Temu meets setbacks in Vietnam, indicating that the Southeast Asian market does not welcome blitzkrieg. | Focus Analysis

作者 | Zhang Ziyi

编辑 | Yuan Silai

After being banned from registration in Indonesia, Temu has also encountered new troubles in the Vietnamese market.

The Vietnamese Ministry of Trade stated on December 5 that due to the failure to complete the relevant business registration requirements, the department has requested Temu to suspend its operations.

Temu opened its Vietnam station in October this year. According to information from multiple media, Temu has submitted an application to carry out e-commerce service activities in Vietnam, but the government has not yet given a timetable for the resumption of operations.

Not only Temu is affected. SHEIN, which has been online in Vietnam for at least two years, is also required to register with the government before the deadline. Both companies said they are in the process of registering with the Vietnamese Ministry of Trade.

In the past two years, Temu has achieved rapid growth. A report released by market research institution Sensortower in October shows that Temu became the shopping app with the highest number of downloads in the United States in the third quarter, followed by SHEIN and Amazon (Amazon) in the second and third places respectively.

Temu, which operates in more than 80 countries, has had a relatively slow and bumpy development in Southeast Asia. Before the suspension of its business in Vietnam, Temu has successively entered the markets of the Philippines, Malaysia, Brunei, and Thailand, leaving only the two major markets of Indonesia and Singapore yet to enter.

The e-commerce competition environment in Southeast Asia is fierce and saturated. The mainstream e-commerce platforms are mainly Shopee, TikTok Shop, and Lazada, and low-price competition is the norm.

"Unlike in China where there are big promotions like Double Eleven and Double Twelve, e-commerce platforms in Southeast Asia launch activities almost every month, issue coupons, and more and more sellers are engaging in live-streaming with goods." An industry insider working in the e-commerce industry in Thailand told 36Kr.

Vietnam is the country with the fastest-growing e-commerce. E-commerce accounts for 60% of Vietnam's digital economy, and Vietnam's legal environment is also considered one of the most conducive to the development of e-commerce among ASEAN countries.

The Vietnamese government previously released a related plan for the development of e-commerce, aiming to promote the country's digital transformation and the development of the digital economy.

From a policy perspective, the Vietnamese government's support for e-commerce is conducive to the development of e-commerce platforms. However, Temu's setback proves the complexity of the overseas market.

01 The Fastest-Growing Market

The shopping habits of Vietnamese consumers are being changed, much like in China many years ago.

In the latest report on Vietnamese consumers' shopping behavior by NielsenIQ Vietnam, it is stated that the possibility of consumers shopping online has doubled compared to 2023. Specifically, on average, each person shops online nearly four times a month and spends more than eight hours a week shopping online. This number is almost twice the frequency that Vietnamese people go to the supermarket each month.

The top three categories of goods purchased are food, beverages, and cosmetics. Followed by fashion-sports goods, home care and technology, mother and baby products, service registration, online booking, and freight and other digital services... In the past, Vietnamese consumers used e-commerce platforms to purchase more non-essential items such as electronic products, household appliances, and fashion.

The change in the types of goods purchased from non-essential to daily necessities indicates that the Vietnamese e-commerce market is becoming increasingly mature.

Compared with other Southeast Asian countries that impose higher import tariffs on e-commerce products, the Vietnamese government encourages domestic enterprises to join the e-commerce market.

According to foreign media reports, the Vietnamese government supports e-commerce platforms such as Vecom (Vietnam E-commerce Association), TikTok Shop, and Shopee to train merchants. Since May, Vecom has trained about 450 sellers in nine markets. The training content includes how to open a store on an e-commerce platform, manage online orders, and conduct live-streaming sales (where viewers can buy products in real-time when the host showcases the products).

In December last year, at a TikTok event held in Ben Thanh Market in Ho Chi Minh City, online influencers helped merchants sell thousands of items through live-streaming. According to local media reports, a digital human developed by a local company received hundreds of orders for a wide variety of goods, from household appliances to coffee.

In order to develop the e-commerce business, the Vietnamese government encourages the use of cashless transactions and limits cash transactions to less than 10% of the total payment amount. And this is extremely beneficial for Temu.

In Southeast Asian countries, the main e-commerce payment method is cash on delivery. Shopee, which has been operating for many years, supports街口 payment, and Lazada allows cash on delivery.

However, Temu's mainstream payment methods are mainly international credit cards and paypal, and it is easy to encounter payment problems in the Southeast Asian market.

With the Vietnamese government's supportive policies for e-commerce in various aspects, its e-commerce development is the fastest among Southeast Asian countries.

According to statistics from the Metric e-commerce data platform, in the second quarter of 2024, the total expected revenue of the five major online retail e-commerce platforms in Vietnam, including Shopee, Lazada, Tiki, Sendo, and TikTok Shop, is approximately 85 trillion Vietnamese dong, an increase of 78% compared to the same period in 2024.

In the first six months of 2024, the total revenue of the five e-commerce platforms is expected to reach 156 trillion Vietnamese dong, an increase of 78% compared to the same period in 2023.

Currently, the competitive landscape of e-commerce platforms in Vietnam is clearly defined. Shopee has an absolute leading advantage with a market share of over 60%; TikTok Shop ranks second with a market share of 20%. The former has a deep foundation in Southeast Asia, while the latter is a leading social media platform that focuses on live-streaming with goods.

Even so, e-commerce in Southeast Asia has always been fiercely competitive in the field of low-price competition. An e-commerce practitioner in Thailand believes that e-commerce in Southeast Asia is still in the early stage of Taobao's development in China, mainly based on low-price competition, and far from the stage of competing on product quality.

Compared with the old platforms, Temu is even more skilled in the low-price war. However, as a newcomer, it is bound to encounter distrust and subsequent obstacles.

02 Tight Space and Time

The suspension of Temu's business may be related to the Vietnamese government's management policies for cross-border e-commerce businesses.

According to media reports compiled by the official website of the Ministry of Commerce, on November 4, the General Department of Taxation of Vietnam will strengthen the management of domestic e-commerce platforms and cross-border e-commerce platforms operating in Vietnam to ensure the accuracy, completeness, fairness, and transparency of taxation and in accordance with Vietnamese tax laws. At the same time, it provides convenient conditions for production and business entities operating in Vietnam to operate with peace of mind and pay taxes to the treasury.

In addition, according to the resolution issued by the Vietnamese government on May 16, 2013, e-commerce platform business activities must be licensed and managed by the Ministry of Industry and Trade. E-commerce platform managers are responsible for registering, calculating, declaring, and paying taxes through the electronic information portal of the General Department of Taxation. For cross-border e-commerce activities carried out on digital platforms, if foreign suppliers generate income in Vietnam but have not registered for taxation, the tax authorities will conduct an examination and take appropriate measures to ensure the effectiveness, transparency, and fairness of tax management, in line with traditional business activities.

It can be said that Vietnam's requirements for Temu are indisputable at the legal level.

Currently, many countries in Southeast Asia are strengthening the supervision of cross-border e-commerce platforms.

The Thai Revenue Department issued a new regulation on December 27, 2023, requiring e-commerce platforms to set up a special account to submit the income information of e-commerce sellers to the tax bureau. This regulation came into effect on January 1, 2024. The Thai government announced on June 20, 2024, that starting from July 5, 2024, a 7% value-added tax will be imposed on each import product not exceeding 1,500 Thai baht.

This move will have a considerable impact on cross-border e-commerce sellers in Thailand.

36Kr has learned that in recent years, the basic logistics system facilities in Thailand have been gradually improved, and the delivery time of local e-commerce enterprises has been continuously reduced. Many areas can even achieve same-day or next-day delivery. However, the long logistics cycle of cross-border goods is a common problem. Coupled with the increase in value-added tax, it will undoubtedly weaken the attractiveness of cross-border sellers.

In Indonesia, the largest e-commerce market in Southeast Asia, as early as August 2023, it will restrict the online sale of imported goods with a price lower than $100 and require these goods to obtain the Indonesian National Standard (SNI) certification.

Tiktok Shop was once shut down due to the regulation in Indonesia that prohibits social media platforms from conducting product sales and trading activities. Later, through holding the Indonesian local e-commerce platform Tokopedia, TikTok's e-commerce business in Indonesia was able to resume operations. After the resumption, TikTok once said that it will provide a series of supports in marketing, branding, and internationalization to help the development of local small and medium-sized merchants in Indonesia.

Obviously, the trend of tightening and standardization is certain. For emerging e-commerce platforms, the Southeast Asian market is more complex than before. In addition to the fierce competition within itself, it is increasingly important to comply with and understand local policies.