[Ho Chi Minh City] FLYING to Ho Chi Minh City in southern Vietnam from the northern capital Hanoi takes more than 2 hours -- longer than the trip from Singapore. With 3,260 km of coastline, the South-east Asian country is vast and diverse. As startup adviser Nguyen Phi Van said with a laugh: "I think Vietnam has 3 countries in one."
The hubs in the north and south are themselves very different; then there is the "third country" of central Vietnam, said Nguyen, who chairs the Vietnamese government-backed Saigon Innovation Hub (SIHUB).
Speaking to Singapore reporters over tea in the central district of Ho Chi Minh City, she said: "You have the big cities like Hanoi, Da Nang and Ho Chi Minh City. Those are, you can consider, probably on par with Singapore in terms of understanding the market or consumer behaviour.
"But outside of these big cities are the smaller satellite cities, or tier 2 cities; you can't expect them to be like Singapore and Ho Chi Minh City."
This, she said, is a crucial point that businesses must understand if they hope to break into the Vietnam market.
"A lot of startup founders are subjective when it comes to market expansion and think, 'My solution works for this market, and it's next to Vietnam, therefore it should work for Vietnam'," Nguyen said. "It doesn't work that way, and I've seen so many failures in that area just because of that."
She gave the example of a Singapore edutech startup that recently approached her for advice. The startup hopes to connect learners and tutors through its digital platform, but Nguyen pointed out that only 30 per cent of Vietnam is urban, with the rest being rural.
Many children -- and even parents -- in rural areas are not well-versed in digital technology. "So you'll have to rejig it to make it an O2O (online-to-offline) model, so that it's partly offline, partly online," she noted.
"Maybe there should be a grocery store that does all the registration for you, so you go there and you get them to register, then you sell the sessions and show them how to get online, for example," she added. "That would probably work for Vietnam."
Industry players emphasised the importance of developing a deep understanding of one's target audience and developing a customised solution.
Tee Mei Yi, co-founder of solar inspection firm AVA Asia, said many tech solutions in Singapore and the West aim to have technology replace labour, because of manpower shortages and high labour costs. But in Vietnam, workers are abundant and labour costs are low.
"So in this market, the kind of value... that you create, say for a technology company, is very critical because it really has to be providing a value that even hiring 10,000 people or 5,000 people cannot meet. And then you'll have a demand," Tee said, adding that it took time for the company to pivot its solution for the Vietnam market, which now accounts for more than half its revenue.
Competition can also be more intense in Vietnam, with companies from all over the world hoping to gain a share of the market. So beyond the benefits of their own offerings, companies pitching to potential clients or partners must understand what truly matters most to the decision makers, said Amy Wee, country head of the Singapore Business Federation's Singapore Enterprise Centre in Ho Chi Minh City.
"So what matters most to them is literally: 'How can each of us benefit from working with you?'," she noted.
Companies used to a more structured and predictable way of doing business, such as in Singapore, are in for a culture shock, added industry watchers.
Wee said Singapore companies often come to her with "very basic" challenges such as wondering why their Vietnamese counterpart did not reply to emails or whether they were on the same page, even if they spoke fluent English.
"There's a business culture difference, so we have to actually understand the nuances in order to be ready, be prepared to cultivate certain relationships that are really very much needed on the ground," she shared.
One of the most important things Singaporeans need to learn about Vietnam is the latter's strong emphasis on people-to-people relationships, said Wee, who became clued in to the intricacies of Vietnamese culture after spending 12 years in Hanoi.
Ng Chee Chiu, project director and founder of web solutions agency Websparks, expects to have to do much more cold-calling and proactive pitching to find clients in Vietnam.
The company has about 30 back-office staff -- mostly developers and designers -- in Ho Chi Minh City who have been servicing its Singapore operations for the last 5 years. Ng now hopes to expand his scope to serve Vietnamese clients, given the industry's current emphasis on digital transformation.
"Here, there's no GeBIZ," said Ng, referring to the Singapore government's procurement portal where businesses can bid for projects. "We actually need to do a lot of groundwork to assess the needs of the customers. It's more about long-term relationship building."
Invariably, what helps is having a reliable local partner to assist with local laws, customs and market insights.
For Singapore-headquartered YCH Group, what worked was setting up a joint venture, YCH Protrade, with Vietnam's state-backed Protrade Corporation 13 years ago.
Protrade, which has a 30 per cent stake, was integral in helping the company navigate legal regulations and licences in its early years; its familiarity and networks with local authorities continue to be critical, YCH Protrade's country general manager Nguyen Nguyen Hai told The Business Times at the company's Binh Duong office.
Having started with a 7-hectare plot in Binh Duong, YCH Protrade now manages 100,000 square metres of warehouse space across 10 locations, with 700 employees.
But the journey was not an easy one, Nguyen said. When YCH Protrade was starting out, many firms in Vietnam tended to manage their supply chain in-house rather than leaving it to a third-party logistics provider.
The company started small but showed customers how it could improve operational efficiency through the use of technology. These days, more customers are using YCH Protrade's end-to-end service: importing raw materials, bringing them to the production line, moving finished products to distribution centres, then delivering them to end-consumers.
The company counts several foreign multinationals among its clients, such as beverage joint venture Suntory Pepsico, French spirits group Pernod Ricard and Korean cosmetics giant Amorepacific.
"Any company that comes in needs to have the right people and right partner to be successful," added Nguyen.
Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.