The COVID-19 pandemic, for all its negative impacts on health, society, and economy, is expediting the growth of Vietnamese e-commerce and digital finance, paving the way for the country to fulfil its digital potential. Traffic on e-commerce platforms in 2020 was 150 per cent higher than the previous year, with approximately 3.5 million visitors per day on various platforms.
Amid this looming crisis, more and more Vietnamese turned to e-commerce platforms and digital financial services. Many Vietnamese businesses and services have also taken measures such as speeding up digital transformation projects and offering new services to meet this new demand. Many retail chains, hypermarkets, supermarkets, and urban retailers teamed up with digital wallets and online shopping platforms for marketing campaigns to promote online shopping and delivery services. We also witness the emerging of pure digital players in the area of consumer goods.
Over the last few decades Vietnam has experienced rapid industrialisation, modernisation, and international integration. In 2020, Vietnam has announced the National Digital Transformation Roadmap 2025 and Vision towards 2030, which focuses on three pillars: e-government, e-economy, and e-society. Vietnamese government has been pursuing a national Industry 4.0 strategy that is expected to grow online businesses by up to 43% within the next five years.
Digital transformation holds tremendous potential for Vietnam’s businesses, but at the same time, putting the country and organisations to test, especially on cybersecurity risk. Securing businesses gradually becomes a major issue for organisations irrespective of their size. The COVID-19 pandemic has added more challenges to the business with the unexpected move to work remotely.
Willis Towers Watson is committed to supporting clients and industry through this unprecedented period and helping them navigate through some of these complexities and understand ultimately what this may mean for them. To discuss some of these challenges facing the retail sector, Miki Kenichiro – Regional Director, Head of Japan Global Practice Group - Asia Pacific and Philippe Robineau – General Director, Willis Towers Watson Vietnam engaged in conversation with Mr. Furusawa
Yasuyuki, General Director of AEON Vietnam.
What are the top challenges facing the retail sector in Vietnam in the immediate future as we emerge from the COVID-19 crisis?
Supply chain is the biggest challenge we are facing in and after the lockdown period, we have seen lots of difficulties with logistics to bring in products because of challenges in the transportation and particularly the lack of delivery drivers. During this COVID-19 period, on one hand, the e-commerce business has been increasing significantly; on the other hand, it has been increasingly difficult to manage logistics through the whole supply chain.
AEON is one of the largest players in the retail market and we have been able to manage this challenge throughout the crisis, but small and medium retailers are facing critical issues while e-commerce is taking an increasing market share. This rapid change has to be accompanied by fast administration and legal adjustments.
How has the COVID-19 crisis impacted the risk landscape for Vietnam’s retail sector and how is that likely to influence the insurance and risk management practice? What support does the sector need in this regard?
Consumers’ behaviour has been changing as they prefer to stay at home, purchase online and hesitate to move to multiple places for shopping in this period. People are more health conscious. As a retail shopping mall, we need to attract consumers in giving additional benefits or motivate them to come to our malls.
Retailers are facing increased operational costs from the supply chain disruption and the new requirements to maintain a safe environment, while we and our tenants are facing a sharp revenue decline.
What are the opportunities and challenges for the retail sector in the context of Vietnam’s fast-growing consumer market?
The biggest opportunity is the e-commerce significant development, and the increasing of online literacy in Vietnam. Our challenge is now to adjust the supply to the demand and develop our capabilities to deliver most of the orders instantly within 1-2 hours. Retailers must adapt and change quickly to meet the ever-changing consumer behaviour and expectation. AEON is also considering giving additional benefits to customers as a try and error basis.
What is your view of the current digital transformation of retail’s companies in Vietnam? Any best practices that you can point out from that.
We can see that there are some trials in digitalization in the retail sector, like delicatessen and ticket-vending machines. AEON is also thinking of digitalisation of its relationship with suppliers in the future, for example digitalization of distribution process, slips/receipts, information, and timely shipping.
Business improvement can bring more efficiency and ultimately better margin, typically improving suppliers’ quality with digital transformation will increase customer satisfaction.
What challenges will digitalization of the sector put to players and consumers?
We believe that it is about new experience, and from both sides the retailer and the consumer. Clearly staff reduction is not the purpose of the digitalization as it will create distortions within our organisation more than benefit us. At AEON, any digital transformation decision is being considered carefully by the leaders and shall absolutely outweigh any negative impact produced by the change. This is one of the necessary skills expected from leaders nowadays.
Certain forms of cybercrime are particularly impactful to retail business, particularly when it starts engaging in e-commerce
Do you think digital crime can be one of these challenges? How retail sector can address issues around cybersecurity?
We do not have enough data or reference to evaluate the current level of cyber risk or security exposure, for example staffs are using daily sms and we do understand that this may be a threat. To make advancement in the growing e-commerce trend, digitalization is undeniable. And whenever you adapt to new digital platform, there is always an underline cyber risk threat.
The fundamental challenge for retailers in Vietnam today is about the awareness of cyber risks and the way to manage them. Knowing the risk is critical. The ability to measure the risk is equally important. It is key to better understand the risks and consequences on the business when applying digital solutions in our working procedure. We may be exposed to cybercrime to a certain level. Yet we must ensure that the benefits of using that digital program outweigh the potential risks.
What are your top 3 recommendations for Vietnam’s retail sector to realize it full potential? What support will the retail sector need from policy makers, insurers, intermediaries, and others?
At this moment, most of retail specialists are considering the cyber risk exposure, and at the same time trying to better understand the consequences for the business and the consumer before we make the decision.
What can we learn from the experience of more advanced countries and how can that be implemented in Vietnam?
We are still exploring solutions, and always try to protect our employees and our clients in times of challenge
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