E-commerce high growth provides fertile land for logistics

E-commerce high growth provides fertile land for logistics. (Photo: blog.paycorp.co.za)

The scale of e-commerce in Vietnam is forecast to reach US$10 billion in 2020, with many companies investing not only in their sales websites and marketing but also in goods transport and delivery service.

However, major domestic delivery service companies are unable to meet the need of online retail, as they simply provide the traditional logistic services without adapting them to e-commerce, according to Nguyen Quang Thuat, director of order processing at Sendo Joint Stock Company, an e-commerce retailer and online commerce platform.

Sendo’s latest survey showed over 40% of its customers complained about the time for delivery. In addition, delivery costs are considered to be high.

Director of Lazada Express Vu Duc Thinh said logistics costs account for 30% of e-commerce revenue, a high level on the world, compared to 10-15% in India.

Logistics services are not keeping pace with the boom in e-commerce, according to Thinh. For example, as online retailers may receive hundreds of thousands of orders a day, the hiring of “shippers” to deliver goods by motorcycle will be impossible, he said.

Thinh also pointed to a lack of a law on logistics and cumbersome regulations. He cited as an example a regulation requiring a bill of sale for imported goods in transportation, which is hard for on-line retailers which deal with hundreds of orders a day, with some orders worth just several tens of thousands of dongs (several USD).

Poor connection between e-commerce and logistics sectors is a weak link of Vietnam’s e-commerce and hinders opportunities of logistics firms.

What is more worrying that there is currently no school specializing in logistics training.

Vice Chairman of the Vietnam Logistics Association Dao Trong Khoa admitted that few domestic logistic companies can meet the requirements of their e-commerce partners.

He suggested logistics companies to link up based on their respective strengths and available services in order to best meet customers’ demand.

Thinh of Lazada Express urged logistics companies invest in technology and learn from world experience.

Pending State support and policies, many companies have made their own efforts to catch up with new demands.

In anticipation of a three-fold increase in orders this year from 2017, the Giao hang nhanh delivery company plans to invest 2% of its revenues in upgrading technologies, including the integration of the positioning application to classify orders according to destinations, thus reducing delivery time.

Director General of the company Nguyen Tran Thi said the company aims to deliver all orders in Hanoi, Da Nang and Ho Chi Minh City within 2 hours from the time of order placement, and within 24 hours for customers throughout the country.

Foreign e-commerce platforms also select local delivery partners based on whether their technologies are compatible.

According to Fabian Wantd, CEO of Lazada Vietnam, domestic delivery companies have good understanding of the local market while foreign retailers are strong in technology. Therefore, Vietnamese firms must invest in technology if they want to cooperate with foreign partners.