Vietnam is any tech startup’s dream market.

This Southeast Asian country has a population of over 96 million, of which 64 million are connected to the Internet, and has a smartphone penetration of 70 per cent.

There are approximately 1.9 million brick-and-mortar retail shops in Vietnam, of which only 10 per cent are into modern trade. Digitisation of retail sector is growing.

Home-grown IT company Citigo Software anticipated this opportunity early on and launched a cloud-based point-of-sale (POS) system KiotViet in 2014. Since then, it has expanded its services to provide a suite of omni-channel business and management solutions aimed at micro, small and medium enterprises (MSMEs).

At present, KiotViet has over 1,000 employees, covering 63 provinces and cities in Vietnam, with 19 sales offices.

In August last year, the startup raised US$6 million in Series A funding from Jungle Ventures and Traveloka.

KiotViet is one of the few companies that went on to exploiting the COVID-19 pandemic to drive business digitisation in Vietnam.

In this interview, the startup’s Deputy General Director Tri Cao talks about the digitisation drive in Vietnam, the impact of the pandemic, and the broader B2B e-commerce market.

Excerpts:

The COVID-19 pandemic has forced many offline businesses to go digital around the wold. Do you see a trend picking up in Vietnam as well?

The pandemic has changed consumer behaviour and how traditional businesses carry out their operations in Vietnam.

With social distancing measures in place, the drop in sales has been a catalyst for change among traditional retailers to move from their usual offline channels to online platforms, such as e-commerce marketplaces and social commerce.

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We are seeing companies and consumers leapfrogging ahead in many aspects of digital transformation in Vietnam. Suddenly ‘nice-to-haves’ — like being able to buy groceries online or even supply chain digitisation — have become ‘must-haves’.

Increased number of consumers turning to online platforms for their needs has made digital transformation a priority for businesses, mostly SMEs.

With a population of over 96 million, Vietnam is well-connected to the world, with 64 million Internet users, 143 million mobile subscriptions and 70 per cent of smartphone penetration.

Vietnam’s modern retail industry has the potential for significant growth as shops start to integrate technology into daily retail operations. We have observed a growing interest in going digital and the modernisation of the retail sector which has been driven mostly by the next wave of young and hungry entrepreneurs.

More often than not, these entrepreneurs who have taken the reins of their family businesses or have launched their startups are increasingly conscious of the importance of technological application in daily business management.

Moreover, the Vietnamese government is supporting digital transformation in all sectors, including MSMEs and households. Customers who were afraid of applying technology to management have changed their behaviour.

Retail store owners are increasingly using technology for their sales management, developing new sales channels and starting to use software to manage costs and optimise business operations.

How well equipped are you to exploit this opportunity?

Digitisation is no longer an option but a necessity. Going digital has now become essential to remain relevant and stay connected as the world is emerging out of the pandemic.

At KiotViet, we have over 1,000 employees, covering 63 provinces and cities in Vietnam, with 19 sales offices. We have our sales and customer service personnel present in the deepest of pockets and smallest of towns.

To date, KiotViet has been adopted by 100,000 stores in Vietnam and has 50 per cent market share.

There are approximately 1.9 million retail shops in Vietnam. However, only 10 per cent are in modern trade and 65 per cent of the country is rural.

Our main barrier is the status quo. Many family-owned small business owners have been running their businesses using traditional book-keeping processes for decades. This is a time-consuming and resource-intensive process.

We have seen the daily struggles of business owners managing their retail business with limited to no technology. However, with the new generation taking over in those businesses, we are seeing a marked difference in the approach and they are more willing to adopt the technology.

KiotViet has overcome this barrier through a customer-first approach, generating trials through an affordable pricing model and providing excellent customer service. We have an easy-to-use affordable product where we ensure that every customer feedback is addressed.

They see how technological advancement provides them with a competitive edge over international companies in Vietnam and reach a bigger consumer base.

For example with KiotViet, our consumers see that they can reduce their operating costs by 40-50 per cent, increase efficiency and grow faster by reaching more consumers.

Which sectors do you see a growing interest to go digital?

We continue to see SMEs across the spectrum going digital. Our customer profile continues to be clothing and apparel, groceries, F&B and electronics.

The majority are small shops with three to ten employees. We have observed a growing interest in going digital and the modernisation of the retail sector, which has been driven mostly by the next wave of young and hungry entrepreneurs.

More often than not, these entrepreneurs, who have taken the reins of their family businesses or have launched their own startups, are increasingly conscious of the importance of technological application in daily business management.

What are the different services you provide to your clients?

Here at KiotViet, we offer an end-to-end solution — from software and hardware, to added third-party services for MSMEs. We provide clients with an affordable cloud-based POS and store management software.

Our omnichannel management software solutions include services such as inventory management, cash flow management and marketing, as well as both online and offline enterprise solutions.

We also leverage technology to help support SMEs to realize untapped opportunities and help increase the efficiency of their business operations and workflow processes.

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Our KiotViet+ services provide our clients with added integration with third-party providers, such as e-commerce marketplaces, shipping providers and social networks so they can market and sell their products more efficiently.

What is the size of your target market? How is the market growing and where is it heading for? Do you have any local or international competitors?

As I mentioned earlier, Vietnam has approximately 1.9 million retail stores, and the retail sector is the country’s fastest-growing market.

The sector has recorded a compounded annual growth rate of 10.97 per cent and annual retail sales of US$142 billion in 2018. Under 10 per cent is Modern Trade, and 65 per cent of the country is rural.

So the 1.7 million traditional brick and mortar retail stores will still be the foundation of Vietnam retail for a long long time.

There is a rising preference for online retail and social commerce among young consumers in both the major cities as well as rural areas, from apparel to electronics and SMEs have to keep up and digitise faster to keep up with the changing trends, or else will lose out to larger players.

There are more than 20 POS providers in Vietnam but none of them has the coverage, product superiority or customer support as KiotViet does.

Traveloka is one of your investor. Is it a strategic investor? What synergy do you see with this Indonesian travel-tech firm?

Yes, Traveloka is a strategic investor in KiotViet.

One of KiotViet’s main goals is to become the market leader of business store management software in Vietnam, and we believe that with Traveloka we can achieve that.

Traveloka, I assume, means ‘travel local’ and that means providing travellers with local experiences. Through Traveloka, we partner with small businesses such as F&B outlets, salons, spas and hotels, to enhance the travellers’ retail experience in Vietnam.

This partnership benefits the SME business owners by enhancing their customer experience, while travellers enjoy a more seamless and secure way of making their purchases.

At the time of the fundraise, you said you would collaborate with more ecosystem players and explore future regional expansion…

Our strategy continues to be to focus on Vietnam and in time, expand to other parts of Southeast Asia. At the moment, there are many Vietnamese merchants using our products in countries with a Vietnamese community, such as the US, South Korea, Australia, Laos and Cambodia.

We are also exploring the opportunity to open offices in select Southeast Asia for testing the market before scale up to other countries.

Do you expect to raise more funds to catch up with the growing demand?

Since our Series A fundraising round, we have been channelising and using the capital to increase our market share and focus on the development of our value-added services, such as logistics, payments and B2B supply chain.

On the back of the growth the organisation has seen over the last few years, we would be looking to raise our next funding round. We hope to start the process before the end of the year.

Image Credit: KiotViet

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The post ‘Our main barrier to growth is status quo in retail sector’: KiotViet’s Deputy GM Tri Cao appeared first on e27.