Consumers shopping at CO.OPmart Rach Gia supermarket, Rach Gia city (Kien Giang). (Photo: Le Huy Hai/VNA)
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Recent observations of the digitalization trend in distribution and retail channels reveal that manufacturing and trading enterprises are focusing on connecting and strengthening direct relationships with their retail networks.
Based on this, the manufacturing and trading enterprises gather customer information and build a database to serve their digital transformation strategy in distribution and retail.
According to experts, digital transformation helps enterprises reduce costs and optimize operations based on data, and this wave is spreading in the Vietnamese retail industry.
However, the question of which stage of the distribution and retail chain to digitalize to create an efficient business model, especially in exploiting the retail market on e-commerce platforms, remains a significant challenge for these enterprises.
At a seminar on “Digital Transformation Roadmap towards the Market” held by the Leading Business Club (LBC) and the Association of Vietnamese High-Quality Goods Enterprises in Ho Chi Minh City, Mr. Pham Hong Son, an expert in e-commerce and digital transformation of distribution systems, pointed out that an increasing number of enterprises are achieving up to 30% of their revenue from e-commerce.
Additionally, the strength of an enterprise’s brand lies in its ability to connect with end consumers, as the nature of e-commerce platforms is merely a means to sell products.
Mr. Pham Hong Son further stated that when manufacturing and trading enterprises develop a multi-channel distribution and retail strategy, they will have different product lines. In most traditional networks, premium products are usually not the backbone of the enterprise’s business.
For new product lines, enterprises often choose to promote them more on e-commerce platforms and are willing to incur higher investment costs on this channel. Furthermore, in the context of digitalizing distribution and retail channels, enterprises are focusing on connecting and strengthening direct relationships with stores and gathering personal customer information to build a database.
Statistics show that Vietnam has three main sales channels: traditional channels (grocery stores) account for 70% of consumer goods distribution, with a growth rate of 4-5% (lower than GDP growth rate but still positive); modern channels (supermarkets, convenience stores, etc.) account for 20% of sales and grow at 10%; and online channels, although accounting for only 5%, are growing at a rate of 35-45%.
In terms of sales costs, traditional channels still have the lowest costs, while modern and online channels incur the highest costs, mainly due to promotional expenses. However, the traditional sales channel remains the largest and will continue to develop for at least the next 20 years.
Currently, there are about 700,000 grocery stores in the traditional channel, and many store owners are dynamic and quick to adapt to the 4.0 technology trend, starting to digitize their stores. Data analysis and understanding consumer behavior trends help retailers better grasp customer needs and respond promptly to their consumption preferences.
According to the Ministry of Industry and Trade, Vietnam’s retail industry has a market size of 142 billion USD and is expected to reach 350 billion USD by 2025.
The retail industry is expected to be a high-growth sector, significantly contributing to the country’s GDP growth and promoting a shift in the economic structure towards increasing the proportion of industries and services.
For e-commerce, the average growth rate reached nearly 21% in the period of 2018-2023; in 2023 alone, it grew by 25% compared to the previous year, reaching 20.5 billion USD, accounting for about 8% of the total retail sales of goods and service revenue nationwide.
Vietnam’s e-commerce growth rate is higher than that of other regions in the world, such as Asia (20.6%), Latin America (20.4%), the Middle East and Africa (17.0%), and Central and Eastern Europe (15.5%).
Mr. Nguyen Anh Duc, Chairman of the Association of Retailers, shared that in the top 5 e-commerce platforms in Vietnam, only 2 are Vietnamese representatives, Tiki and Sendo, with an insignificant market share compared to the other 3 international platforms, Shopee, TikTok Shop, and Lazada, which account for 98.7%.
Additionally, the average revenue per shop on Shopee is 222 million VND, 151 million VND on TikTok Shop, 90 million VND on Tiki, and 54 million VND on Lazada.
While e-commerce presents opportunities, it also poses challenges and necessitates changes for domestic suppliers, distributors, and retailers. For instance, the e-commerce market has higher standards for product quality, variety, production volume, design, and pricing.
Mr. Nguyen Hai Trieu, Founder and CEO of PrimeData.ai, stated that the scale of Vietnam’s e-commerce market is expected to reach 23.77 billion USD by 2029, with a compound annual growth rate (CAGR) of 10.09%, ranking 10th in the world and 1st in Southeast Asia.
In the first quarter of 2024, Vietnam’s e-commerce market grew by about 80% compared to the same period in 2023, with 510,000 online sellers, 768.44 million products consumed on the platforms, and a total transaction value of 79,120 billion VND.
Given this context, enhancing competitiveness in the market through omnichannel sales strategies and synchronizing multi-channel distribution systems necessitates digital transformation in distribution and retail.
Therefore, whether manufacturing and trading enterprises invest in modern retail systems, traditional distribution networks, or e-commerce markets, they must ensure a comprehensive and flexible strategy.
Moreover, omnichannel sales solutions and synchronized distribution systems not only help enterprises optimize their competitive advantages and build strong brands but also reduce dependence on a single sales channel.
Specifically, when enterprises launch a new product, marketing becomes crucial, both in traditional and modern channels, as it creates a ripple effect.
Some enterprises have pointed out that digital transformation in distribution and retail involves key aspects such as maximizing scale with online/e-commerce channels, maximizing profits with loyal customers and owned channels, possessing multi-channel and multi-platform customer insights, managing customer experience, and growing within prioritized customer segments.
Notably, customer data is a journey that manufacturing and trading enterprises should embark on by establishing mechanisms and elevating their teams accordingly.
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