Online retailers face challenges due to increasing fees

Online retailers face challenges due to increasing fees

Online retailers in Việt Nam are facing challenges, with many of them either halting online sales or raising retail prices in response to e-commerce platforms announcing fee increases starting from April.

Delivering online orders to customers in HCM City. Many retailers are facing difficulties after e-commerce platforms announced they will increase fees from April. — VNS Photo Thu Ngân

Online retailers in Việt Nam are facing challenges, with many of them either halting online sales or raising retail prices in response to e-commerce platforms announcing fee increases starting from April. 

Lê Hương, the owner of a baby clothing brand in Hà Nội, has been engaged in online trading for years across various e-commerce platforms in Việt Nam. 

She candidly acknowledged that an economic downturn, combined with the new fee rates imposed by e-commerce platforms, has made the situation difficult.

In her conversation with Việt Nam News, Hương revealed that after the increase is applied from April 1, fees paid to e-commerce platforms account for over 30 per cent of product costs. 

To avoid losses, Hương is contemplating raising prices. While her company strives to maintain stable pricing for existing products, she may adjust pricing for new ones to ensure profitability.

Many other retailers find themselves in a similar predicament. 

Nguyễn Thành Tiến, a fashion business owner in HCM City with years of experience on e-commerce platforms, disclosed to tuoitre.vn that in the initial phase of the platforms' launch in Việt Nam, he could make a decent profit by marking up the cost price by only 1.5 times. However, he now faces the prospect of doubling the cost price and still failing to earn any profit. Consequently, in order to maintain profitability, Tiến has had to increase the markup to between 2.5 and 3 times.

Similarly, Kiều Thanh, specialising in the sale of office supplies on an e-commerce platform in HCM City, estimates that setting selling prices at VNĐ49,000 - 50,000 (US$2) for items with a cost of VNĐ25,000 ($1) involves significant risks and potential losses. 

In addition to the 20 per cent platform fees, additional costs such as electricity, water, Internet, packaging, and personnel wages need to be accounted for. 

Furthermore, handling return shipping fees in cases of unsuccessful deliveries or unfulfilled orders places an additional strain on costs. Advertising expenses, commission payments to affiliate marketers, and other operational costs further add to the financial burden.

Increasing fees for service upgrades

Recently, two major e-commerce platforms, Shopee and TikTok Shop, announced adjustments to certain fees starting from April 1. Furthermore, Lazada raised its commission rates at the beginning of February. According to estimates by the e-commerce data analysis company Metric, nearly half a million shops will be impacted.

While TikTok declined to respond to interview requests, it explained that the fee increase is aimed at enhancing the platform's quality and service, and it was also done in previous years.

In an interview with Việt Nam News, Shopee stated that its revised fee structure aims to improve service quality and enhance the overall user experience based on thorough market analysis and seller feedback, ensuring a balanced and sustainable marketplace.

In early March, Shopee introduced a simplified commission fee structure for non-Shopee mall sellers as part of a policy update. 

This change aims to provide a more transparent and predictable cost structure for our sellers. 

Delivering online orders to customers in HCM City. Many retailers are facing difficulties after e-commerce platforms announced they will increase fees from April. — VNS Photo Thu Ngân

Accordingly, effective April 1, 2025, the commission fee will include the shipping service fee. To enhance buyer experience and boost sales for sellers, the company will launch a platform-wide shipping fee promotion. This includes offering free shipping vouchers worth up to VNĐ500,000 ($20) to all sellers.

Before April 1, 2025, more than 90 per cent of orders sold on Shopee were applied with a free shipping voucher at checkout. Internal data indicates that sellers participating in Freeship Xtra can experience a 2 to 5 times increase in revenue, along with a significant rise in order volume.

Additionally, over two-thirds of Shopee sellers have enrolled in the Freeship Xtra programme, which carries a service fee of up to 6 per cent, capped at VNĐ50,000 ($2) per product based on its selling price. As a result, after April 1, 2025, the majority of sellers will see either a minimal increase in fixed fees or no change at all.

By incorporating the shipping service fee into the commission fee, the company said it can offer free shipping on all transactions, creating a more seamless, convenient, and cost-effective shopping experience for buyers. 

This revised fee structure is balanced by the expanded free shipping programme, ensuring that most sellers will not experience significant changes to their overall costs, Shopee confirmed. 

Bizhub