Big brands push locals to improve

Big brands push locals to improve

The Vietnamese retail market has been making huge strides in a time of fast-moving shopping tendencies and international player pressures. Domestic retailers are now being forced to grow in order to keep up with global trends.

In 2016, Zara was the first international brand name knocking on Vietnam’s door, occupying the front of the Vincom Centre on Ho Chi Minh City’s Dong Khoi street. Zara was soon packed with a long queue of local customers who wanted to experience international products right on their doorstep.

A second Zara outlet opened in Vincom Centre Ba Trieu in Hanoi, and it did not take long for a wave of international brand names such as The Body Shop, H&M, GAP, Levi’s, and Mango to create chains in Vietnam.

The latest brand to do so is Japanese global apparel retailer Uniqlo, which plans to open its first store in Vietnam next year by acquiring a 35 per cent stake of Vietnamese fashion company Elise, which has more than 100 outlets nationwide.

While many foreign fashion brands are now present in Vietnam, analysts said that Uniqlo does not want to miss out, especially as Vietnamese consumers often tend to prefer Japanese goods.

French retailer Decathlon meanwhile is waiting for approval from the Ho Chi Minh City People’s Committee to set up a 5,000-square metre supermarket at Rach Chiec National Sport Complex in District 2. The first Decathlon supermarket is only the first of a planned 50 supermarkets across the country.

Tomas Ngo, co-founder and CEO of N Kid Group, the owner of TiniWorld, commented that to develop strongly in Vietnam, the group has to understand customer demand, to innovate and reform all the time, and to meet the newest demands and trends of consumers.

Other international brand names coming to Vietnam include retailers such as Japan’s Takasimaya and AEON.

Fast-growing pace

According to the latest report issued by The Economist Intelligence Unit (EIU), a large number of international investors are showing interest in the Vietnamese retail market.

EIU forecast that overseas companies will continue expanding business activities in the coming years.

The report also forecasts local consumer spending to rise sharply in the next five years, thanks in part to Vietnam’s population of around 94 million people, one-third of whom are aged 35 years or younger.

According to the Vietnam Retailers Association (VRA), more than 200 foreign fashion brands are present in Vietnam, providing a wide range of products from mid- to high-end products, which hold 60 per cent of the market share.

“Foreign brands show big interest in Vietnam because of the industry’s high average growth rate of 20 to 30 per cent per year,” said VRA chairwoman Dinh Thi My Loan.

According to statistics from the Ministry of Industry and Trade, the total revenue generated from retail sales and consumer services in Vietnam in 2018 reached VND 4.4 trillion ($191 million), up 11.7 per cent compared to 2017.

The wholesale and retail sector continues to be a major attractor of foreign direct investment (FDI), with total registered capital in 2018 of $3.37 billion, accounting for 10.3 per cent of the country’s total FDI.

In the 2018-2021 period, it is expected that the retail market will grow steadily with the annually increased demand of leisure (10 per cent), modern grocery (9 per cent), and apparel (6 per cent).

Sales of fashion, personal services, food and beverages, and entertainment such as gyms and cinemas will all rapidly increase over the years to come.

Adaptation of local retailers

Domestic retailers are now being urged to develop strategy and improve their governing capacity, service quality, and know-how to promote their brand name.

According to Loan, location is always of prime importance. More specifically, a spot in a trading centre which can offer good facilities with stable rental is an ideal choice.

“Domestic retailers in Vietnam are quite active and creative in their business but this is not enough. They must gain experience from other international retail chains with updated trends and tendencies,” Loan said.

According to Tran Thu Hien, deputy general director of Vincom Retail JSC, Vincom’s all-in-one system now offers the most complete system for retailers, from entertainment, food and beverages, and leisure to all ages and levels of customers.

Speaking about the company’s 2019 strategy at a seminar held recently in Ho Chi Minh City, Hien said that Vincom planned to set up 13 new malls to help the company create a retail area of 1.6 million square metres across 79 retail centres in 42 provinces and cities. Last year the company opened 20 new retail centres and attracted 180 million ­customers.

vir