How Vietnam's Social Commerce Industry is Powering E-Commerce
What is social commerce?
Social commerce is a sub-sector of e-commerce that involves social media and online media that supports social interaction, online buying, and selling of products and services.
Social commerce sellers can be as small as one person selling products to their followers on social media platforms like Instagram or Facebook. Many do not have a web storefront and instead rely on private messages to take orders and payments.
In May 2020, Vietnam’s Prime Minister released Decision 645/QD-TTg approving the National Master Plan for e-commerce development for the period of 2021-2025 with two key objectives:
· 55 percent of the country’s population will participate in online shopping, with an online trading value of US$600/person/year; and
· Business-to-consumer (B2C) e-commerce revenue (for both online trading goods and services) increases by 25 percent per year (US$35 million), accounting for 10 percent of total retail sales and consumable service revenue in the country.
In order to successfully realize these two goals, it is important to reinforce and diversify e-commerce channels. For that, social commerce has emerged as a cost-effective e-commerce support channel, especially for small and household businesses.
However, due to the prolonged pandemic and the new normal, even large brands and enterprises have had to expand their social network-based channel to distribute their goods and services.
According to a recent Bain & Co report, social commerce in Vietnam accounted for 65 percent of Vietnam’s US$22 billion online retail economy last year.
The selling of products through social media
E-commerce in Vietnam is growing at an extremely rapid rate. Social commerce, as a subsector of e-commerce, is gaining momentum as a dynamic and cost-effective channel for businesses and enterprises to approach customers.
However, one of the major differences between social commerce and e-commerce is that social commerce is yet to be equipped with online ordering functions. Further, buyers and sellers have to directly contact each other to complete transactions. In the meantime, e-commerce purchases are finalized on e-commerce platforms, from ordering to shipping and delivery.
Even though some social platforms like Facebook or Zalo (a Vietnamese social media platform) have adopted e-commerce-like functions (such as Facebook Marketplace or Zalo Shop), these functions only cater to the introduction and the information provision of the products, rather than supporting online ordering, shipping or payment features.
Social commerce in Vietnam
Most-used social platforms
While Facebook is not the only social media platform in use for social commerce in Vietnam, it is by far the leading shopping destination, having a much higher penetration rate for online shopping than other social channels.
Apart from Facebook, Vietnamese Zalo is the second most-used channel for social commerce, while other international social media platforms such as Instagram and TikTok have also been demonstrating growth potential, especially among the younger demographic.
According to a recent survey, among many reasons for using social media, over a third of the internet users in the country stated that they relied on these platforms to find products to purchase.
Diversified products increasingly sold on social commerce
Before the pandemic, social commerce was most commonly used for buying clothes and personal care products, especially among younger females. Nowadays, more Vietnamese consumers have turned to online channels for essentials and consumer goods products. Social commerce usage has now extended beyond fashion and cosmetics, with purchases ranging from fruit to home appliances.
Surprisingly, 55 percent of Vietnamese online shoppers prefer to shop for fashion on social networks and only 41 percent choose e-commerce platforms. Read More…
