Author | Yangzi

Editor | Liu Jingfeng

At the ongoing APEC Leaders' Meeting, Vietnamese President Le Quang Sang stated that "isolationism, protectionism, and trade wars only lead to economic recession, conflict, and poverty." Therefore, Vietnam has become a bridge for cross-regional trade and connectivity, maintaining good relations with most global countries, including China, the United States, South Korea, and Japan.

For a long time, Vietnam has been acting as a connector, which is also a survival strategy for many small and medium-sized countries.

Vietnam's economy is "export-oriented." China is Vietnam's largest trade deficit partner, while the United States is its largest trade surplus partner. In simple terms, Vietnam imports a large amount of production equipment, raw materials, and components from China, South Korea, and other East Asian countries, then assembles and processes them for export to the United States, earning a "processing fee."

Therefore, on the surface, Vietnam appears to be a transit point and a safe haven. In 2018, when the United States announced increased tariffs on Chinese products, many Chinese enterprises used Vietnam as a transit point, hoping to avoid the increased tariffs by labeling products as "Made in Vietnam." Now, after Donald Trump's return to the White House, with tariffs looming, can Vietnam still be a transit point for Chinese goods to change their identity?

Undoubtedly, Vietnam's role as a connector has brought rapid growth. According to the Southeast Asia E-commerce Report recently released by Singapore tech site OpenGov Asia, Vietnam's e-commerce market has grown at an average annual rate of 16%-30% over the past four years, ranking first globally. Over the past five years, the international scope of Vietnamese enterprises has expanded significantly, with the number of products exported through international e-commerce platforms increasing by 300%, and many small and medium-sized enterprises earning annual revenues exceeding US$1 million.

The rapid growth of the Vietnamese market coincides with the time when Chinese e-commerce encounters a ceiling, which is undoubtedly a bonus for Chinese e-commerce practitioners. Many cross-border e-commerce practitioners told Xiaguang News that if they had looked at Vietnam in 2020, they would have felt that Chinese e-commerce was a dimensional reduction blow in the past. However, today, if growth is still captured through "dimensional reduction" and Vietnam is only viewed from the perspective of a transit point, it underestimates Vietnam.

In early 2023, Liu Jing started selling women's underwear and vests on TikTok Shop. Having already sold underwear in the domestic market, she discovered a new continent—for products like underwear, beautiful backs, and vests, selling to Vietnam requires little localization. Standard products can be dropshipped, and the return rate is about 10% lower than before in the domestic market. Liu Jing chose a good category, beautiful back products, which are versatile and have few restrictions on distribution.

In April 2022, TikTok Shop officially launched in Vietnam, quickly attracting the attention of a large number of sellers and consumers with its unique short video + live e-commerce model. For Chinese merchants, the combination of Vietnam and live streaming adds a double buff to the idea of "copying from China."

On the one hand, Vietnam has a large group of young internet users, perfectly matching TikTok's entertainment attributes. The number of TikTok users over 18 years old reaches 39.65 million, ranking sixth globally. This e-commerce model familiar to Chinese consumers is considered the most suitable main battlefield for Chinese merchants to "dimensionally reduce." In fact, TikTok has also had live streams with over 200,000 concurrent viewers in Vietnam.

Live e-commerce is also growing rapidly in Vietnam, with consumers spending an average of one to two hours a day on TikTok and generating 1 to 2 million orders through the platform. Earlier this year, Nguyen Lam Thanh, TikTok Vietnam's representative, stated that over 2.8 million Vietnamese small and medium-sized enterprises were already operating e-commerce businesses on the TikTok platform. This rapid progress is considered a phased victory for the entry of the live e-commerce model into Vietnam by many merchants.

On the other hand, Vietnam, which once shared too many cultural similarities with the Chinese market, was considered the most suitable place to "copy from China."

Zhang Ke, who has worked in Southeast Asia for five years, shared with Xiaguang News, "One of my Filipino friends couldn't tell the difference between Chinese and Vietnamese because they look so alike." Traditionally, Vietnam celebrates festivals such as the Spring Festival, Mid-Autumn Festival, and Dragon Boat Festival, just like China. Vietnamese people also perform spring cleaning, paste Spring Festival couplets, set off firecrackers, and visit relatives and friends during the Spring Festival; enjoy the full moon and eat mooncakes during the Mid-Autumn Festival; and make zongzi and race dragon boats during the Dragon Boat Festival. Vietnam has been deeply influenced by Confucianism and has long used Chinese characters in its history, with Chinese vocabulary occupying a high proportion of the Vietnamese language.

The similarity in culture and customs allows Chinese businessmen to naturally empathize with the Vietnamese market. More importantly, bordering Guangxi, Vietnam has become one of the central pivots of trade between China and Southeast Asia.

Therefore, it is not surprising that most overseas enterprises choose Vietnam as their first stop. According to Vietnam's business registration data, from October 2023 to August 2024, in less than ten months, Chinese enterprises registered a total of 1,795 enterprises in Vietnam, with investment destinations covering 36 provinces and cities in Vietnam. According to incomplete statistics from Xiaguang News, 16 new routes have been added to the routes between China and Vietnam in 2024.

In addition, the maturity of e-commerce and Chinese manufacturing also provides a basis for the judgment that "Vietnam is easy to enter and do business in."

First, due to the improved supply chain system, Chinese goods can respond to market demand more quickly. The investment promotion manager of Shopee Vietnam stated that even with the latest production technology, the fastest production cycle for a piece of clothing produced in Vietnam is 35 days, while in China, it takes no more than seven days from raw materials to finished products, and logistics delivery to Ho Chi Minh City takes about five days.

Similarly, the improved supply chain system also brings price advantages to Chinese products. For example, on Temu, which just entered the Vietnamese market in October, a pair of sandals can be purchased for 28,000 Vietnamese dong (7.9 yuan), a shatterproof phone case for 37,000 Vietnamese dong (10 yuan), a smartwatch for 180,000 Vietnamese dong (52 yuan), and a cool and advanced wireless smart sunglasses for 280,000 Vietnamese dong (78 yuan).

Variety, speed, quality, and affordability—all essential elements for consumers to place orders—can be found on Chinese e-commerce platforms, and Chinese products can provide them. But even with all the perfect theoretical elements in place, "copying to Vietnam" still stumbled.

The first to be setback was Temu.

Within about a month of entering the Vietnamese market, Temu's marketing in Vietnam was more aggressive than in the Philippine and Malaysian markets, which entered last year. Upon launch, it offered free shipping and discounts of up to 90%, providing commissions of up to 30%. Newly registered users could receive a reward of 50,000 Vietnamese dong, and users could earn additional rewards by sharing registration links and product links.

As long as the IP is in Vietnam, opening Facebook will display Temu's advertisements, such as "lowest price in history" and "buying is earning." Temu chooses the C2M model to ship directly from Chinese factories to buyers, eliminating intermediaries and lowering prices.

However, cheap commodity prices are detrimental to Vietnamese enterprises with poor local competitiveness, from the perspective of the Vietnamese authorities. Therefore, for these innovative but aggressive players, Vietnam hopes to absorb their innovation but also needs to learn to protect itself.

The rapid progress of Chinese enterprises has sounded the alarm for local Vietnamese businesses, disrupting their original pace of progress, which also means fear and uncertainty.

A report in the Vietnamese media Tuoi Tre News titled "Many Chinese Warehouses Appear on the Vietnamese Border" (in Vietnamese: Nhiều kho hàng Trung Quốc 'mọc' sát biên giới Việt Nam) points out that at the Bang Tuong port area bordering Lang Son Province, China, "containers filled with e-commerce goods are constantly coming and going." However, this forces "Vietnamese enterprises (mainly small and medium-sized enterprises) to compete with Chinese 'giants' in Vietnam's 'home court,' giving Chinese enterprises an advantage."

Earlier this month, the Vietnamese authorities required Chinese cross-border e-commerce platforms Shein and Temu to register with the government by the end of November, or all their services, business, and advertising activities would be suspended. In a sense, this is an eviction order from the Vietnamese government.

Protecting the local market is a prerequisite for doing business in Vietnam. In fact, when Temu first entered the Vietnamese market, some Vietnamese merchants sneered at Temu for not having a Vietnamese version and only accepting credit card payments. "Temu only sees Vietnam as a site in its own way, but in reality, deep localization in Vietnam is very important. It's almost a joke to try to seize the market without Vietnamese."

Such minor incidents are a necessary process for Chinese enterprises to break in the Vietnamese market, but the message conveyed is that in Vietnam, stability must come before growth. This also requires Chinese enterprises that want to capture the growth of Vietnamese e-commerce to invest more time rather than seeking quick profits.

A Vietnamese overseas warehouse practitioner told Xiaguang News, "To succeed in the Vietnamese market is not about going overseas but diving in. It takes no less time than any other market and requires deep cultivation."

In fact, even in a growth state, there is still much room for the spending power of Vietnamese people. There are few opportunities to make quick money.

A former employee of a large company who now works as a digital nomad in Hanoi told Xiaguang News that Vietnamese housing prices have been rising in recent years, and most young people don't have the intention to buy a house. If they rent, with an average monthly income of around US$600 for young people in Hanoi, renting a bedroom might cost US$400, leaving only US$200 for living expenses.

The Vietnam E-commerce Trends Report 2024 released by Vietnamese market research firm Q&Me also shows that although Vietnamese people shop online frequently, most consumers do not spend much. Nearly 50% of consumers control their monthly online shopping expenses within 500,000 Vietnamese dong (approximately US$20.37). 73% of respondents considered price a deciding factor in whether to purchase, and 69% believed that promotional discounts also influenced their purchasing decisions.

This means that even if Vietnamese young people are willing to spend, they are "willing but unable."

Secondly, from the perspective of logistics and manufacturing, Vietnam also needs more time. Vietnam is a long, narrow country with a distance of 1,700 kilometers between its two major cities, Hanoi and Ho Chi Minh City. High-speed rail has not yet been built, and over 95% of transportation still relies on roads. Therefore, logistics costs account for 16.8%-17% of overall production costs, which is higher than neighboring countries.

The main gap in manufacturing lies in the imperfection of the supply chain, and this "incompleteness" cannot be quickly remedied. In the book Spillover by political scientist Shi Zhan, it is mentioned that what China transfers to Vietnam is not the entire industry in certain sectors but specific links in the production process of that industry, mainly those with lower supply chain demands and higher labor cost proportions. The result is that the more specific links in the production process are transferred to Vietnam, the greater the demand for China's supply chain, forming a deep embedding relationship between Southeast Asian countries represented by China and Vietnam.

So, what type of merchants does Vietnam, an emerging market, want to attract at this moment?

"For example, cross-border e-commerce is like buying train tickets during the Spring Festival travel rush. A window called 'China' is very busy but overcrowded. Now there's a new window called 'Vietnam.' Do you think the people at the front or back of the queue will go to the new window?" the overseas warehouse practitioner asked Xiaguang News.

Strong merchants often choose markets with stronger spending power and faster results first, not Vietnam. Those flocking to Vietnam are usually losers in previous markets. However, what Vietnam needs are e-commerce platforms and merchants with patience to grow together.

This mismatch between supply and demand means that there will inevitably be a shuffle during the growth of Vietnamese e-commerce.

It is worth noting that even with limited spending power, branding and shuffling have already emerged in categories with lower average order values that fit within the spending power of Vietnamese consumers. Compared to many other regions in Southeast Asia, Vietnamese consumers are willing to pay for quality and brand premium, which will be the best reward for patience.

A clear example is lower average order value beauty products. According to the Southeast Asia Color Cosmetics E-commerce Industry Market Insights Report 2024 by digital commerce solutions provider TMO, in June 2024, among the sales of Southeast Asian color cosmetics products on Shopee and Lazada platforms, Vietnam accounted for approximately 41.0% of the market share, already the largest segment in the six Southeast Asian countries.

Among them, the total revenue of Chinese cosmetics on the three major Vietnamese e-commerce platforms Shopee, Lazada, and Tiki reached 1,005 billion Vietnamese dong (approximately RMB 289 million). Phil's Deer , Perfect Diary, Colorkey, ZEESEA, and Juedo topped the list of sales for Chinese beauty brands going overseas to Vietnam.

Whether in terms of price or marketing methods, the above-mentioned brands are more suitable for the Vietnamese market. For example, the matte lip gloss of Felure, which is a hit in Vietnam, sells for 89,000 dong (approximately 25.6 yuan). The pricing of Juhuo, Zese, and Perfect Diary can also be classified as "affordable high-quality products." Compared to similar products, this price is a bit higher, but Vietnamese consumers are willing to pay for it if they can afford it.

Another example is Colorkey, which topped the Vietnamese TikTok Shop rankings across all categories for five months and continues to dominate the charts. Its locally popular products also have a brand premium, but due to its deeper local brand influence, its total GMV has reached $11.76 million as of now.

The products are highly localized and the brand is willing to make efforts in local operations. On the TikTok platform, "COLORKEY Vit Nam" has collaborated with many Vietnamese beauty influencers. Currently, there are 3,400 influencers associated with the Colorkey Vietnam store, nearly 6,000 related videos, and hundreds of related live streams. Short video challenges, live streaming sales, and other methods have successfully elevated the brand to new heights.

As consumer spending power continues to increase, the same trend will occur in other categories. Compared to other markets, Vietnam has shown a strong consumer willingness and brand direction, which is a positive sign for those accompanying the growth. In her second year in Vietnam, Liu Jing strengthened her determination to build a brand: "Don't underestimate Vietnam. Just treating Vietnam as a transit point will lead to rejection. Vietnam needs those who are determined and brands that grow together with Vietnam.