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Selling on Amazon poses challenges, risks to Vietnamese enterprises

Selling on Amazon poses challenges, risks to Vietnamese enterprises

Tuesday, June 04, 2024, 11:00 GMT+7
Selling on Amazon poses challenges, risks to Vietnamese enterprises
Many Vietnamese enterprises are persevering in selling goods on Amazon. Photo: T. Dung / Tuoi Tre

Tapping international e-commerce platform Amazon, many Vietnamese enterprises have either struggled to maintain their online sales or suspended operations due to poor consumption, high costs, and stagnant inventories.

Nguyen Ngoc Luan, general director of Meet More Vietnam Company, recounted that the firm had used Amazon in an attempt to expand its sales, but it then ceased operations through the online marketplace due to a lack of profits.

The coffee seller even suffered losses after deducting all expenses, he said.

“Revenue was positive, but transport and storage costs were sky-high,” Luan shared.

There are two forms of selling goods through Amazon, including Fulfillment by Amazon (FBA) that allows vendors to outsource orders to Amazon, and Fulfillment by Merchant (FBM) where sellers are responsible for all order fulfillment tasks.

“We had yet built a warehouse, and had poor connection with distributors and partners in the United States, so we applied for FBA," he stressed.

“However, the profit margin of our products was low.”

Luan also divulged that the firm is seeking American partners to address cost-related problems to restart sales on Amazon or another international online marketplace.

N.C.T., a representative from a cosmetic company, said that his firm sent the first FBA batch of products to Amazon’s warehouse last year, but only two out of all five products received orders.

Nguyen Dung, CEO at 5MSTAR E-commerce JSC and founder of a community of Vietnamese merchants on Amazon, stated that many companies had failed to sell goods on the e-commerce site.

For instance, he mentioned that a company offering trending products on Amazon still faced difficulties in making a profit and even encountered issues with excess inventory.

A firm based in Cu Chi District, Ho Chi Minh City is selling rice paper and dried noodles on Amazon, but it has faced multiple challenges and lower-than-expected sales.

Though it has been selling the merchandise on the e-commerce platform for three years, its sales remain modest, up 15 - 20 percent from the initial period of its online business on Amazon.

“The price of products on Amazon is much higher than that of items on the domestic market, but profits are relatively moderate. Meanwhile, advertising and operation costs are high,” the representative said.

Statistics from Amazon indicated that the number of Vietnamese vendors through the site in 2023 rocketed over 300 percent against 2019.

Besides, the number of merchants reporting their revenue at over US$1 million in 2023 surged nearly 10-fold from 2019.

In 2023, Vietnam’s wood and woodwork exports fetched $13.2 billion, down 15.9 percent from 2022, according to Phung Quoc Man, vice-president of the Handicraft and Wood Industry Association of Ho Chi Minh City.

Slow global economic growth and increased trade barriers have dragged down the nation’s traditional exports, but online sales of handicraft and interior furniture products are still growing.

“However, the number of Vietnamese firms selling goods on e-commerce platforms remains low,” Man said.

Tran Huu Hau, deputy general Secretary of the Vietnam Cashew Association, observed that while online marketplaces enable merchants to send their goods worldwide, farm produce such as cashews, pepper, and coffee beans is predominantly sold to brokers.

"Vietnamese firms favor traditional selling methods over e-commerce platforms due to the convenience of sea transport, goods delivery, and payments, as well as the affordable transport costs," Hau explained.

Nguyen Dung attributed the challenges of selling on international e-commerce platforms to inexperience and a lack of research on customer demands.

He advised firms to develop a long-term plan and intensify efforts to establish their brands in the global market.

According to Dung, companies can achieve success on online marketplaces by leveraging either FBA or FBM methods, depending on their products.

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Tieu Bac - Binh Khanh - Nguyen Tri / Tuoi Tre News


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