Ho Chi Minh City: Piloting digital transformation in retail

Vietnam Dairy Products Joint Stock Company applies digital transformation in its production process. Photo: Uyen Phuong

Facing the threat of encroachment by foreign e-commerce

On August 28, 2024, the Ministry of Information and Communications (MIC) issued Decision No. 1459/QD-BTTTT, approving the Program to support retail stores in digital transformation. Eligible participants include businesses, stores, and wholesale and retail business households across the country. According to Mr. Tran Minh Tuan, Director of the Department of Digital Economy and Digital Society under the MIC, to implement this program, the MIC has selected Phu Nhuan district, Ho Chi Minh City, as the pilot location for the program's core activities before summarizing and expanding it citywide and nationwide.

According to the MIC, the National Strategy on Digital Economy and Digital Society Development to 2030 sets a target for the digital economy to contribute 20% to the national economy by 2025 and 30% of GDP by 2030. By the end of 2023, the digital economy reached approximately 16.5%, with the digital economy in the information technology sector reaching approximately 55%, and the digital economy in other sectors and fields reaching approximately 50%. Within the structure of sectors and fields of the digital economy, the dominant sector is services, accounting for approximately 70%, particularly e-commerce, logistics, tourism, digital technology, and broadcasting and television, which are areas with strong development potential.

However, currently, the proportion of e-commerce and retail in Vietnam only reaches around 8%, while the global average is around 19.4%, with some countries like China reaching 43%, the UK 35%, South Korea 28%, and the USA 26%. Consequently, the development space for e-commerce in Vietnam remains substantial.

Furthermore, according to Mr. Tran Minh Tuan, Vietnam has over 1.4 million grocery stores and 9,000 traditional markets. This sector not only ensures the smooth flow of goods within the economy but also generates numerous jobs. Net revenue from the retail sector accounts for 3.91% of GDP, creating employment for 3.19% of the total workforce in this sector. Meanwhile, net revenue from wholesale activities accounts for 27.6% of GDP and attracts 8.76% of the workforce.

On average, each Vietnamese person makes online purchases 4 times per month. This indicates the growing popularity and demand for e-commerce. The value of the e-commerce market has steadily increased from 2018 to 2023, with revenue reaching 20.5 billion USD in 2023, representing a growth rate of approximately 25%. In 2023, the size of Vietnam's e-commerce market surpassed that of the Philippines, ranking third in Southeast Asia, trailing only Indonesia and Thailand.

Despite achieving an impressive growth rate of 25% for several consecutive years and securing the third position in Southeast Asia in terms of market size, Vietnam's wholesale and retail industry faces the risk of encroachment by foreign e-commerce, with goods and financial security facing numerous challenges. Therefore, drawing upon international experience and the realities in Vietnam, the MIC has approved the Program to support retail stores in digital transformation.

Prioritizing the development of the digital economy

Director of the Ho Chi Minh City Department of Information and Communications, Lam Dinh Thang, stated that Ho Chi Minh City has set ambitious goals for developing the digital economy. The target is for the digital economy to account for 25% of GDP by 2025 and 40% of the city's GDP by 2030. This proportion is 5-10% higher than the national average, demonstrating both the aspiration and the significant challenges associated with developing the digital economy in Ho Chi Minh City.

Currently, Ho Chi Minh City has implemented various solutions to promote the digital economy within the city, focusing on digital transformation in key industries. In addition, it supports small and medium-sized enterprises and wholesale and retail households in their digital transformation efforts, facilitating the listing of their products on e-commerce platforms to boost revenue growth through digital technology. It also actively mobilizes social resources to participate in digital transformation.

To ensure a synchronized implementation, the Ho Chi Minh City People's Committee recently issued a plan to support small and medium-sized enterprises in digital transformation until 2025. According to the plan, Ho Chi Minh City will provide support to local small and medium-sized enterprises in implementing digital transformation to optimize operations, enhance production and business efficiency, strengthen capacity and competitive advantages, and create new value for businesses. The objective is to deploy digital platforms by 2025 to assist small and medium-sized enterprises in accelerating digital transformation. This will ensure that 100% of businesses operating in the city have access to and can update information, enhance their awareness of digital transformation, and have the opportunity to try out digital transformation platforms.

The plan also sets a target for the rate of small and medium-sized enterprises utilizing digital platforms to reach at least 60%; concurrently, it establishes a network of consultants who meet the specified criteria and regulations to support businesses in their digital transformation journey.

The Ho Chi Minh City People's Committee has announced that it will provide financial support for consulting, renting, and leasing digital transformation solutions for businesses. Eligible recipients include businesses and organizations operating within the city, particularly small and medium-sized enterprises, cooperatives, and business households that require support in digital transformation.