E-commerce in the context of digital transformation in Vietnam: opportunities and challenges
Hoang Thanh Tung
University of Labour and Social Affairs Nguyen HaAn
St. Paul American School Hanoi
The prolongedepidemic situationhas forced many firms to switch to the e-business model to meet the market's demand. At the same time, the revolution of4.0technology isdeveloping more, therefore,the tran sition from traditionalbusinessto e-commerce is important. In thisresearch, theauthor studies e-commerce in the context of digital transformation in Vietnam, from that evaluate the opportunities and challenges of e- commerceinthe situationof digital transformationthat is occurring strongly.
1. E-commerce in the digital transformation background
1.1. Concept of e-commerce
According to WTO (1998), e-commerce refers to the process of selling, buying, and exchanging items, services and information via computers, including the Internet. Therefore, e-commerce is a new way of making onlinebusiness happen on a website on the Internet. A store that sells products on e-commerce channels can be an online store, a manufacturing business, or a commercial enterprise. E-commerce channels not only help enterprises to quickly approach the customers but also plays the role of supporting consumers to purchase products online as required. TheE-commerce business model is con
sidered one of the waysto push the development of the economy, especially in the conditions of social distancingto prevent epidemics.
E-commerce activities include buying, selling, and exchanging products, and online services; buyingand selling online services, online payment, and online customer services (Magenest.com, 2022). The e- commerce market is divided into different forms depending on the participants. There are 6 basic forms of e-commerce: Business to Business (B2B), Businessto Customers (B2C); Customer to Customer (C2C); Customer to Business (C2B); Business to Government (B2A); Customer to Government (C2A) (Magenest.com, 2022).
1.2. Digitaltransformationconcept
According to the definition from the Ministry of Planningand Investment (2021),enterprises' digital transformationisto "integrateandapply digitaltech
nology to improve business efficiency, management efficiency, enhance capacity and competitiveness of enterprises and create new values". Digital transfor mation is the process of altering the businessesthat operate in areas through dataconnectivity,technolo
gy integration, innovation, and digitization such as product data, research, and development data (R&D), human resource management; production line, cus
tomerdata, distribution channel...
Digitation: is the transformation from a physical document (paper) to anelectronic form. In thisway, businesses enable digital content to be included in theworkflow.
Digitalization: is theinnovative version of digitiza
tion, which is to use digital technology and the data that has been digitized before, and use it to utilize business activities.
Thus, the digitaltransformationof businesses will begin with the transition from paper documents to digital formats, from hard files to soft files, applica
tion checklists, and digitization of information shar
ing. workwith a group of stakeholders through the migration to the cloud to allow them to work with data together, or use shared management services online...
1.3. E-commerce development associated with
digitaltransformation
In the contextof the world entering the Industrial Revolution4.0, e-commerce has attracted the atten tion of many countries becauseitlargelycontributes toeconomic growth.Whenthe Internetwas born,the worldcannot denyits significance in all areasof social life. Itcan be said that e-commerceis growingrapidly and itis an indispensable part of businessactivities. E- commerce depends on electronic money transfer, internet marketing, online transaction processing, electronic data interchange, inventory management systems, and automated data collection systems. E- commerce related to digital transformation is an opportunity for cooperation and sharing between economic agents; e-commerce enterprises;
Enterprises provide technical solutions to awaken the potential ofe-commerce human resource training.
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NGHIÊN CỨU
RESEARCH
2. The current State of e-commerce in the con
text of digital transformation in Vietnam
2.1. Realization of e-commerce
Thelevel ofdevelopmentin thee-commerce mar ket in Vietnam: Accordingtothe e-commerce market researchin the first half of 2022 bythedata research company name Metric, Vietnam is becoming the sec
ond largest market in Southeast Asia, just behind Indonesia. Compared to the current world e-com- mercesituation,Vietnam isdevelopingstrongly. The global e-commercegrowth rate has a rate of 16.24%
in 2021 and is forecast to breakthrough to 24.5% in 2025. In Vietnam, this figure is more than 20% in 2021, with a size of 16 billion USD. By 2025, the growth rate of e-commerce in our country can reach 29%, reaching39 billion USD (Metric, 2022).
Market share of the e-commerce market in Vietnam: The data collected byMetric company has shown that Shopee, Lazada, Tiki, and Sendo are the four e-commerce platforms with the largest market share in Vietnam. Specifically: Shopee takesthe lead in the e-commerce market, with total revenue of up to 43.12 billion, which accounts for 72% of the largest market shares in 6 months, from November 2021. This is followedby Lazada with20.9%, equiva lent to total revenue of 12.54billion (Metric,2022).
2.2. Advantages of e-commerce
Spending on online shoppingis rising: While the number of consumers spending less than 1 million VND for onlineshopping declined(from 26% in 2019 to only 16% in 2020), the rate ofconsumersspending 1-3 million, 3-5 million and 5 million and more is recorded increasing. Starting with an e-commerce model will set itself apart from the competition, increasing customer targeting.
Lower operating cost compared to traditional shops: An online store in an e-commerce model will not berequiredtopay therent, electric bills, or other maintenance fees. Although businesses still need to buy someservices,such as webhosting packages and domain names, the total cost is much lower com
pared to the traditional stores.
Expanded set of potential customers worldwide:
Aftersetting up and runningthestore on the e-com- merce platform, all customersaroundthe world can access the products being sold. Any customer can connect to the seller via theInternet and credit card.
E-commerce websites are easy to optimize:
Extending an online business is easy, businesses can optimize themselves without necessarily having prior highly specialized programming or design knowledge. Businesses can optimize by themselves without necessarilyhaving prior knowledge of pro
gramming or highly specializeddesign plans.
Business is not limited by timeand space: E-com- merce shops are accessible all day,allowing people to shop 24/7 no matter where they are. Even if a cus tomer'sorder hasn't been processed right away, they can still browse the store and make a purchase. It allows customers to add as many products as possi blewithout worrying about space limitations.
The e-commerce model associated with digital transformation helps businesses do this easily and quickly by popularizing keywords and customer files stored on Big Data. It allows learning about trends through social media platforms.
2.3. Disadvantages of e-commerce
Security,antifraud: An e-commerce store's active time, security, and fraud protection are critical. One of the hardest partswhenstartingan online business is choosing a hosting provider that can ensure the business is secure and up and running at all times.
Besides,the ethical issue in e-commerce business has not been promoted, the fact that virtual buyers are still very much makes it difficult for businesses, on the contrary, many businesses or individuals partici
pate in selling on websites.
High Competition: There are manyonline stores on the internet, which can make it difficult for new businesses to stand out, compete, and attract cus
tomers to visit the store and make a purchase.
Businesses must focus on providing high-quality products and excellent service from the outset, and develop appropriate promotional plans to gain trac
tion faster.
The number of attacks on websites increases:
Vietnam is also not immune to the risks that devel oped countries face in terms of e-commerce. The number of attacks on websites with malicious or warning purposes, aswell asthe number of cases of theft of personal payment account information online,is increasing. Common types of attacks are:
Viruses: Viruses can cause seriousharm, threaten the integrity and continuity of operations, change functionality, change data content, and sometimes even paralyze the entire system, the operation of manysystems.
Attacking Programs: A data thief or computer criminal is someone who gains unauthorized access to a website, database,or information system.
Credit card fraud: In e-commerce, credit card fraudis morediverse and sophisticatedthan intradi
tional commerce. Currently, in Vietnam, credit card theftsare very sophisticated.
Denial ofService Attack: An attack that causes a computer system or a network to be overloaded, leading to theinability to provide services or to stop working. These attacks alsoentail huge costs because customers cannot make purchasesduringthe down
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time of the website. At the same time, this business disruption will affect the reputation of the company, which isnot easy to restore.
Sniper: is a type of program that monitors, eaves drops, and monitors the flow of information on the network.
Phishing: is a type of high-tech crime that uses emails, pop-ups,or websitestotrick users into enter ing sensitive personal information such as credit cards, passwords, etc. row. Hackers often imperson ate well-known companies by asking customers for information. In addition, e-commerce crimesare car
ried out in many forms such as spam services, and hiring hackers to destroy competitors' websites...
3. Opportunities and challenges for e-commerce in the context of digital transformation in Vietnam
3.1. Opportunities
E-commerceis emerging as a growthpillar for the digitaleconomyofSoutheast Asian countries, includ ing Vietnam. In 2021, Vietnam's e-commerce has bright spots and continues to record growth.
Accordingly, e-commerce between businesses and individuals (B2C)in Vietnamhas grown by about16- 17%, reaching the milestone of 13.7 billion USD, accountingfor nearly 6% of the total standardof con
sumer goods and services in the country. The strong growth in e-commerce will be an opportunity for e- commercebusinesses to successfully transform digi tally (Thu, M., 2022).
Vietnam's e-commerce is on a solid premise for development,with a fairly complete legalframework for e-commerce, information technology, and telecommunications infrastructure, thepopularity of the internet, and smartphones for consumers...
Besides, the push from the COVID-19 epidemic has brought about changes in consumer behavior, con
sumption habits, and digital transformation require ments forsmalland medium-sized businesses. These dynamics will continue to bemaintained in thefuture after the COVID-19 pandemic is brought under con troland Vietnam'se-commerce develops to unprece dented levels (Ministry of IndustryandTrade,2021).
The digital transformation in e-commerce helps businesses to more closely managetheir e-commerce business. Enterprises can approach customers across thecountry and also foreign customersthrough e-com- merce and use digital transformation to analyze and store data via BigData, businesses can respondto cus
tomers quickly, and even setup an auto-answer mode.
3.2. Challenges
E-commerce associated with digital transforma
tionis acommon trend, but combining digital trans formation and e-commerce is not an easy task.
During digital transformation, e-commerce compa
nies face the following challenges:
The strong development of the industrial revolu tion 4.0 along with the Covid-19 pandemic has caused peopleand businessestochange their percep
tion ofmanyaspects ofdigitaltransformation. Itcan beseen thatdigital transformation is areally impor tant issue in the business development process of enterprises. Digital transformation will help Vietnamese businesses looking for a more flexible business model, both in terms of cost reduction and resource optimizationto overcome difficulties.
Thechallenges of delivery, safety, network securi ty, and personal security ine-commercetransactions also pose significant challenges for businesses.
Ethical issues in e-business are also very complicat
ed. Transactions in e-commerce in Vietnam are quite easy, many businesses or individual retailers sell low-quality products or post good product images but sell low-quality products, quantity for customers.
On the contrary, some customers deliberately do not receivethe product after placing anorder.
High-techcriminals are also increasingly sophisti cated, leadingto more and moredatahacking,infor
mation theft, and asset appropriation scams. This requires businesses tobuild a solidnetwork security system and always have supervision to manage net work security issues. However, to have a good net work security team, it is necessaryto spend a lot of money on hiring personnel, and theoperating system also needs a large cost, making it difficult for many businesses.
Digital transformation in the business model of enterprises is inevitable and increasingly necessary for e-commerce. In addition to many economic opportunities for businesses, it also brings many challenges for businesses when technology crimes are becoming more and more sophisticated, and competition between businesses is increasingly fierce. Therefore, businesses need to make smart choices when bringing digital transformation into e- commerce.
References
Ministry of Industry and Trade (2021), E-com- merce andDigital Economy, https://moit.gov.vn/
Ministry of Industry and Trade (2021), E-com- mercewhite book, https://moit.gov.vn
Ministry of Planning and Investment (2021), Programto support businessesin digitaltransforma
tion, http://digital.business.gov.vn
Magenest.com (2022), What is E-commerce?
Overviewof e-commerce in Vietnam,https://magen- est.com.
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