“A small number of e-commerce platforms dominate the market, with profit shared among these giants, instead of being evenly distributed among all market participants,” Dr. Huynh Thanh Dien said in an interview with The Saigon Times.

A blossoming industry with hidden challenges The Saigon Times: According to the HCMC Tax Department, there were 90,204 organizations and individuals active in e-commerce in HCMC in 2023, representing 0.08% of the city’s population. Are you surprised by this figure? What does it say about HCMC’s e-commerce market? Dr. Huynh Thanh Dien: E-commerce can be understood as a form of trade where transactions are conducted online. Vietnam began establishing a legal framework for e-commerce in the early 2000s, with significant investments in internet and telecom infrastructure, especially in major cities like HCMC and Hanoi. However, the real surge in e-commerce happened during the Covid-19 pandemic, which forced people to migrate to online transactions. This convenience has attracted consumers and encouraged businesses to focus more on e-commerce. HCMC has been at the forefront of this e-commerce trend. The city’s e-commerce revenue last year amounted to US$6.2 billion, making up 29% of the nation’s figure. Sales, calculated by warehouse location, reached US$4.7 billion, accounting for 23% of the country’s total. Notably, HCMC’s e-commerce growth rate is consistently higher than the national average, with 37% growth in 2023 compared to the national rate of 25%. There are several reasons for HCMC’s vibrant e-commerce market. Firstly, HCMC is Vietnam’s most populous city, attracting people from across the country, many of whom are young and quick to adopt new trends. Secondly, rising rental costs have pushed businesses to partially or fully shift online to cut fixed costs, lower prices, and boost competitiveness. Startups, in particular, often begin their ventures online, instead of opening physical facilities. HCMC also boasts some of the best e-commerce infrastructure in the country, including comprehensive internet coverage, advanced telecom systems, widespread smartphone usage, robust logistics networks, and efficient payment solutions. Additionally, the city government has been proactive in developing e-commerce by creating plans that connect platforms with businesses and supporting household businesses in transitioning to online platforms. The growth of e-commerce in HCMC is the result of a combination of these factors, with significant support from the city government to help businesses and individuals embrace online trading. The trend towards e-commerce is expected to continue, as online trading is an inevitable and irreversible market shift. But the boom of e-commerce also poses new management challenges. What’s your view? State management typically lags behind market realities and the extent of this lag depends on the level of economic development and the specific sector involved. In any emerging field, management faces significant difficulties in the initial stages. In practice, the management of e-commerce is gradually improving and becoming more structured. Take taxation, for example. A few years ago, there were significant tax losses in e-commerce, but the situation has now improved. In the near future, e-commerce tax management may even become more effective than in traditional trade. This is because all transactions and payments on e-commerce platforms are recorded. E-commerce market participants are required to provide identification numbers, tax codes and even biometric authentication, if needed, to fulfill their tax obligations. If businesses fail to comply, the respective e-commerce platform would be held accountable. For new business models, we plan to enhance the legal framework and develop the necessary technological infrastructure for effective management. Another issue is the control of counterfeit and imitation goods, which has not yet been truly effective. In the future, we will manage direct and online channels and apply technology to detect and handle fake and imitation goods better. This approach will certainly lead to improvements. The key figure is not just the 90,024 individuals and organizations trading online. The report by the HCMC Department of Industry and Trade also showed that although total e-commerce revenue expanded last year, the number of vendors decreased by 18.5%. This indicates fierce competition on the e-commerce market. The cost of doing business is rising as vendors need to invest in new advertising and marketing strategies, such as hiring live streamers and paying high commissions to e-commerce platforms—often around 20% of an order value. This is an issue that authorities need to consider and address to help the business community operate more efficiently. E-COMMERCE PLATFORM ESTABLISHMENT: Easy but… HCMC has mapped out a plan for e-commerce development and has been doing what is stated in the plan. Do you believe a more practical approach is needed to promote e-commerce development in HCMC? State management in e-commerce involves two key tasks. The first is to provide direction and raise awareness of e-commerce among people and businesses. The second is to develop necessary infrastructure, which includes both hard infrastructure, such as the Internet, payment systems, logistics services, and legal frameworks, and the technology foundation. The focus of management should vary depending on the stage of development. From what I have observed, most people in HCMC are already familiar with trading on e-commerce platforms. The city’s Internet, payment, and logistics infrastructures are more advanced than in other parts of Vietnam and even some developed countries. However, as the market continues to grow, these infrastructures should be further upgraded. There are still some challenges, especially information security. On e-commerce platforms, information of both buyers and sellers is easily leaked. Platforms have access to buyer information and can analyze buyer behaviors, which raises concerns about behavior manipulation. Regulations are needed to govern how e-commerce platforms collect and use information. For sellers, leaks of business information can lead to unfair competition and market disorder. Protecting intellectual property of products displayed on e-commerce platforms is also crucial, as imitation goods can appear within a week of a new product being launched online. Authorities need regulations to maintain order, ensure fair competition, and protect consumers. In doing so, supply and demand will naturally align, and the market will develop healthily. Another issue is the growing monopoly of a small group of e-commerce platforms, which are dominating the market. These platforms might collude on commission rates, forcing sellers to pay higher fees. Consequently, profits are concentrated on these few platforms. The trend where the market size increases while the number of vendors declines suggests the beginning signs of a monopoly. HCMC authorities should cope with this concern carefully. THE RISK OF DEPENDENCE ON FOREIGN E-COMMERCE PLATFORMS  Many experts have highlighted the risk of relying entirely on foreign e-commerce platforms. It is crucial to set up a Vietnamese e-commerce platform that can compete with these giants. What role do you think HCMC should play in achieving this goal? E-commerce platforms operate as business entities, typically driven by the private sector. The city government’s role is to create policies that support and protect businesses, especially startups, to encourage the creation and effective operation of Vietnamese-owned e-commerce platforms. Developing such a platform is primarily about applying the right technology, which is not necessarily difficult. The real challenge lies in attracting both sellers and buyers to adopt the new platform. HCMC should establish clear goals and develop a plan to support the creation and growth of a Vietnamese e-commerce platform. This could include initiatives to connect businesses within specific sectors, gather feedback on the challenges they face when using foreign e-commerce platforms, and identify what they expect from a local platform. The city should also work on technological solutions to help these businesses promote their products and facilitate connections between producers and tech firms, particularly startups, to create an effective e-commerce platform. The city government can offer incentives for businesses that invest in e-commerce platform development, such as tax breaks or interest rate support for tech companies in this field. Once a Vietnamese e-commerce platform is established, it would be vital to foster connections between the platform and local producers, and to promote the platform to consumers in HCMC and elsewhere in the nation. In this context, industry associations play a key role. They need to act as a bridge, helping businesses migrate from traditional sales methods to e-commerce. This shift would require mindset change to embrace the digital age. The HCMC Union of Business Associations could lead by drawing up a plan to establish an e-commerce platform as a joint-stock company. This plan should encourage the business community to invest, thereby linking their interests to the platform’s success. Businesses that contribute capital would be the first to offer their products on the platform. The plan should also include engaging all businesses within trade association networks and district networks to participate in the platform, ensuring a diverse range of products that will attract shoppers. This way, HCMC can develop a robust e-commerce platform rooted in its local business community, providing an effective distribution channel for Vietnamese businesses. As competition intensifies, especially in the digital space, it will increasingly become a cross-border challenge. If Vietnamese businesses don’t unite, support, and help each other grow, local products would not be able to compete with foreign goods, even on the home market.