Recently, the emergence of low-cost e-commerce platforms from China, notably Temu, has caused a fever in the Vietnamese market. With strong support from large technology corporations such as PDD Holdings, the parent company of Pinduoduo, these platforms promise to create fierce competition, profoundly changing the already vibrant e-commerce landscape in Vietnam.

In 2023, Vietnam's e-commerce recorded an impressive growth rate of 25%, affirming its position as one of the most attractive markets in the world. However, the entry of "giants" from China such as Temu, Taobao, 1688 or Shein is creating significant challenges for domestic businesses and existing e-commerce platforms.

According to the forecast from the Center for Industry and Trade Information (Ministry of Industry and Trade), total retail e-commerce revenue in 2024 could increase by about 45% compared to 2023, reaching nearly 30 billion USD, accounting for about 14% of the country's total retail sales of goods. This development has attracted not only domestic enterprises but also many "giants" from abroad, especially China.

Currently, e-commerce platforms such as Shopee and TikTok Shop are dominating the market with a total market share of more than 91%. The presence of these two "giants" has created a solid wall, making it difficult for other Vietnamese e-commerce platforms such as Lazada, Tiki, and Sendo to compete.

Vietnam's e-commerce market faces fierce competitive pressure. (Illustration photo)

However, the market situation may change when low-cost e-commerce platforms from China such as Taobao, Temu, and 1688 officially join. With advantages in competitive prices, product diversity, and business experience, these new "players" promise to bring a new breeze, disrupting the current order of the market.

Vietnamese consumers, especially young people, who are always sensitive to new trends and love cheap products, are extremely excited about the opportunity to access diverse and affordable sources of goods from the country of a billion people. Previously, to buy goods on Taobao, consumers often had to go through intermediaries, making the shopping process more complicated and costly. But with the emergence of new e-commerce platforms, consumers can now freely choose products, pay online and receive goods quickly, even faster than when buying on domestic e-commerce platforms.

However, the strong growth of e-commerce, especially small orders from China, is posing unprecedented challenges to Vietnam's tax and customs management system. According to the Ministry of Information and Communications, in the first half of this year, there were 4 to 5 million orders from China to Vietnam every day, with a value of about 50 million USD, without paying tax.

Under current regulations, imported goods valued at less than VND1 million are exempt from import tax and value-added tax. This was initially introduced to facilitate consumers, but it has inadvertently become a loophole for businesses to take advantage of, smuggle goods and evade taxes. The fact that millions of small, low-value orders are imported every day has created a major loophole in current tax regulations, seriously affecting the state budget and creating unfair competition.

While domestic manufacturing enterprises have to pay all kinds of taxes, imported goods from China enjoy tax incentives, creating an unfair competitive advantage. This situation not only causes damage to the state budget but also affects the development of domestic enterprises.

Faced with similar challenges, many countries around the world, including the United States and the European Union, are considering eliminating duty-free treatment for low-value goods to improve tax administration and protect domestic production. Thailand and Singapore have taken the lead in imposing a 7% value-added tax on all imports, regardless of value.

The decision of whether to continue tax exemption or tax on small orders is a difficult one. If tax exemption continues, the state budget will lose revenue and domestic production will face difficulties. On the contrary, if tax is applied, the cost of goods will increase, affecting the interests of consumers. Moreover, managing and collecting taxes on a large number of small orders will require a complete management system and a team of highly qualified staff.

While China has built a closed production and distribution system, from input materials to final products, domestic manufacturers are facing many difficulties. High logistics costs are also one of the biggest burdens for Vietnamese businesses. According to the Vietnam Logistics 2023 report, logistics costs account for 15-20% of production and business costs, significantly higher than the world average of 8-10%.

Logistics plays a very important role in determining the success or failure of a business. However, Vietnam's logistics system still has many limitations, as the warehouse infrastructure is not synchronized and there are many intermediaries, leading to high logistics costs and long delivery times. Vietnamese businesses can usually only collect goods 1-2 times/day, causing delays in the delivery process and reducing customer satisfaction.

In fact, Vietnam can absolutely become a regional logistics hub with its many potentials and advantages. Businesses need to proactively change, learn from successful business models and take advantage of modern technologies to optimize business processes. If the logistics system is not quickly improved, Vietnamese businesses will face countless difficulties in the face of increasingly fierce competition.