As of October 7, 2024, Temu, the online marketplace operated by Chinese e-commerce company PDD Holdings, is present in 82 countries and territories. It was anticipated that Temu would expand into Vietnam by late September, and by mid-October, the platform gained significant attention in Vietnam due to its marketing activities—similar to the strategies used in other market openings.
Looking at Indonesia, another country working to protect its domestic industry from ByteDance and PDD, I’ll explore the opportunities and challenges for the local market in light of Temu’s expansion into Vietnam.
Who is Temu?
With the backing of tech giant Tencent Holdings, PDD extended its domestic experience with Pinduoduo and embarked on a grand overseas push with Temu. Temu’s rapid global growth once made its owner, US-listed PDD, surpass Alibaba and JD.com, becoming China’s most valuable e-commerce company.
Temu has grown in more than 80 countries since its establishment in September 2022. PDD Holding’s ecosystem has generated revenues totalling US$113,355 million, as indicated by the Q2 2024 report of Temu’s parent company. Temu is a formidable rival in the e-commerce sector, having effectively executed the three key growth drivers: price power, product range, and operational efficiency.
Temu’s aggressive footprint expansion is evident as the market opening playbook has been formulated. Over a year after its entry into the Southeast Asia market with launches in Malaysia and Philippines, Temu expanded to Thailand in July 2024, showing a renewed focus on the region. Temu’s expansion into Vietnam has been anticipated.
Vietnam: The 82nd country added to Temu’s market-entry playbook
Vietnam had the fastest YoY GMV growth rate in Southeast Asia e-commerce at 52.9 per cent, surpassing the Philippines as the third largest market in the region with US $13.8B GMV after Indonesia and Thailand, according to the Momentum Works report.
Vietnam’s proximity to China provides advantages in logistics. Many Chinese warehouses have been constructed at the border gate with Vietnam since the livestream phase driven by social commerce surge.
Temu quietly entered Vietnam at the outset of October. Temu’s social marketing, promotions, and broad affiliate program gained prominence soon after. Prior to Vietnam, despite the low-key openings, Temu’s low prices and 90 per cent discounts, rapidly grabbed attention in the Philippines, Malaysia, and Thailand as well. What we have observed in Vietnam in recent days is already Temu’s market-entry formula.
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Let’s delve more into opportunities and challenges for Vietnam’s domestic market regarding Temu’s Vietnam expansion.
Vietnam is up against the wall in the fierce e-commerce race with regional giants.
Only when more Vietnamese enterprises are involved in Temu’s supply chain will there be benefits for the domestic economy. Otherwise, cash flow is leaving the country. Local consumers’ cash is spent on regional platforms, foreign suppliers, foreign shipping, and on other foreign middle-layer parties.
Domestic manufacturing businesses face pressure: pricing, and limited consumer spending, now exacerbated by price competition.
Local marketing stakeholders could leverage Temu’s marketing budget at this market-entering stage; however, the benefits are short-term and depend on the company’s strategy, which can be adjusted anytime to serve its objectives. These people are PDD; they possess the capacity to utilise money and perform extremely effectively and efficiently.
The incumbent market’s business strategy is centred on ROI. Earlier this year, TikTok Shop reduced subsidies and increased commissions across several SEA countries, indicating a shift towards profitability trends.
To seize the opportunity, strengthening Vietnam’s e commerce ecosystem is demanded
To leverage the economic benefits and maintain the country’s economic ecosystem, there is a need to enable more domestic players to participate in the supply chain, including brands, enablers, payment solutions, delivery services, packaging, aggregators, etc. This requires the capacity of domestic companies and the necessary opportunities & support of the country’s strategy for local businesses and startups.
While it improves the current stagnant employment situation by generating additional job opportunities, it is crucial to develop mid-to high-level personnel with experience for the long-term growth of the Vietnamese workforce.
The competition of Bytedance, PDD, SEA, and Alibaba drives the growth momentum of the e-commerce economy in Vietnam. To seize the opportunities outlined, it is crucial to have the country’s support for investment and financing for local businesses.
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