As is the case in all corners of Southeast Asia, small and medium enterprises (SMEs) play a crucial role in Vietnam’s economy. SMEs contribute to around 40% of the country’s GDP and more than nine million jobs were generated by small and medium businesses in 2019.
Yet SMEs have limited access to capital and face tight competition from foreign-invested enterprises. “With the recent economic developments in Vietnam, a lot of foreign retailers and businesses are coming to the country with technical know-how and financial advantage. Many SMEs find it difficult to compete with larger enterprises,” Tri Cao, deputy general director of Vietnam mobile POS startup KiotViet told KrASIA.
KiotViet is a subsidiary of Vietnamese Software-as-a-Service company Citigo Software. Citigo itself has been around since 2010, with its core business in product development consultancy, software solutions, and professional programmer outsourcing. Back in 2014, the founders of Citigo thought that this was the right time to build something for Vietnamese consumers. The idea for KiotViet came when they realized that small enterprises were struggling with managing operations and scaling their businesses without enterprise software that is easy to use.
“Of course, there are enterprise resource planning software providers like SAP and Oracle, but those aren’t built for SMEs. There is also inexpensive software, but they’re not usually good, with limited services. Long story short, KiotViet was established in 2014 to digitize SMEs’ inventories, helping them to grow more quickly,” Cao continued.
As a point-of-sale startup, KiotViet builds tools to keep track of transactions, inventory, and checkout operations for small stores. The platform also offers human resources and payroll management features. KiotViet’s end-to-end platform increases efficiency and generates up to 40% operational cost savings for SMEs,Cao claimed. Vietnam currently has nearly 600,000 SMEs, and KiotViet has digitized 100,000 of them. “It translates to about a 16% penetration within five years, which is a big achievement for a startup that only raised around USD 6 million so far,” said Cao.
Conventional SMEs need software that is easy to use, as many have low technical literacy, he explained. The best way to achieve this is to keep customer feedback channels open.
“We spend a lot of time listening to customer feedback and we update the software regularly to make sure it stays relevant to customers’ needs. Moreover, people who are not familiar with technology are usually not comfortable buying software or partnering with companies without seeing the representatives in person. Therefore, we have opened many offices in the second- and third-tier cities to serve customers in remote areas who have low technology knowledge and access,” Citigo Software co-founder and deputy director Tony Ng told KrASIA.
According to a report by market research and consulting firm TechSci Research, the Vietnamese cloud service market is projected to grow from USD 165 million in 2018 to USD 291 million by 2024. This growth is led by the adoption of cloud services such as Infrastructure-as-a-Service or Software-as-a-Service, as well as the growing number of small and medium enterprises that utilize inventory and operations management systems. However, KiotViet is not the sole player in this segment.
Nonetheless, KiotViet believes that it has a unique proposition for merchants. “Our software offers a seamless experience. It has a simple interface and is easy to use, merchants can set up and run the software within five minutes, even if they have very little knowledge of technology,” Ng said.
Another factor that contributes to KiotViet’s positive growth is its affordability. The startup offers its services for SMEs starting from VND 180,000 (USD 7.72) per month, or VND 250,000 (USD 10.73) for larger private enterprises.
Besides its SaaS business, the firm is developing a new line of products under KiotViet Plus, which allows integration with third-party services, such as e-commerce platforms and shipping providers, so SMEs can manage their sales more efficiently.
“For example, we started a shipping service for merchants in late 2018. Merchants can use our software to create shipping orders and we connect them with our partners. We also recently launched payment service and we are currently working on other products as well,” Cao said.
Last year, the firm raised USD 6 million in a Series A funding round from Jungle Ventures and Indonesian travel tech company Traveloka. With a strategic partnership with Traveloka, KiotViet partners with F&B outlets, salons, and hotels, allowing these businesses to enrich the customer experience for travelers visiting Vietnam. It plans to kick off another round in July and complete it by the end of this year, according to Cao.
Going forward, KiotViet wants to have at least 300,000 merchants registered on its platform within the next two years. The firm is also eyeing regional expansions to Indonesia and the Philippines.
“We’re also exploring opportunities in payment, lending, and B2B supply chain at the moment. We are in the process of obtaining a payment license and we’re currently expanding our distribution network. For lending, we’ll be working with banks and other financial institutions, including credit-scoring fintech firms,” Ng said.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.