The recent developments concerning two major e-commerce players, Temu and Shein, in Vietnam have brought to light deeper issues regarding regulatory practices and market dynamicsBoth companies, albeit at different stages in their operational tenure, have faced significant setbacks due to non-compliance with local lawsThis situation not only underscores the challenges foreign businesses encounter when entering Southeast Asian markets but also reflects a broader shift in Vietnam's approach to e-commerce regulation.

Vietnam's move to halt Temu and Shein’s operations stems from adherence to the e-commerce law established back in 2013, mandating that foreign platforms register with the Ministry of Industry and TradeTemu, having launched its services only recently, quickly found itself in a turbulent environment after generating a buzz through its entry into the marketTheir proactive marketing efforts, coupled with a sudden halt to operations, indicate the precarious balance that new entrants must maintain while navigating compliance.

By mid-November, many Temu users began receiving notifications about delays in their package deliveries, leading to frustration among customers who had already placed their orders weeks prior

Comments from unhappy customers filled social media platforms, expressing their irritation at not being able to receive orders they were excited aboutThis backlash illustrates how essential timely delivery and clear communication are in the e-commerce sector, as unhappy customers increasingly turn to social media to voice their dissatisfaction.

What makes the situation even more compelling is the manner in which such delays unfold—while customers were informed of their packages being stuck, many opted to cancel their orders, not realizing that refunds would merely return to the Temu wallet rather than their bank accountsThese complications in refund processes can create further friction with consumers, which is a harsh reality for brands that rely heavily on customer satisfaction for repeat business.

The timeline of events for both Temu and Shein reflects a synchronized struggle against the backdrop of a changing regulatory framework

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Shein, which has been entrenched in the Vietnamese market since 2022, faced a similar fate as the government’s patience dwindled regarding compliance issuesRegulatory bodies in Vietnam made it clear that foreign firms must adhere to stringent operational guidelines, and November 30 served as a hard deadline for complianceWith both companies now in the limbo of waiting for regulatory approval, the future remains uncertain.

On December 5, the situation escalated further as Temu’s Vietnamese language option was removed from their site, limiting usability to English, Chinese, or FrenchThis move not only hampered accessibility for many users but also sent a grim signal regarding their operations in the nationClients and potential customers were left speculating about whether Temu’s withdrawal indicated a permanent departure or a temporary pause until regulatory issues were resolved

In this complex milieu, the potential implications on market share and brand loyalty are dire for both companies.

With Shein following suit in temporarily halting its operations within Vietnam, the impact on the burgeoning e-commerce landscape became glaringly evidentAs economic activities adapt to new regulations, the Vietnamese government has responded to the influx of affordable imports, particularly those from ChinaExperts have raised flags regarding the impact of Chinese products on local businesses, highlighting the need for a balanced approach to foreign investment and competitionThe concerns have led to calls for a tightening of customs regulations and the elimination of previous tax breaks for low-value imports, which historically benefited consumers but undermined local suppliers.

Taxation of cross-border e-commerce, particularly small parcels, represents a significant shift in the Vietnamese government’s strategy

Initiated in the face of concerns over the increasing volume of e-commerce transactions escaping regulatory oversight, new proposals reflected a desire to protect local industries while generating revenuePrior to this, a tax exemption for low-value shipments had permitted easy entry for countless international goods, fostering a culture of bargain hunting that benefitted consumers at the expense of local producersAs of November 2023, discussions on eliminating these tax exemptions began to gain traction among policymakers.

Countries in the region, including Malaysia, Singapore, and Thailand, have all re-evaluated their stances on low-value imports and imposed taxes accordingly—moves that have highlighted an escalating trend towards trade protectionismThe intention is clear: to generate revenue while fostering local enterprises, a dual aim that carries both a potential economic boost and logistical complications for e-commerce platforms

If smaller enterprises and brands wish to thrive, they must adapt by innovating their supply chains and manufacturing capabilities, potentially setting up local operations to better align with regulatory requirements.

The broader implications for Chinese cross-border merchants are also significant, as brands are now called upon to shift from merely selling products to establishing comprehensive supply chainsThis leap from product export to supply chain development is essential for achieving success in international marketsBuilding a presence in Vietnam, along with other Southeast Asian countries, may involve increasing local partnerships and investments to foster a sustainable business environment, allowing foreign firms to respond adeptly to the shifting landscape.

In essence, the pauses in operations for Temu and Shein signal a pivotal moment not only for the companies involved but for the entire e-commerce ecosystem in Vietnam