Chinese e-commerce giant Temu's Vietnam entry: unfair competition or market economy norm?

Vietnam's social media is currently inundated with ads from Temu, the e-commerce platform under China’s PDD Holding, showcasing a diverse array of products – from electronic chips to refrigerator mats – at discounts of up to 90%, and raising concerns about its strategy and compliance.

New users are being lured with a bonus of VND1.5 million ($59) and other enticing promotions including lottery-based discounts for referrals.

In an apparently belated move, the Ho Chi Minh City Department of Industry and Trade recently issued a document calling for action against cross-border e-commerce platforms that offer excessive discounts (over 50%) and free shipping.

This followed some Vietnamese entrepreneurs pointing to Indonesia banning Temu to protect its domestic market. However, in Vietnam, Temu's presence in visible and it apparently plans to stay, as indicated by submitting registration documents to with the Ministry of Industry and Trade.

The platform’s aggressive social media campaigns also underscore its intention to capture a significant market share in the country. Temu is not the first cross-border platform to stir up the Vietnamese market. Other platforms from China like Taobao, Tmall, and JD.com; and U.S. giants like Amazon and eBay have done the same, offering big discounts to lure new shoppers.

The more established ones in the Vietnamese market, like Shopee and Lazada from Singapore, TikTok from China and local platform Tiki have competed against each other in less obvious ways; and they continue to compete against traditional retailers, emphasizing convenience, affordability, and business-to-consumer models.

This competitive landscape has contributed to a booming e-commerce sector, which saw sales soar to $16.4 billion in 2022. Meanwhile, major shopping streets in Ho Chi Minh City and Hanoi are witnessing dwindling foot traffic, reflecting the rise of online shopping.

Inevitable trend

Given that Vietnam is currently engaged in greater international integration with the signing of numerous free trade agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam FTA (EVFTA), it is perhaps inevitable that it will also have to embrace business models like that of Temu as an inevitable development.

Of course, there is the classic economic possibility of increased competition benefiting domestic consumers, offering diversity of choice, reasonable prices and attractive promotions.

In a globalized world, competition is unavoidable. If domestic manufacturing and supply chains are robust, there’s no reason to fear the entry of Temu or any other competitor.

The era of "if you can’t control anything, ban it" is over. Instead, effective, transparent, and fair regulatory measures are needed to protect both consumers and local businesses in this competitive landscape.

However, it cannot be allowed that Temu or any other platform enter the country illegally, undermining competition and preventing the government from collecting taxes. Illegal entities can even flood the market with counterfeit goods.

According to the Ministry of Industry and Trade, Temu, the international version of China’s Pinduoduo, has been selling products in Vietnam since early October, but it had not submitted papers to register its operations until last week.

It was allowing users to connect directly with manufacturers in China and offering free delivery fees, thus allowing international clients to buy products at cheap prices.

The Chinese platform debuted in the U.S. in September 2022 and has swiftly expanded to Canada, Australia, New Zealand, Europe and Southeast Asian countries including Vietnam.

With its aggressive expansion strategy, Temu has become the second most popular e-commerce platform worldwide, with 663 million monthly visits in Q3/2024, only behind Amazon.

The latest report by e-commerce data provider Metric shows that the value of e-commerce transactions in Vietnam jumped 37.66% year-on-year to VND227.7 trillion ($10.91 billion) in the first nine months of this year, or over $1 billion per month. The figure for Q3 alone was VND84.75 trillion, rising 18.15% from Q2.

In a Saturday dispatch, Minister of Industry and Trade Nguyen Hong Dien instructed the Vietnam E-commerce and Digital Economy Agency to advise consumers to exercise caution when shopping on e-commerce platforms, including cross-border marketplaces.

He wanted the public warned against transacting with platforms that have not been verified and registered on the e-commerce management portal.

The agency has been tasked with preparing a proposal for the Prime Minister to direct the Ministry of Finance to take measures for monitoring and managing imported goods circulating through unregistered e-commerce platforms.

According to current regulations, online cross-border retail platforms with Vietnamese domain names, using Vietnamese language in displays, or processing over 100,000 transactions annually from Vietnam must register their operations with the Ministry of Industry and Trade.

The rules aim to ensure consumer protection, information security and other customer rights. However, the agency has admitted that there are platforms in the country that have not complied with the rules.