B2B E-commerce Faces Challenges

Despite generating high revenue, many B2B e-commerce platforms in Vietnam are struggling due to overwhelming operational costs, leading to their eventual closure.

Thúy Phạm

Female , Lives in Vietnam

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Posted 9 days ago 134 Views updated 5 days ago

Mr. Bui Sy Phong, the founder of Telio, a B2B e-commerce startup focusing on wholesale trade, recently confirmed that his company ceased operations in late 2024. The closure came after unsuccessful attempts to secure additional funding or find potential buyers. Around 400 employees, including the technology team in India, lost their jobs. Even though Telio's monthly revenue reached $2.5-3 million, the startup had to shut down due to depleted funds.

Established in 2019, Telio aimed to revolutionize retail digital marketing by connecting small grocery stores with brands and suppliers through their B2B e-commerce platform. During its operation, the startup successfully raised $52.5 million through five funding rounds from major investors including Tiger Global, Granite Asia, Peak XV, and VNG. However, like many other B2B e-commerce ventures, maintaining profitability proved challenging despite the promising business model.

Prior to Telio, in 2023, another e-commerce startup, Kilo MDC Company Limited - the management entity of Kilo - also suspended operations after about three years in business. Kilo, founded by Kartick Narayan, a former Marketing Director at Groupon and Business Director at Tiki, launched in 2020 with the goal of digitalizing Vietnam's retail value chain through retail digital marketing. Although officially listed as temporarily suspended, the likelihood of Kilo returning to the market remains very low.

Kartick Narayan (Photo: vietcetera.com)

Ms. Ha, who owns a grocery store in Thu Duc City (Ho Chi Minh City), tried using the b2b e-commerce platform Telio but eventually discontinued her usage. She explains that while Telio's prices were slightly lower than her regular suppliers, the profit margins were insignificant and couldn't compete with traditional distributor services. "Traditional suppliers can deliver immediately when needed, offer credit terms for a few days, and provide higher discounts for meeting sales targets," she shares. "Brands also typically offer promotions, support with signage, and pay for shelf space. Telio didn't offer any of these benefits."

Mr. Nguyen Tung Giang, founder of G Investment Group - a long-time seller on b2b e-commerce platforms, believes that high operational costs combined with low profit margins are the main reasons why many startup ventures in the B2B e-commerce sector fail to succeed.

According to Mr. Giang, running a fast-moving consumer goods business through a b2b e-commerce platform presents significant challenges due to extremely low profit margins, especially when considering the average salary of 12-15 million VND per sales staff. The unique characteristic of Vietnamese grocery stores, often located dozens of kilometers apart, leads to high operational costs that revenue cannot cover. When investors stopped providing capital, this e-commerce startup reached a dead end.

However, Mr. Giang believes that the b2b e-commerce model can still succeed if combined with financial services, such as lending based on credit scores and product categories. He cites OnPoint - a retail digital marketing service provider for brands - as a successful example of this approach. Other companies like Vigo and Vinshop have also achieved positive results following similar strategies.

E-commerce expert Luu Thanh Phuong notes that the withdrawal of startups like Telio and Kilo wasn't surprising, as these brands had limited market recognition. "Operating primarily on investor funding without generating long-term profits, combined with a lack of differentiation in pricing and services, were the key weaknesses that forced these b2b e-commerce platforms to exit the market," the expert explains. This situation highlights the challenges faced by startups in the competitive B2B sector.

According to Mr. Phuong, for a b2b e-commerce startup to survive, it must clearly define its core values, build brand presence across multiple marketing channels, and provide comprehensive solutions including both products and financial services. Additionally, partnering with logistics providers to reduce costs and training a quality sales team are essential.

Mr. Hieu Nguyen, Head of Traditional Distribution at a major food company in Ho Chi Minh City, shares that retail digital marketing platforms like Vinshop and Sendo are selling his company's processed food products at prices 10%-15% lower than official distribution rates. This creates challenges for his sales team in retaining customers. However, the b2b e-commerce platform collaboration remains necessary to expand distribution channels and reduce personnel and warehouse costs. "While we can't predict how long these platforms will continue lowering prices to capture market share in the grocery segment, for now, increased competition among sellers ultimately benefits grocery store owners," observes Hieu Nguyen.