Founded in 2021, Vietnam-based social commerce enabler ON currently hosts more than 52,000 online stores that list over 20,000 SKUs.
Giang Nguyen (above center), founder and CEO of On Group, shared with KrASIA how the startup is riding on the popularity of social commerce in Vietnam to help small merchants sell consumer goods and grow their businesses.
This interview has been consolidated and edited for brevity and clarity.
KrASIA (Kr): Tell us more about ON’s business operations.
Giang Nguyen (GN): In a nutshell, what we do is create a single ecosystem to solve the business challenges of social commerce sellers. We help our social commerce merchants sell better by solving their challenges in shipping, financing, and sourcing with a shipping aggregation platform, a COD financing service, and a wholesale marketplace.
At the same time, for our logistics and supply partners, we provide them with a new source of revenue growth and help optimize their operations.
Kr: What social media platforms do you leverage?
GN: Most of our sellers are selling through Facebook and Zalo, which is a messaging app similar to WeChat in China. We leverage these two messaging apps the most because of their popularity in Vietnam.
Kr: How did the idea of setting up ON come about?
GN: Last mile delivery using cash-on-delivery (COD) payment was the first product I built when I came back to Vietnam in 2016 following a work stint in Singapore. I quickly realized that there was huge demand for this, as digital payment was still a new thing here and people were still relying on cash payments.
While Vietnam’s B2C e-commerce market has been expanding rapidly in recent years, it is still dwarfed by brick-and-mortar retail. E-commerce accounts for only 5% of total retail. So there is a significant opportunity for online merchants to capitalize on the e-commerce market, which is still in its relative infancy.
I built a community of last-mile shippers and shop owners in Hanoi and Ho Chi Minh City on Facebook to test the idea of developing an online shopping portal entailing the use of COD. Within months, this community grew to a million users. It was then that I learned a lot more about social sellers and their pain points, from finding suppliers to shipping.
In the end, with my co-founder, Dzung Luu, we decided to create an integrated ecosystem for social sellers.
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Kr: Compared to the regional rate of 44%, Vietnam’s social commerce accounts for 65% of its e-commerce market size. Why is Vietnam doing so well in the social commerce space?
GN: Vietnamese love social media; we are one of the top users of social media in the world. We do everything on social media: from connecting with friends and reading news to shopping. Vietnamese people value relationships and personal connections, and they prefer to buy from someone they trust, which has led to high social commerce transactions.
Trust is an issue for digital transactions. This is another reason why the COD method still accounts for over 80% of all online commerce in Vietnam, including social commerce.
Kr: Recently, you acquired TopShip, an aggregation platform for fulfillment and delivery. Was it necessary to acquire a logistics asset in order to grow?
GN: Essentially, logistics is the backbone of social commerce. You need cheap, fast, and reliable shipping services to be able to thrive in social commerce.
Logistics is always a challenge in Vietnam’s social commerce industry. It’s estimated that logistics accounts for 25% of the overall costs in social commerce. Therefore, increasing efficiency in logistics and reducing lead time are extremely important for e-commerce to grow. Startups that tackle this problem will have a lot of opportunities to acquire users and thrive in the social commerce space.
Besides, with hundreds of shipping companies in Vietnam, each with different pricing schemes and areas they cover, the logistics market is so fragmented. Choosing the right logistics partner, one that can optimize your shipping costs, is always a challenge for online sellers.
Also, bearing in mind that TopShip has important synergies with our ecosystem, we decided to acquire the company to solve the problem of shipping for our social commerce sellers. This M&A deal will allow ON to expand its product offerings and gain access to a network of 15 delivery companies nationwide. In fact, TopShip can help sellers save up to 50% of shipping costs by aggregating orders for the best rates.
Kr: Why is the supply chain such a major challenge in Vietnam?
GN: Vietnam’s infrastructure for logistics is still in the developmental stage. Currently, there are still many areas with no highways or are not accessible by trucks. So it’s a real challenge to increase efficiency and optimize transportation costs.
Also, the level of consolidation in the industry is low and very fragmented.
Logistics companies in Vietnam are mostly small and family-owned. These business operations hardly make use of technology, which ends up making them inefficient.
Kr: How have the recent global supply chain challenges impacted your business?
GN: I don’t really see them as challenges but as opportunities. The global supply chain challenge forces companies to “think local” and own their supply chain to capture the growth in their home markets.
Many of our partners used to focus on exports but have since shifted focus to Vietnam due to the geopolitical tensions as well as the attractive growth of the local market. They have good products but don’t have existing distribution channels. This is where we come in. For example, OnMarket helps them “fast track” and reach end customers by creating a network of thousands of sellers across the country.
Kr: Since the COVID-19 pandemic, some MNCs have been shifting production away from China to other countries, including Vietnam. How has this development affected your business?
GN: At the macro level, this shift will benefit our economy, create more jobs, and increase the overall income of the population. With a rising middle class, social commerce companies like ON can benefit from tapping this rising demand.
At the same time, more manufacturing operations in Vietnam can increase the quality of manufacturing here, which will result in more high-quality goods being produced and sold in the country. And people will eventually need a solution to help them sell better. This is where ON can play a role to facilitate these transactions.
Kr: What are your future plans?
GN: We are focusing on our ecosystem, and we will launch our On App by the end of this year. At the same time, we are working with our partners to integrate tools and apps to our platforms to create more value for our sellers. Next year, we hope to be able to expand regionally.
Kr: Funding-wise, what’s next?
GN: In January 2022, we received USD 1.1 million in a seed funding round led by local VC firm Touchstone Partners, with participation from VC-cum-accelerator, ThinkZone Ventures. The funding helped us expand our presence locally and develop logistical and tech solutions to serve sellers’ management, delivery, and capital needs.
We’re also raising our series A round to fuel growth, and we expect to close this round by the end of this year.