Given its strong e-commerce growth, an Airbnb warehousing model is likely to flourish in Vietnam soon, experts predict.
The relentless rise of same-day delivery has put merchants on the hunt for warehouse spaces close to their urban customer base, and Vietnam is no stranger to this phenomenon.
A new report by the U.S.-based Jones Lang LaSalle (JLL), a global real estate services firm specializing in commercial property and investment management, predicts the Airbnb logistics model will soon develop strong roots in Vietnam.
The firm, which has offices in Vietnam, notes that strong demand has made industrial real estate increasingly hard to find, and even when space is available. "It’s typically not found in the city center, but instead in sprawling sheds the size of football fields in the suburbs.”
Over the past 20 years, Vietnam has established itself as one of the brightest manufacturing hotspots in Southeast Asia, the report notes.
In 1986, just 335 hectares of land was dedicated to industrial parks compared to 80,000 hectares today.
Another U.S.-based real estate firm, CBRE, had said in April that the demand for warehouse space in Vietnam will keep growing thanks to the fast growth of the manufacturing sector. It also said warehousing rentals will rise 1.5-4 percent each year.
More smaller locations
“Because customers today demand such fast delivery when they order online, companies need more smaller locations rather than fewer larger locations,” said Rich Thompson, who leads the global Supply Chain & Logistics Solutions team at JLL.
“The Airbnb model for industrial warehousing space allows companies to be nimble enough to respond to seasonal changes and compete in the age of e-commerce,” he said.
Airbnb is a privately held global company headquartered in the U.S. that operates an online marketplace and hospitality service accessed via its websites and mobile apps. The company’s residential service started to boom in Vietnam in 2010 and has even become a threat for hotels in big cities.
Ken Atkinson, chairman of global consulting firm Grant Thornton and vice chairman of the Vietnam Tourism Advisory Board, said that as of June last year, up to 6,500 hosts had joined Airbnb to provide accommodation services in Vietnam.
The JLL report says that a similar, flexible approach to warehousing could be very successful in the Vietnamese market providing solutions to a number of existing problems in the industrial sector.
Stephen Wyatt, country head of JLL Vietnam said: “It is only a matter of time before we see a flexible approach to leasing warehouse space.”
He said that strong demand from the ecommerce sector in particular required smaller and flexible warehouse facilities “for the fastest ‘last mile’ delivery.”
Ecommerce revenues in Vietnam are estimated at $2.3 billion by Germany's Statista Market Research Co., up from $1.75 billion in 2017 and $1.4 billion in 2016.
The number of ecommerce customers is expected to rise to 52.3 million by 2020 from 49.8 million this year and 48.5 million last year. Vietnam’s current population is over 95 million.
In an April report, the Financial Times said Vietnam’s e-commerce industry is facing challenges due to poor logistics and consumer price sensitivity.
“The challenge for commerce in Southeast Asia in general, and Vietnam in particular, is logistics,” said Vu Duc Thinh, country manager for the logistics arm of Lazada, a Singapore-based e-commerce company which also operates in Vietnam.
Vietnam’s logistics costs accounted for 20.9 percent of gross domestic product (GDP) in 2016, according to the World Bank, which said this was higher than regional peers China, Thailand and Japan.
Inflated logistics costs are putting a strain on local businesses and need to be cut in order to make firms more competitive, Prime Minister Nguyen Xuan Phuc had said at a conference earlier this year.
The reason for this is the cost of transporting goods via land, Phuc said.
In Vietnam, transportation via land accounts for 59 percent of all logistics costs, 9.7 times that of water and 2.5 times that of train, Deputy Transport Minister Nguyen Van Cong said at the same conference.
Insufficient infrastructure development is to blame for the disparity, experts said, with rail links lacking connections to storage depots, and waterway transport taking 3-5 times longer than by land.