How to Overcome Vietnamese Cultural E-Commerce Barriers in its Growing Online Market?
The number of Vietnamese internet users has been rapidly increasing for the past decade, naturally, such an increase in internet users also brings with it an increase in e-commerce activities and digital marketing.
In 2011, there were 28 million people using the internet in Vietnam. In 2016, the number is estimated to grow to 43 milion, around 46 % of the country´s population. The e-commerce market in Vietnam had reached 154 mil. USD in 2011 and in 2015 it has reached a staggering 2,9 bil. USD (source VECITA).
Vietnam might be the ideal place to invest into e-commerce
According to ComScore, the average internet user is 26.2 years old. Moreover, the data from “We are Social 2014” estimates that 55 % of the internet population searches information about products and brands, whereas 35 % of the internet population shops online and visits auction sites. It is also worth noting that international e-commerce players such as Amazon or Ebay have not yet been established in Vietnam, leaving the market open to any company to gain greater market share.
Major e-commerce barriers stemming from the Vietnamese culture
Although Vietnamese e-commerce marketplace is growing, there are some cultural barriers that may stagnate the growth for the future.
1. Vietnam offers weak consumer protection
Buyers take greater risks when purchasing in Asia, because Asian countries tend to offer consumers less protection than Western countries. Vietnam is not an exception when it comes to this negative trend. Buyers in Vietnam cannot for instance freely cancel their orders, without the sellers´ wishes. Moreover, the government´s effort to protect customers through legislation are often unenforceable, as the e-commerce is growing too fast.
Thus it comes as a no surprise that as much as 77 % of buyers have complained about products being of lesser quality than advertised. Moreover, 40 % of online shoppers have complained about the prices being not clear, with extra hidden costs and charges, which makes them more expensive than street products (compare.vn).
The weak government protection, which leads to fraudulent behavior of some merchants inflict even greater damage in Vietnam than it would in any other country. This is because in an average Vietnamese family, money is managed by a wife, who is also a decision maker, when it comes to spending. Vietnamese wives tend to be very careful about their purchases, and e-stores do not give them enough credibility and security.
2. The Vietnamese do not trust banking institutions
Vietnam is mostly a cash based society. Vietnamese do not trust any institutions when it comes to saving and securing their money, which is also the reason why credit cards and online banking are not widely established. According to compare.vn, 37 % of internet users has stated that they do not own a credit card. This comes as a no surprise in a country where only 22 % of the total population has a bank account.
This trend is also shown by the fact that in 2014, as much as 64 % of people preferred cash on delivery system, whereas only 7 % of consumers have paid via credit cards.
Such behavior may have adverse effect on sellers, since it is estimated that cash payments cost sellers an estimated 5,6 % on financial operations. But surprisingly enough, even sellers do not encourage the use of credit cards, as many see a transaction fee of 2-3 % as an unnecessary cost. Moreover, a pay on delivery option may limit larger transactions as claimed by Ryan Vaughan, Managing director of Nielson Vietnam.
How can one succeed with such barriers?
In order to analyze the ways companies can overcome barriers, one need to take a closer look into successful local e-commerce sites such as Tiki.vn.
A company was established by Son Tran in 2010. Like Amazon, Tiki started by selling books online and later expanded to other products such as gifts and souvenirs. The founder has adopted many techniques from Amazon, however, he was careful not to adopt everything due to different cultures.
In order to resolve its customers´ trust and security issues, Tiki made sure that their prices are always 10-20 % lower than prices from offline shopping. The company also provided a 7 days return/refund policy and a 15 hours hotline and support service. Such services were unusual in Vietnam. Moreover, Tiki encouraged customer reviews by giving reviewers discount points.
Tiki also managed to resolve the payment system. Tiki is able to process bank transfer, credit cards, debit cards and cash on delivery payments and hence satisfy all types of customers. And since the company was able to gain trust of its customers, people are more willing to pay online saving Tiki operation costs.
So what should you do?
- build trust by having an outstanding customer service
- focus on building trust with women
- build trust by encauraging customer reviews, even by offering discounts
- be flexible, when it comes to payment methods
- encourage card payments, even by offering lower prices
- make sure you offer prices lower than street prices
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