How to Start an Ecommerce Business in Vietnam

• E-commerce companies have increased their market share in Vietnam, aided by improved internet connectivity, smartphones and, most recently, lockdowns related to the COVID-19 pandemic.
• With over 60 million internet users, the e-commerce industry is projected to reach nearly $ 9 billion by 2025.
• Vietnam Briefing outlines the basic guidelines for those interested in starting an ecommerce business.

With Vietnam’s e-commerce industry showing strong potential due to the recent lockdowns due to the pandemic as well as an emerging middle class, it makes sense for companies to show interest in this fast-growing market. Recently, several large corporations like Alibaba have shown interest in investing in the Vietnamese Masan Group Corp.

According to a study by Google, Temasek Holdings, and Bain & Co, Vietnam’s digital economy is expected to grow by $ 52 billion by 2025, an annual growth of 29 percent compared to 2020. The government also wants to reduce cash payments due to a more transparent economy, increase cashless payments for public services, and at the same time improve the regulatory environment for electronic payments.

Nevertheless, Vietnamese customers are skeptical and distrust of products bought online remains. As a result, customers like to open products to check the quality and any defects, with most transactions being cash on delivery. Nonetheless, the pandemic increased online shopping by 30 percent, with products ranging from groceries to electronics sold in 2020, according to Infocus Mekong Research.

Investors interested in Vietnam’s e-commerce industry and looking to start an e-commerce business need to be aware of Vietnamese regulations and the nuances of its laws. In addition, Vietnam has presented a draft decree on e-commerce which will eventually be amended Decree 52/2013 / ND-CP (Decree 52) – a law that regulates e-commerce activities in Vietnam.

E-commerce defined

According to Decree 52, e-commerce activity means conducting part or all of the business process electronically connected to the Internet, cellular network or other open network.

According to the law, there are three different types of e-commerce activity in Vietnam:

• Online marketplace: This is a place where different traders meet to sell their products. The online marketplace arranges advertisements and payments for products that run through the website. Examples are Amazon, Shopee and Lazada.
• Online classifieds: Online classifieds are similar to an online marketplace, but payments go direct to the seller. Examples are Craigslist or purchases on Instagram.
• Online retailer: Online retailers sell and store their own products. Retailers sell their own products from their own warehouse. Several online retailers are also regular retailers who sell their products online and have switched to this model due to the pandemic. Examples are Walmart and in Vietnam Lotte Mart and Bach Hoa Xanh.

Before setting up an ecommerce website, the investor should decide how to accept payments. For example, if they want customers to pay them directly, they need to apply for an interim payment license. Otherwise, they would have to work with local partners such as banks or e-wallets such as MoMo or Zalo Pay.

Companies that own websites must register online with the Ministry of Industry and Trade (MoIT).

To register an ecommerce business, an investor needs an Investment Registration Certificate (IRC) followed by an Enterprise Registration Certificate (ERC), then a trading license (for those selling directly to customers) followed by the website Notification or registration. The whole process can take anywhere from three to four months, but it can take longer depending on the business area and the specific situation.

While there are no minimum capital requirements when starting a business, investors should note that their capital contribution should cover all business expenses, otherwise authorities may withhold approval or require additional documents to prove how to keep their business going.

Since e-commerce is a conditional business area, investors should ensure that they have appropriate approvals from the Ministry of Planning and Investment (MPI) and MoIT. In addition, depending on the specific line of business, it may be subject to additional conditions as per the government’s conditional sector list.

What is the registration process?

To register an ecommerce website or app, investors must follow these general guidelines:

• Step 1 – Register for an account to access the online system by providing the following information:
  • Name of applicant;
  • Number of the deed of incorporation;
  • Business areas;
  • Applicant’s registered office; and
  • Contact information.
• step 2 – If there is sufficient information, the MoIT grants access to the online system. The applicant can then log in and register their ecommerce website or application and fill out and submit the forms as directed.
• step 3 – If the information is sufficient, the MoIT approves the submission, the applicant must then send an original registration dossier to the MoIT (sample dossier below).
• Step 4 – If the information is sufficient, the MoIT will issue an official code that will be used to display the “Registered” mark on the e-commerce website or app.

An example of a registration dossier that must be submitted to the relevant government agencies for an e-commerce website is shown below:

Investors must also refer to relevant laws including the Cybersecurity Act, Decree 52 on E-Commerce, Circular No. 47 on Managing E-Commerce Websites, and Circular 59 on Managing E-Commerce Activities Via Apps on Mobile Devices.

Prohibited Activities in E-Commerce

According to Decree 52, there are four groups of prohibited e-commerce activities:

1. Organization of e-commerce services in which each subscriber has to pay an amount of money X in order to buy the service and receive a commission.

• • Use e-commerce to trade counterfeit goods or offer services that infringe intellectual property rights.

2. Provide fake registration information or fail to obey regulations regarding registration information on ecommerce sites.
3. Deceive customers on websites including falsifying information from merchants, organizations, or individuals involved in e-commerce activities.
4. Other violations include stealing, using, disclosing, and transferring trade secrets of other merchants, individuals, or organizations, and copying a competitor’s website for the purpose of profit or confusion of customers / users.

Be prepared for changes once the draft decree is approved

Investors are strongly advised to set up a representative office and legal representative for e-commerce activities. While several multinational companies operate across borders and have no office in Vietnam, the Vietnamese government is likely to tighten regulations; The draft ordinance on electronic commerce stipulates that companies must appoint a legal representative or set up a business representative for electronic commerce. This is to ensure that foreign e-commerce companies pay the necessary taxes.