With huge demand driving Vietnam’s merchandise, food delivery market, investors are keen on a piece of the action.
After operating for a year in HCMC Lalamove, a logistics company headquartered in Hong-Kong specialising in same-day delivery and courier services, came to Hanoi Wednesday.
A day earlier Grab had released its food delivery app, GrabFood, after a period of testing.
The food delivery market looks extremely lucrative, and businesses want to cash in, industry insiders said.
“By 2020 Vietnam will have over 50 million customers shopping online,” Phillippe Rambaud, head of Lalamove’s Hanoi market development division, said. “This will be a large market for on-demand delivery services.”
Nguyen Duc Loi, CEO of Lalamove Vietnam, said the firm aims to have 10,000 contracted drivers on a permanent basis.
Grab Vietnam CEO Jerry Lim claimed GrabFood’s growth has been very impressive, with the number of its contractors increasing eight-fold in just a month of testing in Hanoi.
“GrabFood is the next major step for Grab in becoming a super-app which meets all the essential needs of people’s daily lives,” he said.
“The way each individual service interconnects and complements each other allows us to build an ecosystem that delivers real benefits not only to our customers and drivers but also to our business partners and vendors,” Jerry Lim added.
Go Viet has launched Go Send as a complementary service, but also aims to develop it into a super-app like Grab. It also plans to launch a food delivery service later this year.
Last year Go Send delivered over 800,000 fashion products and handled 2.3 million food orders for 203,000 small-scale online vendors.
But despite their major success in the online delivery market, the three entrants have to face the difficulties that come when competing with established incumbents popular in the market such as Delivery Now (Foody), and Vietnammm.
Besides, many of their drivers are reluctant to make advance payments to vendors and take on the risk of wrong delivery and customers not accepting goods.
Lalamove for instance has a policy of having drivers make advance payments for food/goods of up to VND3 million ($130.4) in HCMC and VND2 million ($86.95) in Hanoi.
Many vendors still do not focus on delivery through third party applications as an important income stream.
A representative of a milk tea chain in Hanoi told to revenues still come mainly from direct sales and phone orders as well as the chain’s own digital app.
Its response times are still much faster than using third party apps, he said.
As more and more providers of delivery services emerge, he believed the most important factors vendors would look for are effective support systems and prices.
The intense competition means consumers will benefit increasingly from the variety of choices and the discounts and improvements in service competitors constantly make to gain market share.
Companies like Grab, Go Viet and Lalamove uniformly claim competition is good for the market, consumers and the businesses themselves.
One of them said the Vietnamese market would see even more competitors in future.
Analysts said this boom would soon spark a struggle between digital delivery platforms and traditional services just like the ongoing between Uber and Grab and traditional cabs.
Do Xuan Quang, deputy head of Vietnam Logistics Business Association, said Vietnam was the fastest growing e-commerce market in Southeast Asia, and along with the strong growth of the logistics industry at 15-20 percent, a similar movement in the delivery market is not surprising.
In 5-10 years, the delivery market in Vietnam will be valued at around $10 billion, he said.
U.K.-based market research firm EuroMonitor International values the food delivery market in Vietnam at around $33 million this year and at more than $38 million in 2020.
It also puts the annual growth rate of the market at 11 percent.