Who’s going to survive the e-commerce war in Vietnam?
This article is an analysis of the current situation. It will take a look at the ever-changing landscape that e-commerce is.
Introduction
To get started quickly, e-commerce is to me the act of making a purchase on a platform and get it delivered to your place. Period. I listed down the following players today :
Shopee
Lazada
Tiki
Grab
Tik Tok
That article popped up because I recently discovered I could place an order on Tik Tok and made a purchase impulsively of 2 shorts for 104,000 VND…
In a previous article I was mentioning that Grab was the natural player to enter e-commerce as they have the e-commerce main component, logistics with all their drivers. It simply made sense to me. I didn’t see Tik Tok coming … At all. Needless to say that it blew my mind.
It made sense that Tik Tok can now simply become a natural e-commerce platform, leveraging their short form content and let the creators drive sales on it. What actually really blew my mind was the following chart.
Following this big shift in the landscape, we’ll have to review again the situation and assess with the following parameters :
How does the traffic stand in the past few months?
How profitable is the company?
How the landscape will evolve?
Traffic over the past 3 months - Year 2023
By every metric on Similar Web, Shopee is far ahead and leaves the competition to dust. The numbers are pulled from February 2023 until April 2023 and measures all traffic.
What’s actually impressive is the ability of Shopee Vietnam to attract way more traffic AND get a higher visit duration, pages per visit and lower bounce rate.
Shopee is simply able to offer a superior consumer product to the market today.
Profitability of the company
Shopee is dominating this category
Forrest Li, CEO of SEA has managed to turn its group profitable for the first on Q4 of 2022
Shopee reported in Q4 2022 its first profitable quarter. With over 400M in operating income, the group is able to cruise with profits and doesn’t rely anymore on unsustainable revenue growth. That’s a key strategic milestone for such South East Asian player in the region. It puts Shopee as the king of e-commerce.
According to the CEO of Sea, Forrest Li on an article on Forbes :
Sea turned profitable on the back of massive cost-cutting measures that included retrenching thousands of staff, salary cuts and reducing sales and marketing expenses by 61% to $473.6 million during the quarter. “As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem,”
Tiki is slowing down
With a negative revenue growth of 7% and higher cost of 4% ( 2022 vs 2021 ), the company is not in a good shape to compete against the king of e-commerce nor to slow down the inevitable rise of Tik Tok Shop according this article from VNExpress.
Son has shown several times his resilience to cope with adversity, it wouldn’t be surprising that Tiki can pull something out in Vietnam and position Tiki successfully over the coming years.
Lazada financials are a big question mark
Lazada might not be profitable at the moment but the parent company Alibaba shall have enough firepower to keep the company afloat for quite some time
Since Alibaba made the acquisition, it’s really to extract any financial data from the group. What we may believe is the following, Lazada shall be profitable sooner or later with the management of Alibaba eventually. Rumors about the appointment of their first CEO, Peng Lei from China wasn’t successful and required the comeback of a French CEO Pierre Poignant for some time before he had to hand over again the hot seat to James Dong.
Conclusion
If SEA can keep a positive net income and keep growing over the next 18 months, it will really make it hard for the other players to catch up.
Tiki is unlikely to survive unless the team manages to secure additional funding and keep growing revenue to justify it.
Lazada shall still be around but lose relevance over the next 18 months if Tik Tok keeps the same trajectory. From my standpoint, I don’t see Lazada capabilities for competing against Tik Tok massive audience.
How the landscape will evolve?
The competition landscape
With Tik Tok entering the market for the past few months, we can see a new threat coming in the e-commerce industry. Tik Tok changes the game by relying mostly on organic traffic to drive sales for their merchants through it consumer app.
Their unit economics are just dramatically better, since they don’t have to acquire users, the profitability is just off the charts. Their unique positioning on vertical video content makes it the leader in this category. As they keep growing their audience, revenue will follow.
I don’t think that any of the traditional players, Shopee, Lazada nor Tiki can compete against that. What will be their next move in the coming 18 months aside from survival or profitability? I seriously don’t know. I just know that Tik Tok is going to eat more market share and will hurt the rest of the industry.
The recession
Currently, the global economic recession starts hitting around the world and retail is being hit as well. It’s no surprise that consumer spending will decrease as disposable income is cut down. Several industries are being hard like manufacturing and real estate already with many layoffs in Vietnam.
The ability to keep double digit revenue growth quarterly won’t happen anymore. The main question is more which player will be impacted the most with the shrinking demand. It shall come back naturally to the ability to provide the best offering.
Everyone is going to suffer more or less from the recession. The question is who’s going to take advantage of such environment and position itself to grow even faster in the coming years. It seems at the moment that Tik Tok will lead the e-commerce space and Tiki will not survive from this recession.
Grab
It seems that Grab is now just focused on moving forward with profitability. The group is on track with a reduced net loss quarter over quarter and keeps a healthy cash on hand over 5 billion USD. It hasn’t been able for some reason to turn into a major force in the e-commerce space though.
As a super app, Grab is more like Google, it’s an intent driven app. Consumers want to do something and will then open the app whereas Tik Tok is more a discovery driven app. That might limit the potential for consumers to get on the app and start shopping.
Furthermore, the user interface of Grab is not really friendly yet for consumers to spend time on the app and enjoy engaging with it. A refresh of the app might be necessary.
