Vietnam’s government is tightening regulations in its rapidly growing e-commerce landscape, issuing a bold ultimatum to Chinese online retailers Shein and Temu. By the end of November, both platforms must register with the local government or face significant restrictions, including the prohibition of their apps and websites within the country. This announcement underscores administrative concern regarding the disruptive effects these platforms may have on local businesses, especially considering their aggressive discounting strategies and the potential for counterfeit goods circulating through their sales channels.
The Deputy Minister of Trade, Nguyen Hoang Long, confirmed that Vietnamese officials have been in discussions with both Shein and Temu about the registration requirements. According to Long, the Ministry of Industry and Trade plans to implement stringent technical measures, including blocking access to the platforms if they fail to comply with the requirements set forth by the government.
Historically, Shein has been operating in Vietnam for over two years, establishing a foothold in the market. In contrast, Temu, owned by PDD Holdings, only launched its services in Vietnam last month, which makes the government’s scrutiny particularly revelatory for its nascent operations. In response to the government’s concerns, Shein asserted that it sells products directly to Vietnamese consumers and is committed to adhering to local laws and regulations. Temu has, however, yet to respond publicly to the recent developments.
Vietnam’s concern does not arise from thin air. The e-commerce market in the country has witnessed an astonishing growth rate of 18% this year, reaching a valuation of $22 billion. This makes it the third-largest e-commerce market in Southeast Asia, trailing only behind Indonesia and Thailand. The explosive growth has naturally invited scrutiny as established retail norms and local businesses could be significantly challenged by the sheer scale of operations these retailers bring in.
Analysts observe that the Vietnamese government is particularly concerned about the impact of foreign platforms on local merchants. The trade ministry fears that the significant discounts offered by these platforms could adversely affect local companies, which often cannot compete with such aggressive pricing models. The potential for counterfeit goods further fuels regulatory hesitation. In recent statements, Deputy Minister Long emphasized the need for regulation to ensure local businesses retain their competitiveness and integrity.
Adding to the complexity, Vietnam currently allows for imported goods valued up to 1 million dong (approximately $40) to bypass the value-added tax, a move aimed at stimulating e-commerce. However, the Finance Ministry is considering the end of this exemption as popular platforms benefit significantly without direct investment into local economies.
Moreover, Shein and Temu are not just in hot water in Vietnam; both platforms are under scrutiny in other markets too. Most notably, Indonesia has initiated requests for tech giants Apple and Google to remove Temu from app stores, arguing that such low-priced imports threaten the livelihoods of local merchants.
Amidst these regulatory hurdles, the Vietnamese e-commerce landscape continues to evolve with heightened competition at every corner. Local competitors, such as Singapore-based Shopee and Alibaba-funded Lazada, alongside domestic e-commerce firms like Tiki and Sendo, are keenly observing the situation. They might seize this opportunity to bolster their market share if regulations against foreign entities tighten.
As global e-commerce giants such as Amazon and Alibaba’s Taobao venture further into Southeast Asian markets, the response from Vietnam could set a precedent for other nations grappling with similar challenges. Stakeholders in the region are keenly watching how this situation unfolds, especially in light of the rising consumer demand for fast-fashion products that platforms like Shein successfully offer.
In conclusion, the regulatory landscape in Vietnam regarding foreign e-commerce platforms is exemplified by the recent actions taken against Shein and Temu. While these platforms provide Vietnamese consumers with diverse shopping options at attractive prices, the government appears to be prioritizing local business interests and market stability over unrestricted foreign access. As the deadline approaches, the tension between regulation and market dynamics will likely intensify.
