Vietnamese businesses struggle to sell profitably on Amazon

The number of products sold by Vietnamese sellers on Amazon has increased by 300% since 2019, and for those with sales of more than $1 million, that figure has risen 10-fold, according to an Amazon report.

While US e-commerce site Amazon is a hit for many Vietnamese businesses, some struggle to profitably do business on the platform since operating expenses are high.

Nguyen Ngoc Luan, general director of Meet More Vietnam Co., Ltd that sells fruit coffee, said low profits have dissuaded his company from continuing to sell on Amazon.

“Despite having relatively high revenues, expenses on shipping and storage are quite large,” he told local media.

Businesses operating on Amazon can opt for either Fulfilment by Amazon (FBA) or Fulfilment by Merchant (FBM) services, he said.

They can have Amazon stock, pick, pack, and ship customer orders with FBA, while FBM requires sellers to handle their storage and order fulfilment themselves.

“We use FBA since we do not have our own warehouse or links with distributors in the US, but doing this results in low profit margins.”

A company in Ho Chi Minh City's Cu Chi district that sells rice paper and dried rice noodles said it is still struggling despite being on the platform for almost three years.

“Profits gained from global e-commerce platforms are not high even though products are sold at higher prices than domestically,” a company representative said.

“This is because operating and advertising fees on these sites are high, not to speak of expenses for shipping, packaging, and logistics.”

Lai Viet Anh, deputy director of the Vietnam E-commerce and Digital Economy Agency (iDEA), told an e-commerce summit that cross-border e-commerce is thriving in many countries, including Vietnam, and is aligned with the country’s goal of developing the digital economy.

But it is also a challenge for many businesses because foreign markets have stringent requirements for imported products, she said.

Another problem is the ability of Vietnamese companies, especially small- and mid-sized ones, to research and evaluate potential markets.

Besides production costs, most companies also have to spend on export activities such as market penetration, transportation and currency exchange.

iDEA said it would support over 10,000 enterprises through a five-year programme for developing human resources, assisting them with using e-commerce platforms and equipping them with relevant skills to effectively sell products.

Vietnamese products are well received by Amazon buyers, including household items, kitchenware, home decor, wooden furniture, garments, personal care products, and consumer goods, CEO of Amazon Global Selling Vietnam, Gijae Song, said.

But there are policy shortcomings that need to be addressed since the country is in the early stages of transforming from traditional exports to online exports, and most Vietnamese companies still lack the personnel and resources for digital transformation, he said.

He said Amazon has been forwarding the opinions of Vietnamese companies to the government to create suitable e-commerce policies and foster holistic growth in the industry.

Nguyen Dung, CEO of 5MSTAR E-commerce JSC, said many companies do not do in-depth market research and focus too much on competing on price.

Most of them begin with excellent sales but are then unable to build a sustainable brand name; Vietnamese businesses need to develop long-term visions and plans, and focus on building brands, he said.

“Both FBA and FBM have their pros and cons depending on a company’s products, strategies, and resources.

“For example, a furniture company should not use FBA since the storage fees for large, bulky items are quite high.

“Thus, enterprises need to carefully measure and fine-tune their business strategies to select the most suitable services.”

With average e-commerce growth of 20% over the past 10 years, Vietnam is among the fastest growth markets in the world.

A study by Access Partnership said Vietnam’s exports through e-commerce could reach VND296 trillion ($11.65 billion) by 2027 if businesses receive support to adopt e-commerce.