Finding the Right Shipping Cost for Your E-commerce Store

Experts suggest that e-commerce shipping costs should be based on market forces rather than fixed minimums.

One of the hot topics at the 2023 Postal Business Forum was the unfair competition among service providers regarding postal service fees, promotion programs, and choice of shipping units.

Nguyen Dac Luan, vice chair of the Postal Association, said the rapid growth of postal companies lately, with 800 active units, including foreign-invested ones, has created fierce competition in the market.

Service providers have had to reduce service fees and run promotion programs frequently to gain more market share. The issue is that to maintain profits when having to cut selling prices, sellers reduce product weight and use inferior-quality materials to make products.

The current laws don’t set standard prices for postal services, including e-commerce delivery services.

The postal service fees offered by some foreign-invested companies are lower than that of Vietnamese postal companies with large networks.

The difference between foreign and domestic service fees has caused severe problems, and experts have warned that Vietnamese companies may lose their postal service market share to foreign hands.

The collaboration between e-commerce sites and foreign shipping firms may lead to the market being controlled in both goods and logistics services.

Ha Thi Hoa from Vietnam Post confirmed that there is unfair competition in e-commerce shipping fees.

Foreign-invested postal companies are following a policy under which their service fees are always lower than that of Vietnam Post and ViettelPost, large Vietnamese-owned firms.

The ‘race to the bottom’ forces domestic companies to lower shipping fees, which leads to poor profitability of the postal sector, just 3 percent.

Phan Xuan Dung, president of Ninjavan, said that to ensure the stability of the e-commerce shipping sector, it is necessary to set minimum prices to stop the race to the bottom.

A representative from J&T Express said the proposal needs careful consideration because it is unlikely that the minimum pricing setting would help protect consumers.

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The transportation costs in e-commerce have been dropping quickly, by 10-20 percent per year. In China, the drop is up to 30 percent. Therefore, if state agencies set minimum prices, the changes in service fees may not keep up with the price drops in the market.

Le Thanh Hoai, founder, and CEO of SuperShip, opposes the proposal on minimum service fees, saying that this would violate the competition law. He thinks that it would be better to let the market decide service fees. If so, the shipping units that can provide better services and at lower fees will be selected.

A senior executive of Giao Hang Nhanh cautioned that the application of minimum prices would cause big challenges for newcomers in the market. In general, when entering the market, transport firms need to offer attractive prices to get clients. In the long run, business performance will depend on enterprises’ ability, not on price. If they cannot meet requirements after several years of operation, they will have to rethink their strategies.

Vu Duc Thinh from Lazada Vietnam said in other transport market segments, ‘cheap’ and ‘good’ never go together, but in e-commerce, both must be achieved.

The competitiveness is determined by the operation process, high technology applications (automation, AI) to improve business performance and high-quality staff. Once businesses can optimize their operation, they will have advantages in price, and this is what shipping firms need to aim for.

Nguyen Kim Anh, CEO of SPX Express, a shipping firm belonging to Shopee, said two things need to be done well in the logistics sector – providing good services at low prices.

Commenting about pricing strategies in e-commerce, Ngo Duc Minh, vice chair of the Competition Committee, said reasonable service fees for consumers are always welcomed. However, the competition in pricing must be healthy.

Sophia is passionate about Digital Marketing, E-commerce, and travel. I also like photography and writing interesting articles.