nam on an average it costs approximately 15 percent, so it’s still very, very high. But, get your distributor engagement and commitment before you enter e-commerce because your distributor will be the one who carries out the commercial contract with the e-commerce platform. 

More importantly, you need to discuss, have a discussion, with your distributor. That relationship-building within the e-commerce platform is the same like relationship building with the retailer if your distributor is selling to a retailer. Distributors still lack a lot of capability in this area. Companies must be aware of the market readiness and level of investment before entering, measuring the cost not only in your dollar investment but also in the time and manpower and result that you pull into these processes. In Viet Nam there’s very few agencies that can support and enable you with the end-to-end support, and a lot of expertise in e-commerce that requires to be upskilled.

So how can you maximise the opportunity on e-commerce? There are a few successful cases. For example, there were 2,000 Canadian lobster were sold at a cost average of $100 per lobster during only eight hours, plus they are doing our New Year on one of the platforms.

So you can achieve great results like in the case study if you can capitalise on the right timing for the online promotion campaign, capture the chain that exists during the public holiday, the religious events and the weekend, and like in the case of the Canadian lobster; have an integrated approach to e-commerce such as I discuss with you [unintelligible] link online and offline activity and build a target consumer profile and database for future development. Work with your e-commerce platform to be highly targeted like in the case of [Abbot] and last, carryout on-going refinement for a smooth consumer experience. 

So from all this information what are some of the key takeaway points? Firstly, that e-commerce is the future trend and is a potential channel to effectively penetrate a young market of Viet Nam. Secondly, that F&B [unintelligible] on e-commerce is higher than in any other distribution channel in Viet Nam, and thirdly, that company must get ready and be well prepared before entering e-commerce in Viet Nam because the F&B distribution capability to break through the channel in Viet Nam is still very, very limited.

Now I have just provided you with some good insights into e-commerce in Viet Nam. But I came all the way from Viet Nam to New Zealand not only to talk about e-commerce and I have about one minute left and one last thing that I would like to share with you, so before we came all the way to Christchurch to see all of you and to present to you, our Regional Director, Claire who’s sitting at the end of the room – you heard from her before – she keeps on reminding us that our presentation is about market reality. We are not here to cheerlead the New Zealand companies sitting here to come to our market but I’m Vietnamese and I’m from Viet Nam, and more than that I’m a mother. At home I have two young children, who are this tall, like some of you. 

And speaking as a mother I want the very best for my children so I want your product to come to Viet Nam. The consumer of Viet Nam, the mother of Viet Nam really needs your product in Viet Nam but I would like you to come to our market fully aware of the reality that our marketplace is not easy, it’s not simple and it’s far from being perfect. And secondly, I would like you to come to our market, be prepared to educate the consumer of Viet Nam that 95 million of them, let’s just take the top five percent, the one who can afford [unintelligible] for example, and educate them, and education starts with your very first contact, starts with  your distributor.

And lastly, I would like you to come to Viet Nam with a story, a very good story, not just any story, would have to be an original good, powerful and beautiful New Zealand story.