VinEcom is a massive e-commerce operation that is part of Vingroup, one of Vietnam’s largest real estate companies and founded by Vietnam’s first ever billionaire, Pham Nhat Vuong. In February, we reported that VinEcom would receive $30 million to take on e-commerce. But we can now confirm via Vingroup’s own website that the division is slotted for $50 million in total. No local Vietnamese startup has nabbed funding rounds of that size for projects that have yet to see the light of day.

Who is Pham Nhat Vuong?

In 2010, Pham sold his noodle processing company to Nestle for an estimated $150 million. That company began in Ukraine in the mid-1990s, originally out of his own small noodle shop. He then began investing in resorts, apartment complexes, malls, hospitals, and schools in key areas in Vietnam. Each investment built on the last one’s success, and now Pham is worth over $1.3 billion, making him the richest man in Vietnam. In the midst of his company’s boom, Pham made a rather discrete investment in 2006 in a company called VC Corp, one of Vietnam’s top three internet companies. Through this subtle move, Pham showed an early taste for the online world more than seven years before launching VinEcom.

Could old dogs learn new tricks?

When Vingroup first announced its entry into the e-commerce space in February, it was met with both considerable skepticism and cautious enthusiasm.

On one hand, many people in the press speculated that a real estate mogul would not know how to do e-commerce. After all, the two industries require different mindsets. Real estate folks build, sell complete products, and then collect on their assets. E-commerce, on the other hand, requires intensive operations, razor thin margins, state of the art logistics, expertise in online marketing, and excellent buying prowess.

On the other hand, Vietnam’s current e-commerce leaders – folks from Vat Gia, Hotdeal.vn, Lazada, Tiki, Zalora, CungMua, Sendo, Project Lana, and more – were excited to see a larger player enter the market. It meant that Vingroup would also be willing to grow the nation’s then-nascent e-commerce market.

Stealing the competition

Right away, the key e-commerce players could feel the burn of a new major player in the market. Since Vietnam’s e-commerce market is small in terms of human resources, there are only so many people with e-commerce experience in the country. Vingroup shopped around the ecosystem for potential companies to acquire as well as people to hire. With potential acquisitions, VinEcom assessed the size and potential of the market. With people, the division at times offered to double the salary of key people it wanted to join. Most notably, Erik Jonsson, former head of Zalora Vietnam, is now on board as deputy general director of VinEcom. Kyle Pham, former CFO at NhomMua, once one of Vietnam’s bright e-commerce players, is now on as head of service at VinEcom.

But Jonsson and Pham, both of whom are big names in the small world of Vietnamese e-commerce, aren’t the only employees that got poached into VinEcom. You can see more of the people that have been hired on LinkedIn here and here. If you look closely, you’ll see former startup founders, respected bloggers, and logistics veterans. VinEcom is hiring from well beyond the retail and e-commerce market. Rumor has it that the company has over 2,500 employees to date. Sources tell Tech in Asia that each of the teams, from marketing to content to logistics, numbers in the hundreds. This likely puts VinEcom’s monthly overheads in the millions.

On top of all the hiring, VinEcom has undergone some top level shuffling. In May, we reported that the the CEO of VinEcom, Le Thi Thu Thuy, would resign. Shortly after, a new woman stepped in to fill her place, only to be replaced just this August by Mai Huong Noi, who is now general director of VinEcom. Each new CEO has had to struggle to keep up with Pham’s vision. In the beginning, his role was more as an investor, but now he’s stepped in more to execute his vision. But until last August, the actual substance of that vision remained unknown to outsiders.

VinEcom’s leaked slides

In early August, slides (published in both English and Vietnamese) were leaked from VinEcom outlining its plans for e-commerce in Vietnam. The numbers are most telling:

• VinEcom promises 1.3 million SKU’s on its first day of operation
• Over 2 million items are expected to go through production studios for photography after its first year of operations
• 1.5-hour delivery times for fresh groceries
• 6-hour estimated delivery times for other products, including fashion and electronics
• Thousands of mobile trucks that ship products (potentially out into the countryside)

The document states that VinEcom plans to “create Vietnam’s largest, most professional, and reliable online marketplace.” To give some perspective our sources across the e-commerce ecosystem, from Lazada to Tiki, claim that the average number of SKU’s in Vietnam’s other e-commerce sites is near 45,000. And of that average number, only a small percentage actually get visibility and purchases. So it’s baffling to consider what a site with over one million SKU’s must do in order to to circulate its inventory healthily.

Some evidence indicates that VinEcom has ambitions well beyond becoming a popular click-and-buy e-commerce site. On Vingroup’s main recruitment website, there’s a position for a head of Adayroi TV. Adayroi.com, which is not yet live, is rumored to be the domain for VinEcom’s e-commerce site. In the job description, the position asks that the applicant be able to choose products for their TV channel as well as work closely with the VinEcom division.

This hints that VinEcom may launch a full retail TV channel to accompany its e-commerce efforts, which makes more sense when you consider how Pham Nhat Vu, Pham’s younger brother, is the general director of AVG, a satellite broadcast station. No startup could do this. This is a massive investment that would be totally unique across Asia.

Even more baffling is Vingroup’s recent 10% investment in Vinatex, one of Vietnam’s largest textile companies. But the investment is in sync with Vingroup’s June announcement of launching Vinfashion – could this $1 million investment mark a bid by Vingroup to get into the fashion industry?

These recent moves paint a perplexing picture of what is possibly one of the biggest unlaunched e-commerce projects Asia has ever seen.

Could VinEcom become Vietnam’s Alibaba?

Local e-commerce bloggers have also dug up more than 40 domains (from Vinpay.vn to Vinmall.vn to Vindeal.vn) that Vingroup registered around the time of its initial announcement. The domains indicate ambitions for a marketplace, a payment gateway, a daily deals site, a logistics service, and maybe even an ad network. If one examines the list of VinEcom’s domain names and assumes that all yield fruit (they might not), one could assume that the company aims to become Vietnam’s Alibaba, borrowing and adopting concepts from Tmall’s branded e-retailing and Alipay’s escrow payments service.

But additional evidence indicates otherwise. A recent deal with Vietcombank, Smartlink, and VinEcom in mid September shows that VinEcom may not create its own payment gateway. By partnering with Smartlink, Vietnam’s number one payment gateway, VinEcom can get favorable access to banks. If VinEcom built its own gateway and online bank, like Mobivi did last year, the local banks would find this threatening.

Building an e-commerce house of cards

Given everything we’ve covered above, you start to picture a leviathan. At its current size, it’s possible VinEcom will burn through its $50 million initial investment by the end of the year or early next year. According to sources within VinEcom, the company will likely unveil Adayroi.com, rumored to be its main domain, to the public in December, though little is known about the site besides its expected release date. It will take perhaps a year to experiment and test the market, and perhaps another $50 million. Pham is potentially paying $100 million for a lesson in e-commerce.

The hefty investment accompanies a hefty risk. Most startups face chicken-and-egg dilemmas. They have a hard time getting users onto a marketplace, or getting businesses to join a place where users are. With all the cash and resources in the bank, VinEcom not only faces the chicken-and-egg dilemma, it also sits on a house of cards. Many factors have to lock into place for success. With e-commerce, this might be problematic. In e-commerce, it’s apt to play a long term game where you can test the market, build trust, and train a team before going big, but VinEcom is doing everything in the opposite order.

Moreover, it’s not clear if the Vietnamese e-commerce market is really big enough for such a player as big as VinEcom apparently aims to become. VECITA, a national Vietnamese e-commerce trade association, estimated the market at $2.2 billion in sales, but most industry leaders that Tech in Asia talked to agree that this estimate is not clear on the methodology and is overblown. They argue that pure e-commerce sales are likely in the ballpark of half a billion to a billion dollars. Is VinEcom overestimating the size of the online retail market? Or is it extremely confident that it can quickly flip the retail market into an online one?

With such a large team, and with such lofty goals, speed remains key. In addition, with multiple teams in place, and with a massive launch around Christmas time, every team, despite its size, will be overwhelmed with all the problems that e-commerce veterans know all too well. Even seasoned companies like Lazada, which can tap into regional insights and a wisened playbook from Rocket Internet, face technical and operational issues. People will become exhausted. So if they want to win, they have to win fast, and all at once.

This post was originally published on Tech in Asia