That represents a 43% rate of growth compared to Q1, said Son Tran, CEO of the Vietnamese e-commerce startup Tiki.
“When we look at Indonesia, growth from Q1 to Q2 was much lower, about 34%. And for Southeast Asia overall, the growth rate is around 40%. So, growth in Vietnam is actually higher than the average growth rate for Southeast Asia,” he told GGV Capital recently.
Even then, e-commerce in Vietnam is just 4% of the country’s total retail market, which is valued at around US$200 billion. As such, growth opportunities abound for young startups like Tiki.
In Vietnamese, Tiki is short for search and save. First established as an online bookstore 10 years ago, the startup has expanded to become a leading digital platform equipped with an e-commerce marketplace, smart logistics service and a retail subsidiary.
A master’s graduate from the University of New South Wales, Tiki’s CEO Son Tran recently shared some personal observations on the Vietnamese market and how he’s positioning Tiki for further growth.
Same, but different
Regardless of whether they live in big cities or rural townships, consumers in Vietnam all demand a large selection of high-quality merchandise delivered to them, and fast. The difference lies in how long they are willing to wait for deliveries and the price each is willing to pay for speedier services.
According to Son Tran, urban customers often have no qualms paying more to have their shopping delivered to them within two hours. They pay trillions of dong a year for unlimited 2-hour delivery services, and shop very regularly too.
But as Tiki expanded into Vietnam’s second and third-tier cities, it soon found that customers were willing to wait a bit longer for their shopping, as long as delivery is free. “We have to be mindful of the different customer segments and behaviours,” explained Son Tran.
Strength in delivery
With competition growing in the online electronics market – a key revenue stream for Tiki – Son Tran has positioned his company at the forefront of the logistics business instead. “We prioritised our resources on logistics and in providing two-hour delivery services across Vietnam. We are now the best in class and cost for deliveries,” he said.
This year, amid COVID-19, Tiki launched a groceries delivery service, which Son Tran says is now growing at a rate of 50% monthly. It also started Tiki Pro, enabling customers for the first time in Vietnam to schedule the exact time they want a product delivered and have the Tiki team install or assemble that product for them on the spot.
“We don’t know anyone else in Vietnam that would do this,” said Son Tran, adding that Tiki is able to provide these services based on its understanding of customers’ needs and its platform’s own strengths.
Looking for value
Vietnam is one of the few countries in the region to register positive growth despite COVID-19 this year. “Vietnam managed the COVID-19 situation very well, with the longest lockdown only lasting for two weeks. We didn’t experience months of lockdown like other countries,” Son Tran said.
As a result, Tiki was able to raise its revenue by 45% in the last quarter compared to the same period the previous year, before COVID-19.
Yet, Son Tran said Tiki’s customers are actually quite conservative. “Customers shop online in Vietnam because they are looking for value. Not just convenience and fast delivery, but for better prices and more selection,” he said. Mobile data is also very affordable in Vietnam, with customers able to gain unlimited access to the Internet on their phones for just US$3.
With that in mind, Tiki tweaked its services to offer more value in terms of quality and speed of delivery and pulled back on low-quality product offerings during COVID-19. “We strengthened our operations [instead] and as a result our bottom line improved by 50% over the quarter,” Son Tran said.
The firm also made use of its mobile app to schedule deliveries, installations and even payments. As such, it also became more relevant to a generation of younger and increasingly mobile-first customers in Vietnam.
Betting on the metro
Tiki is planning to focus on gaining market share in metropolitan cities such as Hanoi and Ho Chi Minh in the months to come. That’s because young people tend to move from rural towns to the big cities to attend university, and most end up staying on to find work after graduating.
As a result, there are over 40 million people in Vietnam now living in metropolitan areas. There is also a big gap between the GDP of the metropolitan cities and rural areas, Son Tran said. “We will continue to invest a lot in the metro cities,” he said.
Things will change over the next couple of years though. “The rural areas in Vietnam will become very important, just like China, where a rural commerce market began to emerge 2-3 years back,” he said, adding that Tiki is already considering investments in these emerging parts of the country.