Why are Vietnamese startups not focusing on the domestic market?

The fact that Vietnamese startups are not paying sufficient attention to the domestic market—a potential source of a strong customer base and diverse demand that can propel sustainable business growth—has become a noteworthy issue in the current socio-economic development context.

As someone who frequently works with Vietnamese startups, economist Pham Chi Lan, a judge for the "Green Startup 2024" competition, remarked, "Competing in the domestic market is now even harder than competing internationally."

According to Ms. Lan's observations, early-stage founders often face issues such as prioritizing export markets over domestic ones, assuming that global political movements have no impact on them, approaching financial planning with a narrow perspective, and showing reluctance to collaborate with other startups and businesses.

Why don’t Vietnamese startups prioritize the domestic market?

While the Vietnamese market holds great potential, it also presents numerous challenges, including intense competition, diverse consumer habits, and rapidly changing market trends. Some startups may find it difficult to convince local consumers to adopt new products.

One key reason is the lack of sufficient investment in domestic market research, leading to a limited understanding of Vietnamese consumers' needs and preferences. This hampers product development and reduces their ability to meet local market demands.

Moreover, most Vietnamese startups face significant pressure to achieve rapid growth to attract investment. As a result, they tend to target markets with higher growth potential, often abroad, rather than focusing on the domestic market.

The domestic market’s untapped potential

While challenging, the domestic market offers considerable opportunities, particularly in sectors like e-commerce, information technology, and financial services. Successfully tapping into the domestic market can enable startups to grow sustainably and build strong brands.

Currently, Vietnam boasts 1,241 supermarkets and 254 shopping centers. Over 10 international distributors from Europe and Asia, including Lotte, Central Group, TCC Group, Aeon, Circle K, KMart, Auchan, and Family Mart, have invested in establishing operations in Vietnam.

Across the country, over 100 fixed sales points under the brand “Proud of Vietnamese Goods” have been established in 61 provinces and cities. Traditional markets, with 8,517 markets (including 61 wholesale markets) and nearly 1.4 million grocery stores, continue to operate. The traditional retail channel has undergone significant changes, incorporating electronic payments and combining online and offline sales. It has embraced modern trends in product display, introduction, and consumer feedback, connecting customers directly with manufacturers.

“Globally, there are few economies as open as Vietnam, where exports dominate the economy. As a result, competition in the Vietnamese market is as intense as in global markets—sometimes even more so,” shared economist Pham Chi Lan at the “Green Startup 2024” competition.

The expert further emphasized, “Only when the competitiveness of domestic enterprises strengthens—allowing them to capture significant market share and thrive on their home turf—can the nation's internal strength truly grow.” She advised against viewing businesses in the same sector purely as competitors; instead, they should be seen as partners who can double strengths and synergize to rise above challenges. Collaboration doesn’t necessarily have to be with businesses in the same industry; cross-industry partnerships are also viable. For resource-constrained startups, collaboration is not just a smart strategy but also a valuable one.

To address this situation, Vietnamese startups need to reevaluate their business strategies and find ways to balance product development for the domestic market with international expansion. This approach will help optimize success and ensure sustainable growth.

The domestic market not only stimulates goods production, enhances knowledge, and contributes to internal economic accumulation but also provides a solid foundation for expanding external economic relations.

Hiểu Châu