This article was originally published in Chinese on Momentum Works’s Wechat platform, translated into English by Phyllis Pe from the MW team.
Last Thursday, the Vietnamese government requested Temu to suspend its cross-border ecommerce business in Vietnam. Another cross border ecommerce player SHEIN has also complied with the government’s request to stop selling into Vietnam.
Early last month, the Vietnamese government had asked both companies to complete their local registration by the end of November. Temu stated that it had submitted its application but was uncertain about when approval will be received.
Last week, half of the Momentum Works Insights team was in Hangzhou and Yiwu meeting the cross border ecommerce ecosystem. During these meetings, we discussed with stakeholders about this development in the Vietnam market. Here are some thoughts:
- Although Vietnam is not a major market for Temu at this stage, the loss of hundreds of thousands of orders a day and millions of dollars in GMV, at least temporarily, can be still agonising, especially for the team working on it.
- The damage to Temu is more than this temporary loss. This is likely the first time that Temu, which currently operates in close to 90 countries and regions, has been made to completely suspend operations in an entire country. In other countries across Southeast Asia and Latin America, Temu is also garnering a lot of attention about its impact on local manufacturing and retail ecosystem – although most of these concerns have not yet reached a level where they can influence decision-making. If the situation in Vietnam cannot be reversed, forces against Temu in other countries might be more emboldened to push their policy makers.
- In fact, the Vietnamese government had already been closely monitoring the development of Chinese-Vietnam cross-border ecommerce before Temu’s launch in October. In August, an article published by Tuổi Trẻ, a newspaper affiliated to the official Communist Youth Union, a government-affiliated newspaper, titled ‘Many Chinese warehouses “Sprout” close to the Vietnamese border’, garnered a lot of attention. When the Momentum Works team visited Ho Chi Minh City at the end of August, this issue was a topic of discussion among local industry players and policy makers, both in meetings and in Zalo groups.
- It’s clear that there were differing opinions within Vietnam’s ecosystem on how to respond to the influx of cross-border ecommerce parcels from China. In discussions, our perspective was that in the medium-to-long term, players should leverage the flow to develop the Guangxi/Yunnan-Vietnam corridor into a new global hub for cross-border ecommerce. In the short term, however, a more pressing concern for the government would be regulation and taxation, to ensure fair competition and orderly development on a levelled playing field.
- Achieving millions of dollars of GMV after just over one month in the market suggests that Temu’s product and marketing worked with Vietnamese consumers. We previously published an article on how Vietnamese consumers view Temu’s aggressive marketing strategy, you can view it (with Google Translate) here.
- On a side note, it seems that SHEIN is also in a rather aggrieved position. In different markets, SHEIN often finds itself becoming collateral damage in policy responses triggered by competitors’ aggressive actions, rather than due to its own issues. However, under the current geopolitical climate, similar situations may continue to arise. This will test SHEIN’s management team’s ability to effectively allocate resources. SHEIN, Temu, and other cross-border platforms may need to step beyond direct competition to instead collaborate on presenting a positive, unified voice for cross border ecommerce. They could look at the Microsoft experience on building industry lobbying.
- As for the market rumours that Temu is looking to acquire the local Vietnamese ecommerce platform Tiki (previously invested in by JD.com), to legitimize its market presence: Our opinion has been that the chances of this happening are slim. Temu likely sees very little value in Tiki aside from the latter’s logistic assets; and the valuation expectations of the two companies are likely vastly different as well. Moreover, at the time of entry, Temu probably did not think that entering Vietnam would be as difficult as Indonesia, whose policy makers have been staunchly against cross-border e-commerce.
- Developments in Vietnam’s ecommerce market are quite exciting. Even though Vietnam has already been the fastest-growing ecommerce market in Southeast Asia over the past two years, the overall penetration rate is still only around 10% according to the Momentum Works Ecommerce in Southeast Asia 2024 report, leaving significant room for growth.
- The journey for overseas ecommerce companies looking to enter Vietnam is likely to be full of bumps and obstacles. Back in September, we conducted a poll on our Wechat channel asking our community, “What do you think about the future of cross-border ecommerce into Vietnam?”. 663 people voted in the poll. Voted answers were “Chinese and Vietnamese players are too competitive, and may undercut prices too much, making it very difficult for anyone to make a profit” (43%) and “The Vietnamese government will step in to regulate if the growth is too much, too fast” (24%). It’s clear that everyone has a keen understanding of the challenges that lay ahead.
