Traditional sales channel in Vietnam forecast to dominate for next 20 years: Unilever exec

Vietnamese businesses have to ask themselves which channel will deliver increased sales and reduced costs before making a choice, said Pham Hong Son, e-commerce and technology transfer expert with Unilever.

Son was speaking Wednesday at the International Innovative Business Forum (IIBF) 2024 held in Ho Chi Minh City. The forum’s topic was "Applying technology to promote commerce consumption.”

He said there were three main sales channels: the traditional channel, comprising groceries stores, which distribute 70% of consumer goods now and has an annual growth rate of 4-5%; modern sales channels, which are supermarkets and convenience stores, accounting for 20% of sales with a growth rate of 10%; and the online sales channel, which, though talked about a lot, only accounts for 5%, but has a high growth rate of 35-45%.

Traditional channels still have the lowest sales costs, followed by the modern channels. Online channels have the largest costs, mainly to do with promotion and promotional inflation. Promotional inflation was a headache not only in Vietnam but also in other countries, Son said.

"We can see that the traditional sales channel is still the largest and will continue to be large for at least the next 20 years because of consumer habits, government policies, and profits. The picture is relatively similar to other countries in the region," Son remarked.

Nguyen Hai Trieu, founder and CEO of PrimeData.ai, said that the scale of Vietnam's e-commerce market in 2024 was $14.7 billion. This is expected to increase to $23.77 billion in 2029 at an annual growth rate of 10.09%, ranking the country 10th in the world and first in Southeast Asia.

E-commerce solutions

Trieu said Vietnamese e-commerce firms were able to sell a lot, but not able to make good profits because it was “a matter of price, fees and promotions."

Another problem for e-commerce platforms was customer retention, he said. Only 15% of customers return regularly, 25% do so occasionally, but most of them leave and do not return. This is also a big problem that online stores have to solve, he added.

“A study has shown that if Vietnamese firms increase their loyal customers by 5%, they can increase their profits by 25-200%," Trieu said.

He noted there were four solutions that Vietnamese firms could apply: maximize the scale of e-commerce channels; maximize profits with loyal customers; manage the customer experience and target growth in priority customer segments; build a mechanism and upgrade the customer data team.