Why would a Louisiana-born American turned Washington DC Politico move to Vietnam to start his own business? The Asian e-commerce explosion provides a simple explanation; in Vietnam, online revenue has grown 314% since 2012. This year, the e-commerce industry in Vietnam is expected to generate over US$4 billion in revenue.
Vietnam displays part of a larger trend occurring in emerging markets where consumers are shifting their spending habits from traditional retail to e-commerce. Globally, the business-to-consumer e-commerce industry is expected to generate over $1.7 trillion in 2015, an increase of over 17 percent from 2014.
I recently spoke with Don Phan, founder of Taembe.com, which is the Diapers.com of Vietnam. We discussed the challenges of building an e-commerce business in Vietnam and his perspectives on the country’s startup community.
His story is worth a listen.
In less developed economies from Africa to Asia, cell phone use is experiencing rapid growth, with many millions obtaining personal access to the Internet for the first time via smart phones. Before the advent of the smartphone, personal access to the Internet was largely unaffordable, especially in off-grid communities.
Vietnam is perhaps at the vanguard of mobile e-commerce. 58% of Vietnamese internet users shop online with their mobile phones, compared with a global average of 44% according to Nielsen. In the United States, the New York Times reports that only 11% of e-commerce purchases occur via mobile.
Mobile technology is changing lives in the developing world – making retail more convenient for consumers. Consider this: In the United States and throughout the developed world, ‘big box’ retailers are dominant, with roads, infrastructure, and zoning laws favoring large corporate storefront commerce, making it easy for consumers to access the goods they need. This ease generally does not transfer into emerging markets, where it is much more common to see chaotic, un-zoned streets with scant parking available (for those that can afford a vehicle), and small storefront mom and pop retailers are everywhere. Grocery shopping in Saigon brings interesting new dimensions that Western residents will never experience –imagine having to balance a large and unwieldy box of diapers on a motorbike while navigating busy and pot-holed city streets.
Now, with a few simple clicks on a smartphone device, a Vietnamese consumer can have those diapers delivered directly to their domicile.
E-commerce doesn’t always look like what it does in the United States. According to Nielsen, 61% of Vietnamese e-commerce consumers paid cash for their purchases either because they lack a credit card, were concerned about security, or wished to avoid transaction fees.
Many others remain pessimistic about the room for growth in the emerging market e-commerce spectrum. Yet, capital flows are only increasing into emerging markets. Every day more and more people are being lifted out of poverty into the ‘consuming class’. According to McKinsey, this group of individuals will grow to number about 4.2 billion in emerging markets with total consumption valued at $30 trillion.
Don Phan’s story might be unique – and it’s certainly one that’s fascinating. But he has picked up on an exploding trend occurring in the developing world. Thanks to the growing proliferation of mobile technology, e-commerce is bringing dividends of convenience to millions of consumers throughout emerging markets.
