Viettel Post, the post and delivery services arm of Vietnam’s largest telco Viettel Group, officially threw its hat into the ride-hailing ring with the launch of its MyGo car and bike-hailing and delivery services.

Tran Trung Hung, CEO of Viettel Post, thinks it is not too late for the firm to enter the market, which is witnessing fierce competition between deep-pocketed regional players Grab and GOJEK and local companies.

“This market depends a lot on the economic growth story. What has changed user behaviour is a combination of economic growth and products available in the market… [A]s the economy continues to grow, there will still be a lot of opportunities for us,” Hung explained.

MyGo, he said, has chosen to operate very differently from its existing rivals, which are investing heavily in marketing and discounts.

The current ride-hailing companies “cannot offer promotions forever”, he added.

“The ultimate goal of a business, especially for overseas companies, is profit. They can give away some benefits to customers now, but in the end, they will have to find ways to make a profit.”

Unlike rivals Grab, GOJEK and local player BE Group, MyGo claims to have a path to profitability in sight. Hung said he expects MyGo to become profitable in 2021.

“As a state-owned company, our mission is to contribute to society’s welfare, so we aim not to make losses. We have a very large scale of business that will help us secure that plan. Thanks to the economies of scale, we can share the cost with users and calculate the price in a way that it is cheap yet would not make our profit negative.”

Edited excerpts:

The ride-hailing market seems to be very competitive already. Why is Viettel Post joining this market?

The technology behind MyGo is developed entirely by Vietnamese engineers employed by Viettel Post. We want to build a Vietnamese product to serve the needs of the Vietnamese people. In addition, this service is a necessity for Viettel’s clients and customers as well as Vietnamese consumers. They need a new, faster and convenient way of transportation and delivery.

Ride-hailing and delivery is a big potential market not only in major cities but also in lower-tier cities that other players have not been present in. Our customer base is nationwide, and we aim to provide this service to even people in small provinces and rural areas. It will complete our ecosystem.

While the market has foreign companies like Grab, GOJEK and some other early movers, it has not been settled yet. This market depends a lot on the economic growth story. What has changed user behaviour is a combination of economic growth and products available in the market. With the growth in wealth and living standard, Vietnamese are opting for more convenient transportation methods. Drivers are earning higher income as a result of a lot more people choosing to ride with these new services. That is, in turn, a result of increasing prosperity. So as the economy continues to grow, there will still be a lot of opportunities for us.

How do you see the competition with your deep-pocketed rivals that continue to incur heavy losses? 

Ride-hailing can be seen as a ruthless market in terms of acquiring users through marketing and promotions. I think the losses of these companies are caused by huge marketing costs, but not all of the costs are targeted directly at customers (i.e. not all of the costs are discounts). Part of them are paid for advertising, and this part does not have any direct benefits for customers.

Also, they cannot offer promotions forever. The ultimate goal of a business, especially for overseas companies, is profit. They can give away some benefits to customers now, but in the end, they will have to find ways to make profits.

Meanwhile, only Vietnamese businesses will use their profits to re-invest in the country. So we want Vietnamese SMEs to join our platform to create more benefits for the people.

For Viettel Post, we will do marketing differently and will not waste so much money on it. We will not join the cash-burning promotion game. Instead, we will try to create long-term benefits for partners and customers. For example, we promise not to hike prices during rush hours, and that is not temporary. We aim to support our driver partners to be equipped with basic sales skills instead of only earning some extra money. This strategy will not see us grow as fast as other companies do, but we believe we will be more sustainable.

How much have you invested or plan to invest in MyGo? What are the targets for 2019?

In the remaining six months of 2019, we will focus on increasing customer experience and have not set targets in terms of investment, revenue and profit as of now, because we will need to examine how much we will need to invest in meeting the customer demand. After 2019, we will have clearer plans.

As a state-owned company, our mission is to contribute to society’s welfare, so we aim not to make losses. We have a very large scale of business that will help us secure that plan. Thanks to the economies of scale, we can share the cost with users and calculate the price in a way that it is cheap yet would not affect our profits.

We expect to reach the breakeven point in the first couple of years of operations and hope to become profitable by 2021.

Please take us through the advantages that MyGo has. There are opinions that MyGo will enjoy great advantages from Viettel Group’s existing database. What’s your take?

Viettel Post will not bear the costs of educating the market, because people are already used to online ride-hailing. That is actually an advantage for latecomers. Meanwhile, we have the advantage of being a top post services company in the country. We have seen exponential growth in delivery, which is a great deal to doing ride-hailing. Other than only deploying services within Viettel Post, we will help other small delivery businesses by having them on our platform.

Viettel Group does not allow any of its businesses to breach customer data privacy. We are focusing on completing our technology platform and increasing customer experience and will use our own way of marketing that will not disturb Viettel mobile subscribers. However, we will do research based on our data to understand our customers so that we can deliver the right services and the right benefits to them.

How many drivers have registered on the MyGo platform?

We had an impressive number of 71,000 driver partners by June 27 and expect them to reach 100,000 on July 1. We also completed 4,500 rides on June 27.

With a presence already in Myanmar and Cambodia, do you plan to expand MyGo there?

Yes, we will expand to international markets within this year. If we are in a new market early enough, we can save some costs in marketing and focus on developing the offering. We will be expanding to more countries than just Myanmar and Cambodia.

Viettel Post is developing a Supper App. Why don’t you include the ride-hailing service in this app?

We are working on the Supper App and will integrate other services later. Developing the Supper App is more complicated as one malfunction can cause disruption to the entire app. We want to avoid those risks, so at the moment, we are running and testing separate apps. Truck delivery is a new feature compared to all other ride-hailing apps.

What benefits will this service bring?

Our service will bring a lot of benefits to this sector. First, the benefit of costs is clear to see. Traditionally, logistics companies only provide full-lot services, which increases cost for micro and small businesses. We partner with logistics companies to reduce costs as well as make full use of trucks.

Second, it helps make the market more transparent. Businesses can track their total costs, routing details and service provider information on the app. We will also bundle other transportation methods like air carrier and shipping to offer more options to business customers.

The ultimate benefit it will bring to the economy is lower logistics costs, which account for about 20 per cent of the GDP. After running ride-hailing smoothly, we will focus on developing the truck delivery service.

How about food delivery?

We will develop that too because it’s one of the benefits we can leverage our platform to bring to the users. We expect to launch food delivery this year. But we do not plan to rush into launching a new service. Instead, we want to make sure the service can be meaningful to the users.

What do you consider as the biggest challenge in this new business?

Viettel is a national brand, while ride-hailing is a social service, not an individual service, which means if our partners cannot deliver the same value as Viettel wants to, it will affect our brand. Therefore, the biggest challenge for us is how to enrol partners to sync with our values. We provide our services in every city and province across the country, which also makes it more difficult for us to control the quality of the service.

Meanwhile, the legal framework for ride-hailing has not been worked out. Will it be a challenge for you too?

While the disputes over whether online ride-hailing is transportation business or technology business have not been concluded, MyGo will follow what the government requires. I believe the government wants transparency and fairness for all businesses, so we don’t see any legal disadvantages whichever model is put in place.

If I was to offer a recommendation, I would recommend the government quickly define which model business ride-hailing is, transportation or technology. In addition, we need to ensure safety and benefits for customers. We don’t need to have a lot of regulations, but the procedures should be simple enough both for businesses to operate and for authorities to easily manage.

With a lot of innovation going on, what is the future position for Viettel Post?

Viettel Post is transitioning from a post services company into a technology-based post and delivery services company. Technology will create more benefits and more jobs for people than we do by directly providing these services. As MyGo and other services of ours start to have a large base of users, we will partner with smaller companies to strengthen the value chain. These businesses are still focusing on short-term metrics and have not yet seen the advantage of scale. That’s why we want to scale MyGo to a certain level before having partnerships with them and helping them grow.

Source: Deal Street Asia.