Will Facebook Marketplace Be the Next E-Commerce Heavyweight in Vietnam?

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Facebook, the largest social media platform in the world is the first social network to surpass 1 billion registered accounts, currently sitting at 1.87 billion monthly active users at the start of 2017. After launching in 2004, Facebook has gone from strength to strength providing users with the ability to share photos and videos, post comments, and advertise products or services.

However, the development of Facebook Marketplace last year has shown that the strategic direction of Facebook is now very much focused on dominating the e-commerce market. Can Facebook use its enormous user base to become the world’s largest e-commerce market?

Facebook released its Marketplace feature in October 2016 to allow its users to buy and sell items directly off each other, similar to Amazon or Ebay. Marketplace opens with photos of items that people near you have listed for sale.

Not only can you see the product description but also the name and profile photo of the seller, and their general location. You can then message the seller through Facebook to make an offer, although Facebook does not yet facilitate the payment or delivery of items in Marketplace.

In some countries, Facebook has launched additional features to add to its e-commerce services. Users based in America can now directly purchase meals, movie and performance tickets and subscribe to regular services such as beauty salons or gyms.

It is through these additional features and Marketplace that Facebook is striving to be the world’s largest e-commerce platform alongside their position as the world’s largest social media platform.

Popularity in Vietnam

Vietnam, with a population of over 95 million has ecommerce revenue of around US$2,187m in 2017. This revenue is expected to show an annual growth rate of 16.5 % resulting in a market value of US$4,024m by 2021. According to Q&Me, 67% of urban Vietnamese have shopped using an e-commerce site. And of these, nearly half of them have experience shopping through Facebook, demonstrating the popularity of the social platform for amongst the internet-going population in Vietnam. Considering that Facebook has over 40 million users in Vietnam, the opportunity is clearly significant.

One of Facebook’s main strengths in Vietnam is that it overcomes one of the greatest challenges to the growth of digital services in that country: trust. In Vietnam, though ecommerce sales are predicted to grow 22% this year, most customers will not pay for online purchases via digital payment services.

Instead, 85% of buyers said their primary payment method for digital purchases was cash on delivery (COD) according to a survey by DI Marketing . Consumers’ preference for COD is largely due to a lack of trust in the nascent ecommerce market. With COD, if a buyer doesn’t like the look of an item they ordered, they can just refuse to accept it when it arrives.

Therefore, Facebook Marketplace is already winning. Not only can you see the sellers name, photo and location, you can see their friends and message them directly through the functionality of the Facebook Messenger. As Facebook doesn’t facilitate payment, buyers and sellers haggle over prices and sort out payment methods between them without having to pay digitally. In the future, when Facebook does eventually launch their much anticipated payments solution, they will have a user base that inherently trusts them, which should encourage digital payment uptake.

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Following in the path of WeChat

If you want proof that one mobile app can succeed in the e-commerce market and do it all, then look no further than Chinese messenger cum e-commerce platform WeChat. WeChat has spent the past few years rewriting the rules for how social networks can expand. It has become the go-to place for needs as diverse as online shopping online, booking performance tickets and even splitting the restaurant bill with friends. It’s clear that Facebook has been paying attention to the success of WeChat and realised that it can also reap the rewards of extending into the e-commerce market.

Is the competition already over for Vietnamese e-commerce companies?

No. Local companies will have an advantage in that they will have an established presence in Vietnam. Tiki, founded in 2010 is one of the fastest growing online retailers in Vietnam and Lazada, founded in 2012, is the leading online shopping mall in Vietnam. Established e-commerce companies will have had time to refine their products, identify their audience’s needs and react to them.

In addition, operators of Facebook stores in Ho Chi Minh City who are making money through selling products through the Marketplace will now no longer be able to escape paying tax. Pham Thanh Kien, director of the Industry and Trade Department has confirmed that sellers have been told to submit taxes to the municipal industry and trade department.

Despite the difficulty in overseeing the revenues of these businesses due to the local’s habits of using cash, tax authorities can start inspecting these online shops and find a way to verify the scale of their revenue and profit. As a result, small businesses may be put off.

Facebook Marketplace is already showing signs of becoming a heavyweight in Vietnam’s e-commerce market. As long as a lack of trust around mobile payments and online shopping remains it is likely to continue to grow in popularity. However, if the Vietnamese government keep pushing its Cashless 2020 initiative and if challenges around digital payments are overcome, it is unlikely to be viewed as a threat to local B2C e-commerce companies in Vietnam.

Join us at Seamless Vietnam on September 6 – 7 in Ho Chi Minh City to find out more about e-commerce and social commerce and the government’s decision to dramatically reduce cash transactions and improve electronic payment methods by 2020.

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