Burgeoning postal market raises concerns over unhealthy competition

The postal service revenue has experienced average growth of over 20 percent between 2019 and 2023, which has led to fierce competition on the market, raising concerns about the emergence of unhealthy competition.

Vietnam Post's automatic parcel sorting system. (Photo: nhandan.vn)

The peak period of the Covid-19 pandemic accelerated the rapid growth of online shopping activities, primarily through e-commerce platforms, helping it become a habitual and frequent necessity for consumers.

As a result, the postal market witnessed significant value growth, soaring from VND28.3 trillion (US$1.15 billion ) in 2019 to nearly VND59 trillion in 2023. Also in the period, the number of parcels delivered by postal companies leapt to 2.5 billion from 715 million. In 2023, approximately 1.8 billion parcels from e-commerce were counted, accounting for some 75 percentof the total amount.

In tandem with the swift expansion of e-commerce, since 2020, many e-commerce platforms have followed a trend of developing their own integrated ecosystems, including postal services for delivery.

Postal enterprises affiliated with e-commerce platforms experienced rapid growth, with many entering the top 10 firms having the largest market share of volume within 2-3 years of operations. Currently, the top 10 postal firms with the largest market shares are also engaged in transporting goods for e-commerce platforms.

According to Nguyen Truong Giang, Chairman of the Vietnam Post Association, domestic postal enterprises are facing a wave of franchising and indirect investment to expand into the postal sector by e-commerce platforms and cross-border delivery companies.

Foreign-invested enterprises are continuously expanding their investment capital sources, reducing transport costs, and increasing discounts and promotions to compete for market share. While the short-term effectiveness of price competition cannot be denied, in the long run, this may lead to negative repercussions for the discounters, other enterprises in the same industry, and the Vietnamese postal market as a whole.

To ensure healthy competition, La Hoang Trung, Director of the Department of Posts under the Ministry of Information and Communications, suggested that amendments should be made to the postal law, focusing on supplementing content regarding conditions for postal operation licensing as well as regulations specific to dominant enterprises and business groups in the market.

The government needs to regulate competition by establishing a legal basis from the highest legal documents, thereby issuing sanction regulations punishing enterprises for violations related to tariffs, promotions, and competition.

Moreover, it is essential to add conditions to ensure the safety of information and data of postal service users, he noted.

According to the official, the ministry will enhance supervision and inspection of compliance with regulations on tariffs and quality, then publicise the results of the 20 largest postal enterprises in the near future. Additionally, the body will rigorously handle and revoke the licences of firms that repeatedly violate regulations or misuse postal licences.

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