Rapid e-commerce growth spawns strong logistics development

09:38 | 17/02/2020 Society

(VEN) - Ranked sixth among the top 10 largest e-commerce markets in the world, Vietnam’s rapid e-commerce growth is providing burgeoning opportunities for the growth of Vietnam’s logistics business.

rapid e commerce growth spawns strong logistics development

Expanding investment

The Hateco Group’s 40,000sq.m warehouse system located in the Sai Dong Industrial Park in Hanoi’s Long Bien District is already full less than one year after its launch. Most customers are e-commerce and shipping companies, such as Shopee, Giao Hang Nhanh and Lazada Express.

Dinh Duy Linh, general director of the Hateco Group, said potential for e-commerce logistics development is huge as the number of e-commerce companies is growing and demand for rental space to store and classify goods is increasing.

The group plans to invest in expanding and modernizing its logistics center to reduce costs. “We are working together with some businesses to create an automatic goods classification system,” Linh said.

Vietnam’s e-commerce has developed strongly in both quantity and scale, ranking sixth among the top 10 largest e-commerce markets in the world, behind only China, the US, the UK, Japan and Germany. According to the Ministry of Industry and Trade, Vietnam’s total retail e-commerce sales will reach US$10 billion by 2020.

The volume of goods traded through online channels has increased rapidly, resulting in increased demand for e-commerce logistics services. According to Giao Hang Nhanh, the number of orders will grow an average of 45 percent per year during the 2015-2020 period, reaching 530 million orders by 2020.

The Lazada Group has invested in three large warehouses in Ho Chi Minh City, Da Nang and Hanoi, with a total area of 22,000sq.m and network of 34 distribution centers nationwide.

rapid e commerce growth spawns strong logistics development

In the Hateco logistics center, LEL Express - a forwarding company under the Lazada Group has invested in the second automated goods sorting system with capacity of 10,000 parcels per hour to meet the increasing demand in the next two years.

Delivery companies such as Viettel Post and Vietnam Post have cashed in on this growth. In addition, some young Vietnamese businesses have promoted investment in delivery services, among them Giao Hang Nhanh and Giaohangtietkiem. With a flexible network of transaction points and transportation, they can take and delivery goods within six hours.

mproving services and lowering costs

According to the Agency of Foreign Trade under the Ministry of Industry and Trade, e-commerce will boom in the coming years and e-commerce logistics will be on the rise. However, some problems facing the industry need to be overcome, including improving service quality and lowering costs.

Logistics costs in Vietnam are high, undermining business competitiveness. They account for about 30 percent of revenues, higher than the rates of 15 percent in India, 11.7 percent in the US and 12 percent in China.

Poor roadway and aviation infrastructure is one of biggest challenges for the logistics industry. In addition, Vietnam largely remains a cash-based economy, forcing e-commerce companies to rely on cash on delivery, which incurs higher operational costs.

Tran Thanh Hai, deputy director of the Agency of Foreign Trade, said there is still much room for growth of Vietnam’s logistics industry. However, companies must apply Industry 4.0 technologies to reduce costs and make big investments in infrastructure to reach their potential, he said.

Nguyen Nga