Vietnamese firms should prioritize product differentiation over price-based competition: RMIT experts

Vietnamese businesses should prioritize digital transformation over price-based competition, and strengthening online presence and adapting to the evolving e-commerce environment are essential, write Dr Scott McDonald, a lecturer, and Dr Nguyen Manh Hung, a senior program manager, at RMIT Vietnam.

The rapid growth of Chinese e-commerce platforms brought intense competition. The influx of low-cost Chinese imports, driven by large-scale manufacturing and advanced digital market penetration, posed significant challenges.

Vietnam could counteract this by enhancing quality control systems, modernizing manufacturing processes, developing dedicated e-commerce platforms for locally made products, and investing in innovation and design capabilities. Turning these challenges into opportunities requires a concerted effort from both public and private sectors to establish sustainable competitive advantages.

This competitive landscape provides valuable lessons for Vietnamese businesses, regulatory bodies, and policymakers. Businesses should prioritize digital transformation and product differentiation over price-based competition. Strengthening online presence and adapting to the evolving e-commerce environment are essential.

Regulatory authorities must implement balanced oversight to protect domestic interests without hindering innovation. This involves establishing effective product traceability systems and enforcing fair-trade practices. Policymakers should create supportive frameworks for technological advancement by offering incentives for automation and digital adoption while fostering innovation through educational programs and industry partnerships. The goal is to build resilient domestic industries capable of thriving in the digital age.

Vietnam's logistics sector also plays a crucial role in enhancing the competitiveness of domestic products. China’s advanced logistics capabilities, including fast delivery services and subsidized shipping costs, have given Chinese products a competitive edge in the Vietnamese market. Key measures include developing smart warehousing systems near major urban centers, adopting AI-driven inventory management, and creating shared logistics platforms to reduce costs for small businesses. Government support through tax incentives for logistics technology adoption and infrastructure development is vital to create an integrated, efficient logistics ecosystem.

Beyond immediate responses to the influx of low-cost imports, long-term strategies are essential for sustainable growth. Logistics efficiency is becoming a decisive factor in competitive advantage. Logistics often receives less attention compared to production, finance, or technology, leading to fragmented responsibilities and a lack of strategic focus.

Vietnam needs a national logistics task force to coordinate efforts across various government departments, including the Ministry of Transport (merging with Ministry of Construction), the Department of Vietnam Customs, the Ministry of Industry and Trade, and local authorities. This task force could streamline logistics services and foster international cooperation, as seen in the partnership between Viettel Post and Chinese counterparts to boost cross-border logistics.

Small and medium enterprises (SMEs) also need to adapt to withstand increasing competitive pressures. Vietnamese firms should identify and develop unique business-added values (BAVs) such as fast delivery, convenient locations, and innovative packaging. There should not be an excessive focus on short-term financial metrics, which may cause businesses to overlook the long-term benefits of efficient logistics. Adopting advanced technologies like AI, big data, and automation can significantly enhance competitiveness by improving customer satisfaction and market responsiveness.

Looking ahead, Vietnamese producers and traders should prepare to navigate an increasingly competitive environment by strengthening their distribution networks and enhancing consumer engagement. Integrating branding with logistics to create a seamless, reliable customer experience. Real-time tracking, personalised delivery updates, and the development of modern fulfillment centres could further enhance competitiveness.

Collaborative supply chain strategies, such as shared logistics and warehousing resources, can also help businesses achieve economies of scale and improve responsiveness to market changes. As the market evolves, firms seeking to access high-end and export markets should prioritize sustainable practices, including environmentally friendly logistics solutions and socially responsible branding.

With a combination of supportive policies and proactive initiatives from businesses, Vietnamese products can overcome current challenges and strengthen their presence both domestically and internationally.