Xpressmen logistics services

“Logistic costs accounts for 30 percent of product price, which is an unreasonably high proportion. In Thailand the figure is 12.5 percent, and the average global figure, 14 percent. This hinders Mekong Delta agriculture products from competing with equivalents from Thailand and China,” said Pham Tien Hoai, chairman of Hau Giang Business Association.

Ngo Tuong Vy, deputy director of Chanh Thu Import-Export Limited Company, specializing in agriculture products, said: “Air transport fees for fresh Vietnamese dragon fruit to Japan is $6 per kilogram.”

She said fresh fruit need to be well-preserved after harvest so it could be exported by sea to reduce costs.

Mekong Delta contributes 90 percent of the country’s rice exports, 65 percent of seafood exports, and 70 percent of fruit exports.

It has a total seven ports, of which the largest is Long An International Port in southern Long An Province. The latter can accommodate cargo ships with a capacity of 70,000 tons. The second largest is Cai Cui Port in the Mekong Delta city of Can Tho, which can handle 20,000 ton cargo vessels. It also has 57 inland waterway ports.

Experts say the Mekong Delta waterway traffic system is of low quality, limiting the capacity of cargo ships operating in the area.

There are only two ways to reach Hau River ports via either Dinh An and Quan Chan Bo estuaries. However, the Dinh An estuary has not been dredged for years and can only handle cargo ships of 3,000 tons. The Quan Chanh Bo estuary can handle cargo ships from 7,000-10,000 tons, but does not have breakwaters, meaning vessels can only operate at low speed to prevent waves from affecting nearby aquaculture projects. Thus, ships normally take a day to pass through the 26-kilometer Quan Chanh Bo estuary.

Heads of export firms said Mekong Delta lacks deep-water ports for container ships serving export, besides logistic centers, warehouses and irradiation facilities.

Agriculture products from Mekong Delta have to be shipped to Ho Chi Minh City (HCMC) and the southeast region of Vietnam to be exported. However, ports in HCMC and the southeast are usually overloaded, upping warehouse costs and export duration.

“The Government needs to upgrade the Quan Chanh Bo estuary to ensure it could handle high capacity cargo ships (up to 20,000 tons),” said Vo Thanh Phong, CEO of logistic firm Hau Giang Maritime Service Limited Liability Company.

He added the Cho Gao channel in Tien Giang Province needs to be dredged and upgraded for barges with capacities of over 3,000 tons to operate, which would reduce transportation duration and costs.

The Ministry of Transport has proposed the government build a deep-water port in the Mekong Delta province of Soc Trang that can handle cargo ships with capacities of 100,000 tons to meet regional export and import demand.

However, this region is showing signs of neglect and decline in recent times. In a talk with Saigon Investment, Dr. NGUYEN DINH CUNG, former Director of the Central Institute for Economic Management, shared his view on this issue.

JOURNALIST: – Sir, there are many opinions that the Southern Economic Region is facing many bottlenecks, which are limiting its ability to accelerate in growth, such as a deteriorating infrastructure, overload of urban transport, and increasing environmental pollution. What is your opinion on this state of decline and related issues?

Dr. NGUYEN DINH CUNG: – First of all, in terms of a region, frankly speaking, it is just an accumulation of neighboring localities, with no significant links. All regional activities are just superficial. The localities have no motivation, and no need to coordinate and connect into becoming a strong economic zone.

One obvious reason is that the same socio-economic indicators are applied to all localities. Thus, local governments have to compete with each other to attract investments, to take care of their home province first, so they have no need to connect with the neighboring provinces. For example, connecting Ho Chi Minh City with Vung Tau is a number one priority for these two provinces, but may not be the number one priority for Dong Nai province. Likewise, connecting Tay Ninh with Ho Chi Minh City may be the number one priority of Tay Ninh, but Ho Chi Minh City has many other concerns that need to be addressed first.

In brief, Ho Chi Minh City and other provinces in the Southern Economic Region have not yet created organic links to become a unified entity. They have not created links with other regions and localities as well, so it is not possible to take advantage of regional relations to create a development momentum for the whole region. For example, Ho Chi Minh City is next to two major industrial and manufacturing centers, Binh Duong and Dong Nai, but the leading service industry of Ho Chi Minh City is real estate, while logistics services in Binh Duong and Dong Nai are their highlight.

– Sir, besides the need to complete twelve socio-economic targets of the region first, what are the other reasons?

– The root cause is that the retained budget ratios of the provinces in this region, including Ho Chi Minh City, are still very low, much lower than those in the North with the same economic scale. Regional budget revenues account for 40% of the national budget revenue, but only 20% of budget expenditure. The industrial provinces around Ho Chi Minh City such as Binh Duong and Dong Nai can only retain 36% and 47% of the budget revenue, respectively. The industrial provinces around Hanoi such as Vinh Phuc, Bac Ninh, and Hai Duong can retain budget at 53%, 83%, and 98%, respectively. Ho Chi Minh City alone is the highest budget contributor, but the retained rate is the lowest in the country, at only 18%.

Consequently, Ho Chi Minh City and the Southeast region lack resources to invest in and re-invest in upgrading the internal transport infrastructure and associated transport systems. The gateway routes connecting Ho Chi Minh City with neighboring areas in the East and the South West are always severely congested, making production, services and export costs too high, thereby reducing competitiveness and attractiveness for investors.

If we look at the results of Foreign Direct Investment (FDI) in Ho Chi Minh City, we will see that the scale of FDI projects in the area is getting smaller and smaller. Specifically, the average size of one FDI project in the Southern Economic Region is about USD 10 mn, significantly lower than the national average of USD 12.42 mn, while the average scale of one project in Ho Chi Minh City is even lower, only USD 5.56 mn. This means that Ho Chi Minh City is gradually lacking projects of large-scale, high-tech and modern corporate governance that are capable of leading development growth.

– Sir, according to you, how can localities in the region closely link and support each other in the most effective way?

– I must emphasize that there are fierce challenges facing the Southern region which require multi-sectoral and multi-local solutions that can only be resolved when localities build links and solve problems together. In order to do that, besides building a quality regional plan, it is necessary to let localities see practical benefits from joint activities and support each other. This means localities must have enough resources to solve their internal pressing problems, as well as participate in regional projects.

In my opinion, the first focus should be on traffic connectivity. If we let the provinces settle for themselves, it will be very difficult and take a very long time. This is where it is necessary to use public investment from the central government, and effectively stimulate development.

Besides, the governments of the provinces and cities must have a global view, so that each locality can bring into full play its own quintessential strengths. For example, Ho Chi Minh City should focus on high-tech projects, high value-added services, and should avoid more labor-intensive projects and production, because it will further stress the situation of infrastructure overload, while the value added is too small.

– Thank you very much.

Anh Thu (interviewer)

In order to buy a body care lotion bottle at a preferential price from a sale promotion program, Tran Thanh Truc in Ba Dinh district, Hanoi, installed a shopping app. Buying the product via this app, she enjoyed a discount of VND50,000 and did not have to pay a delivery fee under the new membership program.

One month after the purchase, Truc removed the app from her smartphone because she no longer wanted to buy things via this app.

Consumers like Truc are potential clients targeted by shopping apps. They compare selling prices offered by suppliers and choose the ones with lowest price levels. They are willing to shift to use other apps if the apps offer more attractive prices.

With the principle ‘new one in, old one out’, they are not loyal clients.

Nguyen Thi Hoai, a housewife in Hanoi, said she often installs new shopping apps. She noticed that sale promotion programs tend to target new customers rather than loyal clients.

“I am the manager of our family’s coffers, so I try to save every dong. I always compare the prices quoted on different apps and I will give up the apps which no longer offer discounts for products and set high delivery fees,” she said.

With the habit of saving every dong, Vietnamese consumers prefer COD (cash on delivery) payment, though online payments are convenient.

Hoai confirmed that she only makes online payments when there are promotion programs run by her e-wallet or Visa card.

When asked which app is her favorite, Hoai said that she doesn’t have one. She buys milk and napkins for kids via onr app, but chooses other apps for books and electronics.

Meanwhile, Do Quang Thang in Hanoi said he removed two apps because of bad quality of products and services.

“The products were advertised as having high quality, but they were really terrible,” he said.

Online sale apps are spending big money on promotion campaigns to retain consumers, but the money seems to have been spent in vain.

On consumers’ forums, people complain that the quality of products is not exact as advertised, and the service is not professional. And trade fraud is another problem. This explains why many people turn their back on online shopping and only buy things after seeing them with their eyes.

A representative of a shopping app said customers will delete unsuitable apps after trying. They install apps when the apps offer preferences, but if they don’t feel satisfied about the services, they will give up the apps because they have too many other choices.

The Southeast Asia e-commerce map of iPrice Group shows that the app removal rate in Vietnam is the highest in Southeast Asia, 49 percent in Q2 2020, though Vietnam was the second largest market in the region, after Indonesia in terms of access traffic.

The average number of visits to websites in Vietnam in 2020 was four times higher than Malaysia, three times more than the Philippines and twice as much as Thailand.

The race to win customers’ heart

In order to lure customers like Truc and Hoai, shopping apps spend billions of dong to make their apps known to customers and persuade them to install the apps. And in order to retain them, they run promotion campaigns continuously and compete with each other every minute.

Lazada, Shopee, Tiki and Sendo, the ‘big four’ in Vietnam’s e-commerce market, ran big sale promotion programs in 2020, on Single’s Day on November 11, Black Friday on November 27, Cyber Monday on November 30, December 12 and others.

Market analysts say that consumer psychology influences buying habits. As the Covid-19 pandemic has been controlled well in Vietnam, consumers are returning to do more shopping.

iPrice suggested that in addition to running sale promotion programs to attract customers, e-commerce firms should think of measures to improve customers’ experience.

E-commerce platforms will get big benefits if using AI and Big Data which gives better recognition to customers, understands their tastes and makes reasonable suggestions to them.

Tran Tuan Anh, managing director of Shopee Vietnam, said when people stay home during social distancing campaigns, they tend to shift to online platforms, which allows them to both satisfy their daily needs and use for entertainment purposes.

E-commerce apps need to integrate many factors for interaction, including games and livestreams to improve connections with consumers.

Vu Duc Thinh, CEO of Lazada Logistics Vietnam, said Lazada will continue to use technological resources and initiative to optimize customer’s experiences. In addition, it will shorten the time needed for north-south deliveries, striving for within-day delivery service at the lowest possible cost.

At present, e-commerce platforms are still taking a loss. They accept this because they have high hopes for the Vietnamese e-commerce market, which is predicted to have the value of $29 billion by 2025.

Google predicts that Vietnam’s e-commerce will obtain the highest growth rate, 34 percent, in the region by 2025.

Duy Anh