In burgeoning Vietnam’s food delivery market, regional players like Grab or Go-Jek are expected to enjoy record growth due to its daunting array of advantages and substantial financial resources. But this unprecedented run may be coming to an end.
Now that local rivals are putting them on notice as the business environment turns more uncertain and hyper-competitive, especially in times of coronavirus crisis.
Robust growth in Vietnam’s food delivery
According to Statista, Vietnam’s revenue in the food delivery market amounts to US$274 million in 2020, backed by a compound annual growth rate of 16.5% during the 2020-2024 period, resulting in a market volume of US$505 million by 2024. The average revenue per user currently amounts to US$37.41, and this figure is predicted to grow further as the market matures. Not to mention, this thriving market is set to supersize to a hefty $449 million in 2023, according to research by Kantar TNS.
The data don’t lie, and it’s easy to see why several players want a piece of the country’s online food delivery pie.
Pandemic pushes the food delivery even to prosper
No need to say, the COVID-19 pandemic has just moved up the timeline for the market growth as most Vietnamese people are now practicing social distancing and thus turning to home delivery—and that could mean big business for delivery companies.
Notably, a slew of food delivery players has recorded a sudden surge of their businesses as the outbreak emerged – orders have increased dramatically, and a wave of new customers have signed up. According to a survey conducted by Nielsen Vietnam, the COVID-19 pandemic has caused more than 50% of Vietnamese people to reduce the frequency of visiting traditional stores, while 45% increase their food stocks at home, and 25% reduce their out-of-home consumption occasions.
A Nielsen survey on the impacts of COVID-19 on Vietnamese customers
Loship, a food delivery player in Vietnam, is part of this growing trend. The local startup has seen record business growth in the wake of the outbreak. Specifically, the startup saw an 80% surge in the number of orders on its app in mid-March—even before the social distancing was announced.
Not to mention, the Vietnamese delivery market is benefiting not just from increased customer demand, but the rising supply side as well. Hit by hard times, some large restaurant chains that didn’t previously offer home delivery are now doing so. Statistics of Dcorp R-Keeper Vietnam and Statista show that Vietnam’s F&B industry currently has 540,000 restaurants, 22,000 coffee shops, and over 80,000 chain-based restaurants. If merely 3% of the nation’s restaurants go online to stay afloat and mitigate losses, that would add another 19,000 merchants to delivery platforms, presenting a considerable yet undeniable boom in the delivery market.
From large restaurant chains such as Golden Gate or Red Sun to coffee chains such as Highland, Starbucks, The Coffee House, most of them have shifted their business operations to online platforms. As the saying goes, “disrupt or be disrupted”, any players who don’t start embracing online commerce as part of their business strategy may see themselves left behind and soon disappear.
Speaking with Loship, the company said it had also seen an uptick in new merchants joining its platform, with more than 1,000 eateries signed up in April alone, far exceeding its previous monthly record.
Co-founder and CEO Loship, Trung Hoang Nguyen, believes this is just the beginning of the boom and that there is a long runway of growth for both his company and the sector at-large. “More and more restaurants are turning to on-demand delivery as a way to connect with customers during turbulent times. We’re happy that we laid the groundwork for everything needed to help the local communities and restaurants and will continue to work around the clock to support them as quickly as possible,” said Trung.
Grocery delivery: Local players come first
The good news is that Vietnam eventually got the virus under control and is showing signs of recovery, with not a single fatality. The Vietnamese economy is, slowly but surely, getting back on its feet, and food delivery is becoming a new norm. As stated by Nielsen, 62% of Vietnamese customers said they’re more likely to dine at home and use food delivery options even after the pandemic winds down.
“During the time of social distancing, I just stayed at home and ordered all the essential goods online, avoiding going outside to reduce the risk of contagion. I could see myself doing it longer-term even when the pandemic is over thanks to its convenience and safety,” one customer living in Ho Chi Minh City said.
The current scenario has definitely brought about a long-term shift in the way customers shop. Those who’ve never bought groceries online are now doing that. With such surging demand, major delivery players are trying to get in on the craze, as proven by Grab, Be and Lazada recently rolling out their grocery deliveries in Vietnam. On the other end of the spectrum, Loship seems to be one step ahead as its grocery delivery service has been deployed in late 2018, and that was one year before the arrival of coronavirus.
Vietnam’s grocery delivery services experience a boom due to the impacts of the coronavirus crisis
However, one question is that after all of this is over, will demand for online grocery delivery services stick? The big challenge lies in how to sustain this positive momentum and make sure customers have a good enough experience to turn from “touch-and-feel” buying habits to “click-and-collect” delivery services, especially when customers are allowed to go back to traditional stores.
Meanwhile, many experts believe that the new shopping habit is likely to stick beyond the pandemic as customers are moving towards digital. “We expect a more permanent higher demand for home delivery as worries overcrowded locations persist, and previously offline-only consumers adapt to the new way of shopping,” said an analyst at Global Data.
COVID-19, in a nutshell, can be a turning point for any food delivery business in the scene. Those players who are more agile, more local, and more responsive to consumer needs will be able to lessen the impact of the crisis, and even prevail in the market once it’s all over. This is where local players stand a chance – Loship as an example.
By Tran Thi My Duyen