Please read the assigned cases at least twice. Your first read is to make sure you clearly understand and comprehend what the case study is about. Your second read is to take more detailed notes based

Please read the assigned cases at least twice. Your first read is to make sure you clearly understand and comprehend what the case study is about. Your second read is to take more detailed notes based 1

Journal of Information Technology Teaching Cases (2016) 6, 1–14

palgrave-journals.com/jittc/

JIT083

Teaching Case

Choosing e-commerce strategies: a case

study of eBay.vn partnership

Khuong Le-Nguyen1,2, Yue Guo2

Cleveland State University, Ohio, USA;

Hohai University, Nanjing, China

Correspondence:

Khuong Le-Nguyen, Monte Ahuja College of Business, Cleveland State University, Ohio, USA; Yue Guo, Hohai University,

Nanjing, China.

E-mails: [email protected]; [email protected]

Abstract

The case uses the story of one of the leading e-commerce ﬁrms in Vietnam to introduce

students to concepts and models of e-commerce, and in particular, to help students get

familiar with cultural, ethical and legal issues in doing cross-border e-commerce. After

solving the top three challenges in doing e-commerce in Vietnam within the past 9 years –

enabling a reliable and secured online transaction, building customers’ trust in buyers and

providing an effective shipping service, the CEO needed to consider whether he should

expand his proven successful domestic ecosystem extensively or build a completely new

one to serve his company’s strategic move: doing cross-border e-commerce in Southeast

Asia where there exist established players in the highly competitive and technology savvy

market. Such a key strategic event occurred in early 2014.

Journal of Information Technology Teaching Cases (2016) 6, 1–14. doi:10.1057/jittc.2016.1;

published online 15 March 2016

Keywords: cross-border e-commerce; Southeast Asia; strategy; challenges; ecosystem

Introduction

he Lunar New Year 2014 was just around the corner:

lights were twinkling and a massive ﬁreworks display was

coming up. The atmosphere was festive. Sitting in his

ofﬁce, Binh Hoa Nguyen, CEO and founder of Peacesoft – one

of the top ﬁve e-commerce companies in Vietnam – had to

consider various options for his successful partnership with

eBay.vn in a quest to expand its customer base in Southeast

Asia whose population is around 650 million. He was thinking

really hard about the news that Alibaba, Rakuten1 and Lazada2

were also having their own ambitious plans with huge funds to

do e-commerce in this region. Having solved the top three

challenges in doing e-commerce in Vietnam within the past 9

years – enabling a reliable and secured online transaction,

building customers’ trust and providing an effective shipping

service, he needed to consider whether he should expand his

company’s domestic business model extensively or build a

completely new one to serve this ‘cross-border market’.

Whatever his approach was, developing a network of delivery

and an online transaction system for this huge market were

high on his agenda. Of course, big money to do business does

matter. Yet, more critical to ensure a success in e-commerce

were running the shipping network that must be able to

address the country’s unique issues and enabling an online

transaction platform to accommodate different methods of

payment. Either the newly developed one or an extended

version of Peacesoft’s domestic ecosystem must enable the

ﬁrm to compete well with those e-commerce giants. Other-

wise, a failure in this market would be inevitable, resulting in

the negative impact on the domestic market and a severe loss

of faith of foreign investors.

After establishing a partnership with eBay, Peacesoft was

transforming itself into one of the top ﬁve e-commerce ﬁrms

in Vietnam. This case explores the unique business model that

enabled Peacesoft to gain and sustain a good market position

domestically and examines its early move to expand

internationally.

Binh Hoa Nguyen: Peacesoft’s CEO and founder

Binh Hoa Nguyen3 was born in 1982 in Hanoi. He founded

Peacesoft in 2001 as a sophomore of computer engineering at

Vietnam National University. During his college life, he won

several awards such as Vietnam Wisdoms, Scientiﬁc Research,

Creative Youth, Informatics Talents, Microsoft Imagine Cup

and particularly the Golden Globe from Vietnam’s Prime

Minister. Such competitions and experiences, which he later

reﬂected on, did give him much conﬁdence and belief in

starting his own business (see Figure 1). His dream was that

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Choosing e-commerce strategies: Insights from eBay.vn partnership

K Le-Nguyen and Y Guo

Figure 1 CEO Nguyen (See more about CEO Nguyen at: http://onforb.es/1Ds6NZN, or http://bloom.bg/1DBd83M.) – founder and CEO of Peacesoft group.

someday he would own a company to freely adopt his creative

ideas to conquer the market and make money. For him,

adopting emerging technologies, building a new business

model, tackling challenges, addressing customers’ demands,

and ultimately, watching his business grow up were sheer joys.

For many people, IT is some magic that could enable ﬁrms

to do everything effectively at a very low cost. During 2000–

2001, the successes and business models of the renowned

companies like Google, Yahoo, Microsoft, PayPal, eBay and

Amazon obsessed him. He reﬂected, ‘I said to my family and

friends that I have been thinking really hard about this

decision. My company [would] sell many stuffs online. Many

companies out there were not really successful, some even

disappeared after just 6 months or a year. They just simply

copied the “Western” models and styles. We need to make it

[our business model] completely different, something that

appreciates the local context, value and customers’ preferences

… Only then can we be successful!’.

His ﬁrst name is ‘Hoa Binh’, which in English means

‘Peace’. So he decided to go with ‘Soft’, which means software,

to give the company the name ‘Peacesoft’. Peacesoft’s vision

was to become one of the leaders in C2CB2C of the Vietnam

e-commerce market with a focus on online auction, transac-

tion and advertising. Peacesoft wanted to come ﬁrst in

customers’ mind. Binh ﬁrmly believed that his dream would

not be too far-fetched.

Binh was certain that Peacesoft could only achieve and

sustain the success based on a strong philosophy and work

ethics, which he summed up in nine golden words: Teamwork

– Passion – Teach and learn – Customer ﬁrst – Embrace

changes – Self-motivation – Creativity – Transparency –

Loyalty and honesty. Binh often shared his thoughts with

new staff and students, ‘I am very much concerned about how

fast you take action and think rather than where to start. For

me, your quick action and decision making capability are

more important than [your] background’.

An overview of e-commerce in Vietnam

Since 2010, Vietnam has been widely seen as a new tiger of the

global economy (see, e.g., http://bloom.bg/1CJUjuN). With its

population of 92.5 million, Vietnam was ranked 15th out of

198 countries based on the number of Internet users4 in 2014.

Vietnam had the largest online population in Southeast Asia

(Do, 2013; Johnny, 2014). With an electronic market that had

39.77 million people accessing to the Internet and had more

than 134 million mobile phone subscribers and 20 million

Facebook users (Kemp, 2014), Vietnam has so far drawn a lot

of attention of both domestic and foreign investors (see, e.g.,

http://on.ft.com/1DRa5Wa or http://onforb.es/1xYeJdv) to do

e-commerce. Still, there are many more interesting issues

about the growth of Vietnam’s e-commerce to mention. For

example, considering Vietnam’s e-commerce market size

during 2011–2016 and other countries in the Southeast Asian

region, the total Internet users in Vietnam has soared 153%

from 28 million in 2011 to 43 million, in a span of just 5 years

(see Figure 2).

Another dimension is the e-commerce Penetration (ECP),

which is an important measurement of the e-commerce

market maturity of each country. Simply put, it is the

percentage of the total retail market being done online.

In 2011, Vietnam’s ECP was only 0.25% and valued at

US$154 million. However by the end of 2016, ECP in Vietnam

is expected to triple to 0.71% while online retail will increase

sixfolds to $900 million (see Figure 3).

As far as Vietnam e-commerce market is concerned, in

2013, Vietnam E-commerce and Information Technology

Agency (VECITA) reported that there were over 100 e-com-

merce Websites primarily focusing on e-marketplace and a

few number doing online auction. According to VECITA

analysis,5 sales per online buyer accounted for approximately

$120 in 2013. Purchasing items are fashion, cosmetics pro-

ducts (62%), technology and electronic products (35%),

household products (32%), air tickets (25%) and others.

In Vietnam, most of online shoppers paid in cash (74%),

while payments via bank accounts and intermediate payments

in e-commerce Websites were 41 and 8%, respectively.

The B2C e-commerce sales were valued at $2.2 billion (see

Table 1).

VECITA also predicted that by 2015 about 40–45% of the

total population will be Internet users and that Vietnam B2C

e-commerce sales will reach $4 billion (see Table 2).

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Figure 2 Vietnam’s e-commerce market size 2011–2016.

Source: Euromonitor.

In 2013, 62% of customers bought clothes, shoes and

cosmetics online while only 10% of customers spent their

money on online professional services, that is, learning

English online or educational consulting (See Figure 4).

As early as 2014, most of the e-commerce business models

in Vietnam were fully developed and since then the competi-

tion has gradually become ﬁerce. The ICTs infrastructure, the

technical capability, the legal mechanism and the support of

the government as well as the community all supported the

growth of the e-commerce industry. In May 2014, the prime

minister issued a decree on the national action plan to develop

e-commerce for the period of 2014–2020. This action plan,

which is worth around $22.5 million of the governmental

budget, focused on three key issues:

●

Completing the IT infrastructure and promoting the adop-

tion of online transaction platform

Securing online transaction – Accepting industry standards

for online transaction such as digital signatures and com-

pleting legal framework

Training and developing the highly skilled workforce6 for

doing e-commerce

beginning, but were then unable to maintain their growth

after a long journey. A few Websites that had received big

investment almost ‘ran their course’, and consequently, were

not enthusiastic about the game anymore. Some of the online

shopping Websites were not completely dedicated to making

customers’ shopping experience enjoyable while many others

just ran as a medium connecting between buyers and sellers,

that is, showing or displaying products online, without

incorporating the online payment systems. E-commerce,

therefore, is a long journey, in which only ﬁrms that have

sufﬁcient resources, competent capability and a well-planned

investment strategy can survive and grow. The thought of

‘instant or immediate successes’ does not exist in this play-

ground. Being a new market entrant or not, a ﬁrm must

identify its capability, direction and the challenges that it will

confront when doing e-commerce.

Obviously, numerous works had to be done.

A close-up of Peacesoft

In April 2001, with just $100, Mr. Nguyen started his own

software business, which he jokingly called ‘a garage software

company’. Peacesoft was initially founded to provide software

solutions, of which software outsourcing was a key service.

Following the steps of pioneering software ﬁrms in Vietnam at

that time such as TMA, Paragon solutions, FPT or Lac Viet,

Peacesoft entered the market of software outsourcing with

hopes that it could soon make big proﬁt by quickly grasping

advanced skills of computer programming and project man-

agement. Peacesoft began receiving small orders from some

local companies and then gradually sought big orders from

clients in Europe and Japan.

The ﬁrst 3 years of his start-up was really hard and his

target was to survive while keeping his eyes on emerging

To further promote e-commerce, VECITA decided that start-

ing from 2014, the ﬁrst Friday of December is the ‘national

online shopping day’. Similar to the United States’ ‘Black

Friday’, on this day, all e-commerce Websites in Vietnam will

offer big discount and free shipping for customers. In so

doing, the government believes that it would help strengthen

customers’ perception of online shopping, thereby enabling

the entire e-commerce industry to be in full swing by 2015.

However, the impressive development of e-commerce in

Vietnam was not without its ﬂaws. There are many Websites7

that had made frantic efforts to attract customers at the

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Figure 3 Vietnam’s ECP rate for the period of 2011–2016.

Source: Euromonitor.

Table 1 Vietnam B2C e-commerce sales in 2013 (VECITA, 2014)

Vietnam

population

2013

92 million

Internet users penetration

(percentage of population)

e-commerce sales per

online buyer 2013

$120

Online buyer penetration

(percentage of Internet users)

B2C e-commerce

sales (in billions)

$2.2

opportunities to do e-commerce. Things seemed not to go as

they had been planned. Peacesoft would still have been a ﬁrm

basically specializing in providing software solutions and

services if its founder had not been invited to join IDG –

ASEAN8 hi-tech investment workshop – one of the largest

annual events of its kind in Asia. At this workshop, each

start-up founder barely had 5 min to pitch to investors and

Mr. Nguyen did not waste the once-in-a-lifetime chance of his

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Table 2 B2C e-commerce sales forecasts 2015 (VECITA, 2014)

Vietnam

population 2015

Internet users penetration (percentage of

population) in 2015

e-commerce sales per

online buyer 2015

Online buyer B2C e-commerce sales

(in billions)penetration

(percentage of

Internet users)

Growth Rate

level

93 million

$150

High70

Medium 65

Low60

$4.3

$4.08

$3.7

Clothes, shoes & cosmetics

IT products (PCs, laptops, accessories..)

Kitchen & Home Appliances

Food

Books & Stationary

Movie & Music tickets

Tour & Hotel bookings

Music/Video/DVD/Game

Spa & Beauty services

Professional services (training…)

Air tickets

20%

19%

16%

12%

11%

10%

25%

35%

32%

62%

businesses, will do well and one day will be able to compete

equally overseas’ (See Figure 5).

Peacesoft’s ﬁrst strategic move: building a partnership with

eBay

In 2005, right after IDG Ventures investment, Peacesoft

ofﬁcially launched its ﬁrst online business called chodientu.vn

(aka ‘electronic marketplace’). Since then, chodientu.vn

has been one of the leading B2C2C sites in Vietnam. It was

built on an open and highly scalable platform. The site was

developed from scratch by Peacesoft’s technical team and was

integrated with technically sophisticated features of global

portals such as Yahoo or MSN. In explaining the meaning of

the site’s slogan, Peacesoft’s director of marketing, Ms. Dao

Lan Huong, joyfully described, ‘The site is truly aligned with

our company’s business strategy named E4, “Everything

Everywhere for Everybody Everytime” – which represents

comprehensive access and availability. We hope to make

online transactions simple so that visiting chodientu.vn is as

easy and commonplace as shopping at a brick-and-mortar

mall’. (See Figure 6) shows the market share of the top ﬁve

e-commerce sites in Vietnam in 2013.

Chodientu.vn was doing so well that it quickly grasped the

attention of big players from overseas (See Figure 7). Among

those household names is eBay Corporation. It was back in

June 2007 when eBay ofﬁcially began its business in Vietnam

by launching a new Website at ‘www.ebay.vn’, expecting to

connect Vietnamese customers to its global online shopping

market. Still, after almost 1 year, what eBay could do was just

simply enabling customers to access and purchase goods at

low prices. In fact, eBay failed in its mission to create an

online auction platform. Difﬁculties such as online payment

barriers and customer support11 that eBay encountered

hindered the realization of its ambition. Being unable to

look for a substantial customer base, eBay was almost

locked in a stalemate in the Vietnam market. To survive and

assert its brand, eBay was forced to choose a well-known

local partner.12 Despite being a new market entrant,

Peacesoft repeatedly afﬁrmed its position in the market by

attaining many achievements. Chodientu.vn received

hundreds of thousands of clicks per day and its founder,

CEO Nguyen, was nursing his ambition of retailing

beyond the domestic market. With such successes, Peacesoft

appeared on the ‘radar screen’ of eBay as the sole candidate

that may meet their expectations and demands. After

several rounds of negotiation in the United States and

10% 20% 30% 40% 50% 60% 70%

Figure 4 Popular products and services on e-commerce Websites (VECITA,

2014).

life to introduce his plan to do his e-commerce start-up.

He seemingly pitched without getting any positive result or

attention of the community of investors. What he felt at that

moment and later was that he had missed something in his

‘message’ or the way his message sent to the investors had

been ‘lost in translation’. Back to Vietnam, Mr. Nguyen wrote

an article published in Tuoitre.vn – one of Vietnam’s leading

newspapers – reﬂecting on his activities in this big event and

his dream on doing one of the ﬁrst IT-enabled enterprises in

the country. Right after the article had been published, IDG

Venture was hugely impressed with his ambitious plan and

break through ideas and this venture capital ﬁrm approached

him for an investment. The meeting between IDG Venture

and Peacesoft went smoothly, a deal9 was agreed and went

through. Peacesoft became the ﬁrst venturing company in

Vietnam to receive a million-dollar investment.10 Mr. Nguyen

shared with a big smile, ‘No money, no dream. This is the

turning point of my business – [It is] the rocket launcher for

Peacesoft and my team … Vietnamese companies cannot just

do outsourcing services. With talented, young, energetic

people in this country and this investment, we must think

and do something new, innovative. That’s my dream and also

my commitment’. He told his staff in a company’s annual

event, ‘Never ever see this investment as something taken-for-

granted! See this opportunity as a “make-or-break”! If we

cannot become bigger, more successful then we [will be]

kicked out of the game. Not only do we need to prove to the

foreign investors that our business would be worth every

dollar of their investment but we also need to demonstrate

that Vietnamese people and companies can still do hi-tech

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Choosing e-commerce strategies: Insights from eBay.vn partnership

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Figure 5 A snapshot of Peacesoft.

Source: http://bit.ly/1GdurZ5.

Figure 6 Top ﬁve marketplaces (in revenues) (VECITA, 2013).

Figure 7 Access rates (growth) of chodientu.vn August 2007–December 2008.

Source: Alexa, December 2008.

Vietnam, it was 17 June 2008 when the e-commerce giant

eBay ofﬁcially established a partnership with the ‘young man’

chodientu.vn.

CEO Nguyen was perhaps one of the very few members

of the management board who expressed his excitement

over this partnership. However, deciding to go with eBay did

raise the eyebrows of many shareholders. The big loss of

eBay13 in China just a few years ago seems to have obsessed

everyone so much as if it just happened yesterday. Why did

such a giant with in-depth knowledge, vast experience and

resources fail in its mission to do e-commerce in China?

Observers believed that eBay was not naïve and neither was its

partner EachNet.

In fact, it was not. At least from CEO Nguyen’s perspective.

CEO Nguyen spent a lot of time on traveling to meet and

talk with investors and entrepreneurs in Asia and the United

States to ﬁnd out what had gone wrong for the eBay–EachNet

partnership. Unlike others on the board, he was quite

optimistic about the partnership’s prospect of success in

Vietnam. He argued that, considering the administration and

leadership, this joint venture was primarily driven by Peace-

soft’s rich experience of the local context and Vietnam’s

unique characteristics. ‘They did not emphasize much at this

issue in eBay-EachNet partnership right from the beginning

and so, step by step, things went wrong. Big companies have

their [big] ego and small ones may not be well aware of that!’,

explained CEO Nguyen. Such a commitment and considera-

tion was reﬂected by the fact that in this partnership, with 20%

of stake, eBay would also act as a strategic consultant for

Peacesoft while Peacesoft would focus on upgrading its

infrastructure and working environment, investing in human

resource and R&D for products and services, and extending

the market. eBay.vn is a Website for online auction and

shopping while Peacesoft sees its chodientu.vn as a shopping-

oriented cross-border social network.

CEO Nguyen maintained that there are auctions, whereby

sellers can communicate directly with buyers via the partner-

ship ebay.chodientu.vn14 but ‘given the context of Vietnam,

we want to add some value-added elements consistent with

the shopping culture, style and preferences of the Vietnamese

people. With its in-depth understanding of the local market,

Peacesoft will select and implement best practices suitable for

this local market. Besides, the company will leverage the

international inﬂuence of foreign shareholders to steer the

Vietnam market to the world’s e-commerce’. Accordingly,

shopping is just part of the many activities that users could do

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Figure 8 Market share of auction Websites (in successful transactions value)

(VECITA, 2014).

when accessing chodientu.vn, such as making friends, seeking

people with the same interests and preferences, sharing

information about products and services, or shopping experi-

ences and tips.

In late 2013, among the top 10 online auction Websites in

Vietnam, eBay.vn came ﬁrst with 46% of the total successful

transactions value (see Figure 8).

Facing the tough challenges

On Day one, CEO Nguyen and his team were well aware of

some of the most challenging tasks that they must face and

address to be successful with e-commerce. These challenges

were in fact commonplace in many countries but even tougher

in an emerging economy like Vietnam. First, it is the

customers’ shopping preferences: they need to physically see

and touch the products and pay by cash. This is what people

got used to experiencing in the traditional commerce, but

CEO Nguyen believed that soon it would be changed as more

and more people bought products and services online and

e-commerce Websites would be more integrated with online

payment systems. Second, most Vietnamese customers did not

fully trust e-commerce. Their common perception was that

what they received was different from what was displayed

online. Third, Vietnam at that time15 did not have an efﬁcient

delivery system. CEO Nguyen argued that solving this third

problem was really hard but the outcome would be very

helpful to enhance customers’ trust in e-commerce.

Regarding the ﬁrst challenge – online payment system –

CEO Nguyen recalled his experience, ‘The ﬁrst thing to do

with e-commerce is perhaps building an effective transaction

or payment platform. As you know, the credit and online

banking growth at that time were very, very slow, under-

developed … though it is much better now … but many

reports [during 2005–2008] can tell that the number of cash-

on-delivery is still higher than 95% in all transactions. The

second issue is trust and awareness of e-commerce in Asia.

I think that the level of trust in Asia is much lower than that of

Western countries and America’.

But things were not easy at all for CEO Nguyen and his

team to tackle such challenges. He in fact had to argue several

times with some senior managers from eBay when discussing

what the options for online payment platform should be, ‘We

had a big debate on what options we could offer…I told them,

for example, if you bring the eBay platform to Vietnam,

Thailand, Brunei, The Philippines, or Indonesia, it will be

problematic for online payment. How would you pay online?

On eBay platform, the method of payment is via PayPal or

using credit cards. But as I mentioned previously, the credit

card penetration, for example here [in Vietnam], is quite low

[during 2005–2008], just around 3%.16 This fact is different

from the US where a large number of the population have

credit cards. So, this means [it’s] a big difference in method of

payment. In Vietnam and many countries in Asia, people

prefer Cash-on-Delivery (COD), about 95% [during 2005–

2008]. Because the buyers here ﬁnd it easy, convenient and

safe. They can only pay for the goods that are in good or

excellent condition. But guys from eBay [some of them are

strategic consultants with years of experience] coming here do

not really understand that [customers’ preference]. They just

want to simply replicate what they have been doing success-

fully in their countries, and so [as you see] they failed. We told

them, we live here, eat Vietnamese food, we know the

Vietnamese, the Southeast Asian culture. Give us a chance to

adopt our strategy’.

A senior strategic consultant of eBay responded, ‘You need

us as strategic consultants. We are here to help. With years of

experience, we can just bring the best to you. We failed in

China and so this time [with this partnership], we are quite

skeptical of any new solution. Clearly, you guys know this

market and customers. No doubt about that. But this is the

ﬁrst time you guys do e-commerce and you seem to be the ﬁrst

to offer online payment in this market, right?’.

In 2005, when Peacesoft launched its ﬁrst online business,

the e-commerce market was still a new concept for the

majority of customers in Vietnam. ‘The biggest obstacle is the

psychology and conﬁdence of the customers. Vietnamese

customers are not familiar with the online payment mode.

Nor do they have the understanding of shopping and secure

online transaction’, explained CEO Nguyen. The context was

even tougher! The global market was scared of conducting

online transactions with some countries in Asia because of the

risk of Internet fraud. In this case, ‘Doing a successful

partnership with eBay could be helpful! EBay – The brand

itself is an excellent testimonial for trust’, CEO Nguyen

commented.

On the one hand, Peacesoft needed the eBay brand in its

quest for e-commerce success. On the other hand, it had to

deal with eBay’s inquiries and convinced them to put faith in

their plans. ‘In some meetings, we had to explain a lot [for

eBay’s managers]. I mean, we had to ﬁnd out what was special

about eBay’s PayPal and why it could be a big failure for the

partnership [and also the Vietnam e-commerce market] if

they do not listen to us’, CEO Nguyen recalled. For the

majority of online payment systems in Western countries

(e.g., the United States/the United Kingdom/Canada), sellers

can get paid immediately but a buyer can open a case of

chargeback17 if there is a dispute. Because, for instance, the

United States has such a good credit-rating system and an

efﬁcient chargeback scheme, buyers don’t have to worry much

about online purchasing (e.g., product quality or receiving)

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while sellers get paid instantly and they can get chargeback

any time. Therefore, the PayPal model would not work

effectively in Vietnam where there is no adoption of charge-

back mechanism and a limited, ineffective credit-rating

system. Given the unique characteristics of the Vietnam

e-commerce, CEO Nguyen and his team suggested a transac-

tion model called Nganluong.vn that could help resolve the

identiﬁed problem. This is the ﬁrst online payment system in

Vietnam (see Figure 9). eBay’s consultants and CEO Nguyen’s

team reached a consensus that the model should be tested

carefully to get the community’s feedback before its roll-out.

Nganluong.vn was ofﬁcially launched in April 2009.

According to this model, a user can register either a

personal or business account that has three main functions:

deposit, withdrawal and payment. All transactions are con-

ducted online via domestic or international credit/debit cards

or bank accounts. CEO Nguyen explained that besides its

function as an online payment tool, nganluong.vn may also be

seen as a solution for small merchants and even the ‘ﬂea

market’ Websites to have a chance to do e-commerce.

Typically, businesses that want to adopt an instant payment

tool must connect to the bank. For small- and medium-sized

businesses, self-creating such a tool is very expensive,

time consuming and technically complicated. Thanks to

nganluong.vn, for those businesses, it would take from 5 min

to up to 4 h to connect to the bank, thereby helping them save

the cost and effort. Speciﬁcally, built on the operational model

of an e-wallet that connects directly to payment channels and

the most popular banks in Vietnam, nganluong.vn allows any

small- and medium-sized merchants to easily register an

account free of charge by using his or her e-mail address and

cell phone number.

To help prevent customers from Internet fraud, Peacesoft

adopted a mechanism called ‘holding payment’ in nganluong.

vn (see Figure 10). This is also a dominant mode of transac-

tion, under which a payment is suspended in the buyer’s

account and the seller can receive the fund only after the buyer

has received goods and approved the transaction (or after a

maximum of 7 days). However, buyers may also optionally

choose the other mode called ‘instant payment’ to transfer

money to those that they know well or sellers who attain ‘seller

guarantee’ issued by nganluong.vn. This option is, as CEO

Nguyen explained, ‘to take into account of the “fair trade”

raised by eBay’s consultants and you can see that we tried to

strike a balance between our model and theirs’. In addition,

the provisions on dealing with complaints and on securing

transaction as well as an automatic monitoring system for

online transaction were built to help ensure the fairness

between buyer and seller in case of disputes.

The success of nganluong.vn cannot be gained without the

relentless and strong support of the government for the

adoption of digital transaction infrastructure. In May 2014,

the prime minister signed an executive order for the ministry

of trade and industry to take essential steps toward enforcing

e-commerce merchants to incorporate online payment plat-

forms into their sites. Before that decree, in March 2011,

Vietnam’s Central Bank (VCB) decided to allow Peacesoft to

coordinate with commercial banks to provide intermediary

services for electronic payment nationwide. So nganluong.vn

became the ﬁrst and for a time the only licensed electronic

wallet exclusively serving the online payment in Vietnam (see

Figure 11). CEO Nguyen commented, ‘Until today [Dec 2014]

nganluong.vn website has 3 million users with more than

80,000 transactions per month. This number accounts for 50%

Figure 9 Online payment and transaction via nganluong.vn.

Source: Company presentation.

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Figure 10 How Nganluong.vn works.

Figure 11 Market share of online payment systems (VECITA, 2014).

of the marketshare of online payment [in Vietnam]. Over 200

websites such as viettelstore.vn,18 chodientu.vn, nguyenkim.

com,19 eBay.vn…accept payment via nganluong.vn. Now, this

nganluong.vn has established more direct links to banks than

any other payment platforms and has been voted by the

community as the most favorite online payment portal for

ﬁve years in a row’.

From the government’s perspective, Mr. Tien Quang Bui,

head of the Payment Department at VCB, highly appre-

ciated nganluong.vn’s business model, ‘Nganluong.vn has

proven its capabilities and fulﬁlled all the requirements of

the VCB by widely connecting with many banks and

ﬁnancial institutions such as Vietcombank, Techcombank

... or Visa/Master card. This is well aligned with the

government’s plan in the years ahead. The acknowledge-

ment of the e-commerce community proves that this ﬁrm is

on the right track’.

CEO Nguyen believed that Peacesoft could not just sit back

and rest on its laurels, ‘We want to succeed overseas. That

should be a real test of the capability of Peacesoft’. In April 2013,

MOL Access Portal20 (MOL), Asia’s leading e-payment service

provider, entered into a joint venture agreement with Peacesoft

to acquire a 50% stake in nganluong.vn. Accordingly, MOL and

Peacesoft would jointly operate Vietnam’s ﬁrst online payments

and escrow platforms together with other related e-payment

services in Vietnam. ‘This is an ideal cooperation as MOL can

bring its global network of merchants into Vietnam, while giving

the opportunity for Vietnamese merchants and publishers to sell

their products and content directly to 12 markets through

MOL’s growing payment network’, commented CEO Nguyen.

Concurring with CEO Nguyen, MOL Global’s Group CEO

added, ‘We have strong trust and belief that we will be able to

bring nganluong.vn to the next growth level with our global

experience and expertise in building, investing and operating

leading localized payment services worldwide. We are extre-

mely delighted to partner with Peacesoft in this strong growth

opportunity’. Such a strong commitment and assertion set a

ﬁrm foundation for Peacesoft’s CEO to start thinking about

expanding its e-commerce activities overseas.

Nganluong.vn’s development plan pursued the three-pillar

strategy, focusing on tapping three major online market

segments including payment for e-commerce, payment for

digital content services forecast to reach $1 billion revenue by

2015 by the Vietnam Software Association and payment via

mobiles – a segment that catches 300% growth each year

globally but is still unavailable in Vietnam.

The second and third challenges are building trust in

e-commerce and an efﬁcient shipping network. CEO Nguyen

was certain that there was a strong link between these two issues.

He believed that whatever the solution was, it should be capable

of addressing both issues and that a good way to begin was how

to improve the existing shipping network. His team then came

up with a model, ‘Shipchung.vn is a completely new concept,

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which you cannot ﬁnd in the US. It is a start-up service that can

help us to deliver goods to customers. Besides Nganluong.vn,

customers can pay by cash when receiving goods. Do you know

that shipchung.vn does not have any delivery staff?’.

CEO Nguyen was so proud of shipchung.vn, praising that it

was special and innovative. Indeed, in late 2014, the Interna-

tional Financial Corporation (IFC)21 did a full study of

shipchung.vn in an attempt to understand how Peacesoft

came up with this idea and to help diffuse this interesting

model and its practice within the community. ‘Not easy at all,

very tough! Unlike the US, Vietnam has up to 50 shipping

companies, each of which is just strong (effective) in some

certain provinces/areas so their coverage network is not that

wide and also their level of technology implementation [for

communicating with customers] was quite below the par.

Also, they prefer serving big merchants who sign the long-

term contracts with them so this means there is no or limited

chance for small merchants or sellers to do e-commerce’.

CEO Nguyen continued his analysis, ‘You know, more than

85% of businesses in Vietnam are small merchants. So, if we

cannot build this shipping system and network successfully,

our dream of doing e-commerce would be unrealistic. Clearly,

you know, they [small merchants] are the backbone of this

market. Without them, who else in this country could do

e-commerce and make proﬁt? So we decided to go ahead and

build a comprehensive system’.

Concurring with CEO Nguyen and his team, investors

pointed out the fact that in this market the majority of

merchants and sellers are small- and medium-sized enter-

prises (SMEs). They went further and challenged Peacesoft’s

capability of resolving this shipping problem. Their view was

that this should be considered a great chance of boosting

customers’ conﬁdence in e-commerce, ‘We would go ﬁrst and

we cannot fail in [this project]. This is how we build a bridge

connecting our business to the customers in the “real” world.

Offering on time, fast delivery service and ensuring that

customers will receive high quality goods are our objectives.

If we do well, we [will] have a good chance to hold a good

position in this market!’.

CEO Nguyen knew that he and his team had to face one of

the most challenging obstacles in their careers. The online

transaction platform was difﬁcult but it was something that he

and his team could handle. The shipping problem and its

infrastructure were even much tougher as they seemed to be

out of his team’s control, ‘The hardest thing is not just about

our suggested model but also about the country’s existing

infrastructure [how it was built and organized]. We must

adapt to this local context’.

Shipchung.vn, another key component of Peacesoft’s eco-

system, was launched with high expectation from both CEO

Nguyen’s team and shareholders. Speciﬁcally, the shipchung.

vn model was aligned with the company’s philosophy:

Centralizing the orders (by connecting with as many as

e-commerce sites as possible) and locating the best service (by

creating a pool of shipping companies). He went into detail, ‘So

what shipchung.vn does is to stay on top of all those [shipping

companies22]. We signed contract and had the Application

Programming Interface (API)23 integrated with all of them

(shipping ﬁrms). In fact we built the API integration for them.

So that means, shipchung.vn is the aggregator of all the

shipping services nationwide. And then, we open our API to

all e-commerce websites. So we allow all e-commerce websites

to do online registration, and they can integrate the shipping

API by themselves and we manage all the rest. So, whenever

someone buys something from an e-commerce website, this

website “calls” to shipchung.vn’s API and then shipchung.vn

will distribute those shopping orders to the best shipping

company in that region [where to send]’.

Shipchung.vn was ofﬁcially launched in September 2012.

CEO Nguyen believed that by running shipchung.vn well,

making it popular and ultimately ensuring that customers would

only pay for what they like are the keys to building trust. ‘You

cannot change customers’ perception [that e-commerce is

associated with fake or poor quality products] by just talking or

advertising. Rather, you need to do something practical in terms

of excellent service. For example, for shipchung.vn, when you

accept COD [Cash-on-delivery], the hesitation of buying [poor

quality products] is completely removed. But we understand

that shipchung.vn is just the beginning. More should be done to

boost customers’ conﬁdence!’.

Building an e-commerce strategy

All those challenges were, in CEO Nguyen’s words, not

separate but intertwined. He believed there should be a

comprehensive solution to address all challenges appropriately

and effectively. After several weeks of debate, he and his team

were unanimous in building a complete ‘ecosystem’: ‘In order

to conquer the domestic market and expand overseas, Peace-

soft must build a model deploying and connecting different

forces. We call it “ecosystem” ’. These forces include key

components such as eBay.vn, chodientu.vn, Nganluong.vn,

Shipchung.vn, Adnet.vn, Pro-eStore and supplemental ones

such as BoxMe.vn,24 MPOS.vn25 and manhthuongquan.vn.26

They all interact on a mutual basis, thereby altogether creating

‘an ecosystem’ to compete in the marketplace (see Figure 12).

This is not only the notion but the structure that shapes

strategic development and reﬂects the competitive character of

Peacesoft. CEO Nguyen believed that in this ecosystem the

interrelationship and mutual support in terms expertise and

experience are what other competitors rarely have. In the

center of the ecosystem is nganluong.vn that has a high

attribute of ‘openness-to-market’ thanks to the ‘merchant

service function’ to serve external Websites outside the

ecosystem. He asserted that within his ecosystem nganluong.

vn would be the component to likely have the most potential

to grow and succeed in the ecosystem in many years to come.

A summary of key components of the ecosystem is provided

in Table 3.

Prepare for a big move: doing e-commerce in Southeast Asia

Fast-forward 13 years, Peacesoft was already one of the leading

e-commerce players in Vietnam (See Figure 13). ‘Our mission

is incomplete yet. [It] has just gone half way’, recalled CEO

Nguyen. He meant that Peacesoft had a strategy, even right at

the beginning, to become one of Asia’s powerhouses in e-com-

merce someday, ‘Our vision of doing cross-border ecommerce

is clear. We only see ourselves a “successful player” if we can

compete well with others [internationally]. Achievements in

the domestic [market] will not automatically guarantee a

success overseas’. The company took step by step, attacking

the Southeast Asian region ﬁrst before expanding its market to

Australia, South Korea, Japan, Europe and the North America.

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Figure 12 The ecosystem of Peacesoft.

Source: Company presentation.

Still, the environment and condition seemed not to be

favorable for Peacesoft with its ambitious move. Within the

last quarter of 2013, there were a lot of news about how its

rivals were planning to do e-commerce not only in Vietnam

but in Southeast Asia as well. The huge success of Alibaba’s

IPO in New York in 2014 even intensiﬁed the heat of

competition in the region. Some urgent actions and smart

planning and moves needed to be deployed at Peacesoft.

In his ﬁrst responding to the news, two questions came across

CEO Nguyen’s mind: Shall we stay with our successfully proven

ecosystem and just simply scale it up to ‘ﬁt’ the scope and

demand of the Southeast Asian region? Or, is it wise to build a

completely new ecosystem from scratch just for this new market?

If CEO Nguyen and his team decided to scale up their

current ecosystem, it would arguably be problematic for doing

e-commerce in Southeast Asia. This is because, although one of

their key components, nganluong.vn, is strongly supported by

MOL – one of Asia’s biggest online transaction platforms – the

remaining components of the ecosystem were not initially built

for this market. An example is shipchung.vn, which was initially

designed to address the local unique context and condition.

There would be many tasks to be done to accommodate the

needs and coverage of the shipping network in a country like

Indonesia where the population is scattered among more than

3000 islands. If so, shall Peacesoft seek a local partner? What if

competitors come earlier than Peacesoft and quickly establish the

partnership with the best local partner?

Alternatively, if CEO Nguyen and his team decided to

design and build a completely new ecosystem for the South-

east Asian market, it would be an enormous challenge.

Obviously, this choice may put them behind their rivals in

the race of conquering the market shares (See Figure 14).

Considering the strong investment of some big e-commerce

rivals such as Rakuten, Alibaba, Amazon and Lazada, CEO

Nguyen once admitted that, ‘Peacesoft does not compete with

them [our rivals] using a single component. Rather, we

compete with our entire ecosystem. We already had sufﬁcient

time to build this [complete] ecosystem’. This comment

indirectly asserted that without standing on what they already

built, they themselves would remove their big advantage. More

importantly, building a new stable, sustainable ecosystem

would need substantial time, effort and funding.

Either way, the road ahead would be an uncertain one.

Learning objectives

This teaching case is designed to introduce the following

issues:

●

Consumer behaviors, shopping preferences and local culture

Business models and concepts in e-commerce

Barriers to e-commerce development: Building buyer–seller

trust and tackling disputes

Key issues of cross-border e-commerce: Ethical, cultural,

social and legal issues

e-commerce Infrastructure: Online payment and transac-

tion platform

e-commerce Infrastructure: Logistics and delivery in e-commerce

Pitching for a hi-tech start-up

Instructor may choose to focus on one or more of these

objectives, depending on the time allocated for the case and

students’ familiarity with the suggested concepts and issues.

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Table 3 Key components of Peacesoft’s ecosystem

Components

Chodientu.vn

(aka ‘electronic marketplace’)

eBay.vn

NganLuong.vn

Description

The pioneer and leading B2C2C domestic marketplace, in association with eBay.vn

The ﬁrst in Southeast Asia cross-border retail platform, enabling Vietnamese individuals and SMEs to

directly buy and sell in retail way with the world

The ﬁrst and largest online payment and escrow platform for e-commerce and digital contents. Among

few companies licensed by VCB, it is currently joining venture with MOL group and partnering with

PayPal for cross-border merchant acquisition

Since its ﬁrst launch in 2009, Nganluong.vn has been ﬁve times in a row awarded the ‘most favorite

online payment platform and service’ prize in Vietnam. Such a very high rating was earned because of its

high quality of services, network coverage and the number of transactions. In December 2014,

nganluong.vn connected to over 15,000 e-commerce sites selling goods and digital contents, 3 telecom

service providers and 24 banks and ﬁnancial service institutions in Vietnam

The ﬁrst and only shipping gateway that connects online merchants to shipping companies and offers

critical automated logistic functions for e-commerce sites including (i) shipping fee calculation, (ii)

auto-generated shipping order on purchase, (iii) cash-on-delivery service before settling payment into

seller’s Nganluong.vn e-wallet account

This one-stop online retail platform for SME rent out professional online stores instead of building and

hosting their B2C online sales Website. Store’s listings are synchronized with chodientu.vn for

immediate buyer exposure and higher chance of sales

Besides the inherent advantages of hiring online stands (in comparison with building and maintaining

Websites on their own), from a customer’s perspective, hiring Pro-eStore of Peacesoft (and thus

enjoying the reciprocal relationship with other components of this ﬁrm’s ecosystem) brings in

additional powerful advantages to compete effectively in the marketplace

CEO Nguyen explained, ‘Pro-Store is a component that has strong features, high ﬂexible capability, and

are integrated with tools to manage sales, web interface, e-marketing features, etc … Thanks to

nganluong.vn, ChoDienTu.vn, CDT-Sell (sales management), CBT-Buy (purchasing management),

pro-eStore is the only one in the market that is equipped with online payment function. Pro-eStore is

capable of enabling merchants to sell their products on chodientu.vn (thus instantly access the domestic

market) while, at the same time, sell their products on ebay.com (thus instantly access the US market),

and even import goods from overseas via eBay and Amazon for re-sale. Further, thanks to AdNet.vn,

Pro-eStore is the only one in the online market that is capable of shooting the adverts on thousands of

websites. With AdNet.vn, merchants now have an effective, ready-for-use advertising tool’

This is the ﬁrst open afﬁliate advertising platform, based on performance pricing structure, to match

thousands of advertisers to thousands of small- and medium-sized publishers with billions of daily

pageviews

CEO Nguyen clariﬁed, ‘Among the ﬁve components, AdNet.vn is the one that has the highest risk of

competition from others in the ﬁeld of digital content because of its great potential’. Still, he assured that

AdNet.vn would always have adverts from those hiring Pro-eStore, ‘Our customers will get discounted

prices when they advertise their products on websites belonging to our ecosystem’

ShipChung.vn

Pro-eStore

AdNet.vn

Learning outcomes

Upon reading and analyzing the case, students are expected to:

1. Explain concepts and components of a business model

adopted in e-commerce.

2. Discuss different approaches or solutions to build a busi-

ness model in e-commerce.

3. Discuss strategies to build buyer–seller trust in cross-

border e-commerce.

4. Describe e-commerce payment systems.

5. Discuss strategies to build a shipping and delivery network

in e-commerce.

6. Discuss cultural, legal and ethical issues related to cross-

border e-commerce.

7. Understand the strategy to pitch successfully for a hi-tech

start-up.