Vietnam, like most countries in Southeast Asia, is experiencing a rapid surge in middle class growth but at a rate faster than its neighbours. According to BCG, the ‘middle and affluent class’ is set to double to 33 million people by 2020 and earn approximately $714 or more a month.
Despite the slowdown of on-demand startups across the rest of the world, Vietnam’s developing landscape has been wide open for value-added services as more professionals in their late twenties and thirties are moving into their own apartments and pursuing white-collar careers.
On-demand groceries and food delivery service MarketOi is one of few startups based in Ho Chi Minh focused on serving the increasing amount of individuals that can afford ‘status’ – expats included.
“It’s not just about being middle class, but also about showing that they’re middle class,” – Oscar Mussons from Dezan Shira & Associates.
eIQ talks to MarketOi’s partner, Nicolas Embleton, about how the company is tackling the ever changing market.
Southeast Asia’s “hip food scene”
The current “food commerce” startups in Southeast Asia – foodpanda, UberEats, honestbee, HappyFresh, etc. – are either delivering hot meals or groceries. MarketOi, founded by French entrepreneur Germain Blanchet last year, actually does it all.
Placed orders are fulfilled within an hour or less as separate in-house riders are based in each of Ho Chi Minh’s districts.
“Customers can order a pizza from a restaurant, a croissant from a bakery and a coffee at Starbucks within one order. We try to optimize the route by estimating cooking and preparation time, and sorting out the pickup order so that it makes sense in the delivery chain. The food has to be hot at arrival, and if it’s impossible, the customer is always notified in advance,” says Nicolas.
“MarketOi is a service, we have to do the best to make sure our customers get what they need.”
The company currently has 40 official restaurant and grocery store partners, with over 50 unofficial partners undergoing a trial period that typically lasts for three months. MarketOi aims to reach 100 official partners by the end of this year.
“We onboard brands first to test their demand during the trial period,” says Nicolas. “If the feedback is positive, then we sign as an official partner.”
On-demand food is notably popular among the stream of expats living and working in Ho Chi Minh thanks to the great “work-life balance” as reported by HSBC data.
Today, 80% of MarketOi’s user demographic are expats and 20% locals.
“MarketOi is still growing, and since the founding team are foreigners ourselves, it’s easier to know what other foreigners want to become early adopters,” says Nicolas.
The platform services 500 active customers to date and carries out approximately 1,300 deliveries a month with $15,000 in monthly revenue. Since its launch last year, MarketOi has experienced 5% growth week on week.
The platform is also investigating delivery for things such as pet food and medicine, two areas amongst those in which Nicolas sees potential.
“We essentially want to become top of mind for consumers when they need something in a short span of time,” he says. As most service providers, convenience is key, but operating in a developing market like Vietnam is not without its challenges.
Scaling the on-demand business
“The Vietnamese market is tough,” says Nicolas. “There is a lack of brand loyalty and costs are high while margins are low.”
“Restaurants also feel the same pressure to fill seats in order to balance their high costs, but it can be tough in a city with a low dining out preference for Western establishments,” says Nicolas.
“We offer restaurants a way to increase revenue without increased marketing costs,” says Nicolas. “MarketOi does the marketing and receives a commission for each partner order.”
It seems like eating out is picking up in Vietnam, thanks to an influx of international brands but only for special occasions. The most common meal that the Vietnamese go out to eat is breakfast, with local noodle shops being the most popular options.
Only 7% of dine out destinations are at Western restaurants, including fast food chains McDonald’s and KFC.
Another interesting note is that more than a third of the company’s orders come through ‘chat app’, another 30-40% from the website, and the remaining from the MarketOi app. Not surprising as 9 out of 10 people access the internet through mobile phones in Vietnam.
As the majority of orders come in via chat, a MarketOi team is dedicated to answering customers and relaying orders to partners.
“Keeping the direct lines between us and the customer is important for an enjoyable experience but this system is impossible to scale because if our orders increase significantly, it will be difficult to manage the personal relationship with our customers,” says Nicolas.
He mentions that the company is currently working on in-house technology such as testing AI, processes, internal tooling and bots to help it scale.
What does MarketOi think businesses know about Vietnam?
“Vietnam is a very ‘do it all at once, or not at all’ kind of country,” Nicolas observes. “Mass behavior is a thing here in Vietnam.”
For example, lemon tea shops were immensely popular a few years ago, and businesses filled each street with the same kind of shop, selling the same beverage and saturating the market.
This led to a fear of starting something new in Vietnam.
Government constraints are also a big hurdle for businesses that want to operate in Vietnam as noted by Raphael Wilhelm, SoNice.vn founder, one of Nicolas’s good friends.
“Paperwork takes time and the only way to speed up process is through local connections, which can be difficult to obtain for foreigners.”
“Sometimes, to get things done, you have to contact a friend of a friend in Ho Chi Minh,” says Nicolas. “It’s the way business happens around here.”
“Within the next year, we want to expand into another city in Vietnam and increase the speed of deployment. MarketOi’s advantage lies in the fact that the service is still very much needed here, but we are seeing a clear interest in other cities where it makes sense,” says Nicolas.