The e-commerce boom in Vietnam is a headache for logistics enterprises

Last week, the Global Supply Chain Committee held an eLog forum in Ho Chi Minh City. The spokesman described the huge growth of e-commerce and the challenge of last mile distribution.

Amanda Rasmussen, chief operating officer of Indo Trans Logistics, a third-party logistics enterprise, said that Vietnam's e-commerce retail industry is growing at an annual rate of 25-35%. The current market value is 4 billion US dollars, which is expected to double by 2020.

"We see that the growth rate of e-commerce logistics is higher in our business," she explained, pointing out that Indo Trans Logistics has a special logistics line named Speedlink dedicated to the last mile.

She estimates that there are 500000 e-commerce orders in Vietnam every day, and 75% of online shopping activities take place in Hanoi and Ho Chi Minh City, two major metropolitan areas. The two cities have a population of 16 million, accounting for about 17% of the total population, but are about 2000 kilometers apart. This has caused great trouble for distribution, and increased the logistics cost of e-commerce, up to about 28% of the product value.

"For Vietnam, a great challenge now is air freight," said Song Van Huynh, vice president of transportation of , the largest e-commerce platform in Southeast Asia. "Air cargo does not really support e-commerce distribution. We have commercial airlines, but they are prohibited from transporting dangerous goods, such as batteries and even toy guns“

In fact, Vietnam has three domestic airlines, but none of them operate cargo planes. "Air cargo routes are the key transport mode Vietnam needs," Song Van Huynh added.

Thinh Vu, Vietnam Regional Manager of Lazada Express, pointed out that there are also problems in road and rail transport.

"The fastest truck service between Hanoi and Ho Chi Minh City takes 48 hours, and the road coverage is very limited and crowded," he explained. "The fastest train takes 32 hours."

The time for large vehicles to enter the metropolitan area is limited, which weakens the freight efficiency. A speaker said that some companies have more room for manoeuvre than other peers, "depending on their relationship with government officials."

For the last mile, Vietnam's preference for COD adds an additional challenge. About 90% of consumers choose this payment method, while only 40% in Malaysia and 20% in Thailand. In addition, most retailers offer an "out of the box" service, which means that buyers can check the product before deciding whether to complete the purchase. As a result, 12-14% of orders failed to deliver.

However, for Mr. Thinh, although COD will bring "trouble" to logistics, it is also a key growth engine of e-commerce retail, because it can enhance trust and thus increase sales.

Thomas Harris, the managing director of DHL E-commerce (Vietnam), said that more and more consumers are demanding customer service in the APP and the ability to rate the delivery staff.

"Deliveryman rating is actually one of the key elements of e-logistics," he said. "This is a critical moment, because it is the only time for sellers to have direct contact with customers."

Harris is optimistic about the potential of Ho Chi Minh City. He points out that Ho Chi Minh City will become the second fastest growing economy in Asia in 2021.

"But there are 45 million vehicles on the streets of Vietnam, and 8000 motorcycles and 750 cars are added every day. We have to consider new logistics methods in these big cities," he added.

He explained that for DHL, e-commerce ties 3PL's global forwarding, supply chain, express delivery and last mile delivery together. DHL has invested a lot of money in e-commerce in recent years, especially in domestic networks in Southeast Asia.

Harris said, "If you can do cross-border business well, you can provide complete logistics services for any online business."