Logistics news

Distribution Network Allocation: Reducing Urban Pressure – Promoting the Development of E-commerce in Vietnam

Logistics Network Allocation: Reducing Urban Pressure – Driving E-commerce Growth in Vietnam

Logistics costs currently account for 16-20% of Vietnam's GDP, which is significantly higher than the global average of 10-12%. This makes the expansion and decentralization of logistics networks into potential provinces a necessary trend for sustainable development.

In the past five years, Vietnam's e-commerce sector has recorded an impressive average growth rate of over 20% per year, placing Vietnam among the top 5 fastest-growing e-commerce markets globally (according to Google, Temasek, and Bain & Company, 2024). However, behind this remarkable growth lies a "puzzle" that the logistics sector must solve: how to reduce pressure on large cities while optimizing operational costs for sustainable e-commerce growth.

From Urban Overload to Network Allocation Demand

Currently, Hanoi and Ho Chi Minh City remain the two largest logistics hubs in the country, concentrating most e-commerce distribution and delivery activities. However, infrastructure pressures, traffic congestion, high land costs, and rapidly increasing consumer demand are pushing these cities to their limits. With logistics costs accounting for 16-20% of GDP (well above the global average of 10-12%), expanding and dispersing logistics networks into high-potential provinces is an inevitable trend. Moreover, it's essential not to concentrate all logistics operations in two major cities. Regional infrastructure, domestic customs procedures, and local business linkages must also be improved to allow e-commerce to truly thrive.

The Clearer Picture of Logistics Shift

Reports from Metric show that in Q1 2025, several provinces such as Bac Ninh, Hai Phong, Binh Duong, Dong Nai, and Da Nang recorded strong warehouse turnover and output growth, surpassing the national average growth rate compared to the same period in 2024.

This is a significant indicator of the shift of logistics activities to satellite regions, reducing pressure on Hanoi and Ho Chi Minh City, and shortening delivery times in these provinces.

Developing local warehouses not only serves domestic consumption but also opens up opportunities for cross-border e-commerce exports, especially with the continued effectiveness of free trade agreements (FTAs) like RCEP, EVFTA, and CPTPP.

Government Support, Business Breakthroughs

The Department of E-commerce and Digital Economy (Ministry of Industry and Trade) is currently collaborating with major e-commerce platforms like Shopee, Lazada, Tiki, and Sendo, along with local governments, to encourage businesses to expand their warehousing networks. Additionally, the Ministry of Industry and Trade is developing a plan to “Develop a Regional E-commerce Logistics System by 2030,” focusing on:

• Investing in logistics infrastructure in high-potential areas.
• Planning land for satellite logistics hubs.
• Simplifying administrative procedures to facilitate business operations.
• Encouraging the adoption of advanced technologies, such as warehouse automation, electric vehicles, and digital supply chain management platforms.

Great Opportunities for Local Businesses

For local businesses, the trend of redistributing logistics networks presents a new opportunity to engage deeply in the e-commerce supply chain. Small and medium-sized enterprises can become logistics partners, handling local transportation, which will help improve their competitiveness and create new job opportunities.

Rural and mountainous areas, which were previously underdeveloped on the e-commerce map, now represent a potential market if logistics infrastructure is improved. When consumers in these regions receive faster, more convenient services, purchasing power will undoubtedly increase, driving the growth of agricultural products, local goods, handicrafts, and essential consumer goods.

Logistics: The Key Enabler of Vietnam's E-commerce Growth

The decentralization of logistics not only helps Vietnam's e-commerce reduce costs and improve operational efficiency but also provides a significant boost to the digital economy. If implemented effectively, this will lay the foundation for Vietnam to become a central hub for e-commerce and logistics in the ASEAN region in the near future. This shift is a crucial step in allowing e-commerce to reach deeper into non-urban areas, reduce pressure on major cities, and enhance national competitiveness.