TOPIC: HOW HAS SHOPEE SUCCEEDED IN VIETNAM’S OLIGOPOLY

OF E-COMMERCE?
1. INTRODUCTION
1.1 Market overview
1.1.1 Definition of e-commerce
- E-commerce is a form of business which is conducted online. E-commerce can be
defined as a process of sales and purchase of goods or services facilitated by online
platforms namely websites, online retailers apps (Glossary:E-Commerce, n.d.).
1.1.2 Overview of the Vietnamese ecommerce market
- The retailing landscape of Vietnam is transforming from heavily bricks-and-mortar
stores to e-commerce by virtue of the burgeoning explosion of internet usage and the
emerging online retailers platforms (Vietnam Briefing, 2024). The growing portion of
the tech-savvy population, and the fast pace of digital transformation in Vietnam, are
making the e-commerce sector outpacing its traditional retail.
- The Vietnamese e-commerce market is looking prosperous, with a forecasted market
value of 60 billion U.S dollars (Nguyen, 2023). During the first half of 2024, a
reported 143.9 trillion Vietnamese dong (US$5.68 billion) was captured by
e-commerce activities (Vietnam Briefing, 2024).
- Fueled by urbanisation and modernization, Vietnam is establishing its leading position
in the online market of the Southeast Asia. Vietnam’s e-commerce has a market value
of US$22 billion, which ranks third in Southeast Asia behind only Indonesia ($65
billion) and Thailand ($26 billion) (Thong, 2024).
1.2 Historical Background
Shopee was established in Singapore in 2015 by SEA Group. Shopee operates in several
Asian countries including: Singapore, Malaysia, Indonesia, Thailand, Taiwan, Vietnam,
Philippines. Started as a C2C business model, July 2017 was a prominent milestone for
Shopee as Shopee Mall introduced - beginning its B2C operations (Asia, 2017).
In 2016, Shopee made its entrance into Vietnam's e-commerce market.
After many years of operating with zero profit, in 2022 Shopee Vietnam had a positive profit
after tax of over 3 trillion VND. With this substantial growth, Shopee maintains its leading
position in the Vietnamese e-commerce market (Shopee Vietnam: Profit after Tax | Statista,
2022).
1.3 Problem Statement
When Shopee has entered the Vietnamese market, it has faced some challenges because there
are numerous e-commerce platforms that were established before (like Lazada, Tiki and
Sendo). To compete, Shopee must find ways to quickly attract new users and dominate the
market. It has the mission “Creating a safe, reliable and convenient online shopping
experience for everyone.” (Linh, 2023). Therefore, they focus to customer’s satisfaction by
applying penetration pricing or loss-leader pricing strategies. Because Vietnam is a
developing country and residents have quite low average salaries (Understanding the
Average Salary in Vietnam: A Comprehensive Guide, 2024), these pricing strategies help
Shopee to have a large number of new users. By offering low price strategy with constant
promotions and especially free shipping policy and big sale campaigns like 11.11 or Black
Friday, Shopee has gradually dominated the Vietnamese market (dataSpring Editors, 2021).
1.4 Research Objectives
Our research Objectives are to analyse Shopee's price strategies in Vietnam and evaluate their
effectiveness in an oligopolistic ecommerce market. This study centralises how Shoppe deals
with the aforementioned issues and maintains competitive advantages. Oligopoly theory is
used in the case of Shopee's strategy analysis in the Vietnamese e-commerce market to better
understand how it operates. Finally, this paper gives some recommendations for Shopee to
maintain growth and improve profitability in Vietnam.

2. OLIGOPOLY LITERATURE REVIEW

2.1 Definition of Oligopoly
First described by Cournot, oligopoly is the market structure in which a small number of
firms make interdependent decisions, meaning that the actions of one firm affect those of
other firms in the market. Each firm holds significant market power, though not as high as a
monopoly, so it has a remarkable impact on the market.
The most prominent characteristic of an oligopoly is the interdependence between
oligopolistic firms. Unlike a competitive market, where firms have no market power and
influence, in an oligopoly market, only a few large firms dominate the market, and they
together share a high concentration of the market, forming an entry barrier. As suggested by
game theory, firms choose the best strategies based on the potential decisions of others.
Because of that, they tend to avoid competing aggressively in altering prices which may
reduce their overall profits. Instead, they often engage in non-price competition and
differentiate their brands, allowing them to compete without directly adjusting prices.
E-commerce in Vietnam can be considered an oligopoly market because there are few
dominant firms (Shopee, Lazada, Tiki and Sendo) that have high market power, and because
of the existence of these large firms, there is a barrier to entry preventing new and smaller
firms from entering the market as they have insufficient power to compete.
Moreover, Shopee, Lazada, Tiki and Sendo also engage in non-price competition (by
boosting marketing and differentiation) to avoid price war.
2.2 Economic Efficiency under Oligopoly
- Unlike firms in a perfectly competitive market that produce at the point where
marginal revenue is equal to marginal cost and set the price at the market equilibrium
price, oligopolistic firms often operate at a lower level of production and set higher
prices to maximize profit, resulting in allocative inefficiency and productive
efficiency.
- Shopee allows various forms of promotion (discounts, free shipping and flash sales)
and launches marketing campaigns to temporarily lower prices and increase consumer
surplus, thus reducing inefficiency.
- Events such as "11.11" and "12.12" helped Shopee create more consumer surplus and
raise sales revenue. The “12.12 Shopee Live Sale Sinh Nhật” campaign boosted
Shopee’s product sales by 50 times compared to daily sales and helped consumers
save over 1.5 trillion VND. (VietNamNet News, 2023)
- Shopee uses a non-price strategy to enhance product efficiency by developing a strong
e-commerce platform with an accessible online website, investing in technological
infrastructure and improving logistics.
- Shopee’s logistics improvement quickens the flow of products. (Thái Nguyên Tuổi
Trẻ Thủ Đô, 2020)

3. THE COMPETITION OF THE E-COMMERCE INDUSTRY IN VIETNAM

3.1 Current Situation of Shopee in the Vietnamese Market
- Shopee is a key player in Vietnam’s e-commerce industry in 2024 (Vietnam Briefing,
2024)
- Shopee is the most frequently visited e-commerce platform in 2022, receiving about
84.9 million monthly visits. (Statista, 2022)
- Shopee has expanded across Vietnam, focusing on both urban and rural markets by
leveraging low internet costs, efficient logistics, a growing consumer base, and a
strong local manufacturing sector. (thitruongtaichinhtiente.vn, 2024)
Strategy
- Customer Engagement: Shopee has used unique customer engagement tools such as
Shopee Live and gamification features like Shopee Games, Shopee Farm. (Tan, 2020)
- Shopee Mall is a specialised section featuring verified brands, aimed at customers
looking for high-quality products, which enhances Shopee’s credibility. ([Thành Viên
Mới] Shopee Mall Là Gì? | Shopee Trung Tâm Trợ Giúp, 2021)
- Automated customer support: Shopee is increasingly using chatbots on their
websites and social media to make it easier for customers to communicate with
customer support representatives (ĐIỀU KHOẢN DỊCH VỤ CHATBOT | Shopee
Trung Tâm Trợ Giúp, 2024)
3.2 Existing Rivals
- Market Position and Reach: Since Shopee’s entry to the Vietnam market in 2016, it
has established itself as a leading e-commerce platform. It also ranked as the most
visited platform compared to other competitors like Lazada, Tiki, Sendo. (Vietnam
Insider, 2020)
- Shopee’s tailored approach to the Vietnamese market: By understanding the
importance of local trust, Shopee remains the go-to platform for the majority. It adapts
to payment preferences, using both traditional cash on delivery and high-tech methods
(Shopee pay). ([Thành Viên Mới] Shopee Hiện Đang Có Những Phương Thức Thanh
Toán Nào? | Shopee Trung Tâm Trợ Giúp, 2021)
3.3 Product Differentiation
- User Friendly Interface: Shopee offers a user-friendly, attractive interface that
improves the online shopping experience. The platform is designed with simple
navigation, well-organised categories, and an efficient search function, making it easy
for users to find products and discover deals. The user-friendly design is key to
Shopee’s appeal, making it a popular choice among online shoppers. (Unveiling
Success: A Comprehensive Shopee Market Analysis - Osum, 2024)
- Personalized and Exclusive Rewards Program: Shopee allow customers to earn
reward points through successful orders and use the tired membership card (silver,
gold, diamond). (Seller Education Hub, 2024)
- Promotional strengths: The campaigns have become so popular that when people
hear “9.9” or “11.11,” they instantly think of Shopee, showcasing its strong brand
association with these events. (Graas, 2023)
3.3 Entry Barriers
 - High Market Saturation with Strong Local and International Competitors:
Vietnam’s e-commerce market is highly competitive, with many strong local and
international players such as Lazada, Tiki, and Sendo. This intense competition
requires Shopee to continuously innovate and make significant marketing
investments. (Shopee, Lazada, TikTok Shop Dominate Online Market Share -
Vietnam.vn, 2023)
- Logistical Challenges in Rural Area: Vietnam’s geography, which includes many
remote and rural areas. This can lead to higher transportation costs and logistical
challenges. (Vietnam Transport Infrastructure: State, Challenges & Future - Vietnam
Guide | Doing Business in Vietnam, 2021)
- Trust Issues in E-Commerce: Many Vietnamese consumers are hesitant to make
purchases online, because they are concerned about the quality and legitimacy of the
products. To solve this problem, Shopee has to work hard to build trust by selling
verified brands on Shopee Mall and having clear return policies. Additionally, clear
return policies are put in place to ensure consumers feel secure in their online
shopping choices. (E-Commerce Needs Consumers to Trust, 2024)
4. THEORY APPLICATION AND RECOMMENDATIONS FOR SHOPEE
4.1 Recommendations for Shopee
● Suggestions to enhance Shopee’s competitive positioning in Vietnam: Enhance local
partnerships: Improving Logistics Efficiency
● Strengthen ShopeePay
● Sustainability Initiatives: Introducing eco-friendly practices to appeal to
environmentally conscious consumers.
● To deepen market penetration, Shopee has increased collaboration with local
influencers, brands and regional businesses.
5. CONCLUSION
To conclude, the combination of strategic pricing, solid partnerships with local business and
streamlined customer engagement is the fuel for the success of Shopee in Vietnam's
oligopolistic e-commerce. Although Shopee has to face competition from Lazada and Tiki, it
has successfully gained customer loyalty through trust and unique promotions. Finally, to
dominate the Vietnamese market, Shopee needs to strengthen its transportation, purchasing
and marketing activities, develop shopping features such as Shoppe pay and apply long-term
sustainable practices in the context of e-commerce to maximise profits and protect the
environment.