Foreign brands eager to enter Vietnam’s booming fashion market

Foreign brands eager to enter Vietnam’s booming fashion market

Last week Japanese casual wear retailer Uniqlo announced it would open its first store in the country in Ho Chi Minh City’s District 1 on December 6. The 3,000-square-meter store would be one of its biggest in Southeast Asia, the firm said.

Opening stores in Vietnam is critical to Uniqlo’s expansion plans in Southeast Asia. As of last year it had 213 stores in the region, and plans to have 400 by 2022, Tadashi Yanai, CEO of Fast Retailing Group, which owns a 75 percent stake in Uniqlo, said.

It is the latest in an expanding list of around 200 foreign fashion brands that have entered Vietnam, including Zara, H&M, Giordano, Mango, Topshop, Gap, and Old Navy.

Vietnam, with its young demographic, growing incomes and 95 million population, is considered a hugely promising market. Foreign brands are attracted to its 15-20 percent annual growth, according to the chairman of the Vietnam Retailers Association, Dinh Thi My Loan.

Vietnamese consumers are also shifting towards prioritizing items like clothes and fashion. In a report released last year market research firm Nielsen said clothes were Vietnamese consumers’ third spending priority after food and saving.

The survey also found that Vietnam ranked third globally in the number of people fond of branded goods after only China and India.

Laura McCullough, a senior Nielsen executive, said: "The change in the level of wealth of Vietnamese people enables them to buy international standard products and services. More and more Vietnamese are choosing to buy luxury goods or exclusive products."

Thanks to the Vietnamese fondness for fast fashion, Zara’s revenues in Vietnam doubled to VND1.7 trillion ($73.27 million) last year, four times its Thailand sales, the company said in its latest financial report.

In 2018, H&M announced revenues of over VND763 billion ($32.89 million), nearly four times higher than what it had collected in 2017 when it opened its first store in Vietnam.

While British brand Topshop and American brand Gap have both filed for bankruptcy and closed all of their stores in the U.S., the former maintains four stores in Vietnam and the latter 5.

Vietnamese retail group Seedcom estimates the fashion industry to be worth $5 billion in 2018 and to reach $7 billion by 2023.

German market analysis firm Statistics Portal expects 22.5 percent annual growth in 2017-22 while Nielsen forecasts 15-20 percent growth.

Foreigners buying up local units

Foreign investors have also been trying to enter with a series of acquisitions in the last few years. In September Japanese fashion company Stripe International acquired Global Fashion, which owns women’s footwear brand Vascara, for an undisclosed sum.

Vascara, launched in 2007, has 134 stores nationwide. Stripe first came to Vietnam in 2017, and earlier acquired another fashion brand, NEM, which has 90 stores.

In February Japanese buyout firm Advantage Partners acquired Elise Fashion, one of Vietnam’s major women’s fashion chains, again for an undisclosed sum.

Elise, founded in 2011, targets women in the 20-45 age range and has 95 stores across Vietnam, with operations vertically integrated from design and manufacturing to customer-facing sales and retail.

With financing from Stripe, Elise hopes to double the number of outlets and quadruple revenues in the next four years.

Inside a H&M store in Hanoi. Photo by Shutterstock/Tuan Anh Vu.

However, industry insiders are worried that the rapid expansion of major global fashion brands could overpower local brands such as Viettien, Canifa, Ninomaxx, and YaMe.

According to Le Tien Truong, general director of the Vietnam National Textile and Garment Group (Vinatex), foreign players have bigger strengths in finance and human resources, and modern management methods.

Besides, many local businesses still do subcontracting work for foreign brands, the lowest level in the value scale in the fashion industry, he told the media.

Robert Tran, CEO of U.S.-based RBNC Consulting, said: "The textile and apparel industry is too focused on outsourcing, big orders, competing for exports, and collecting wages, and is not investing in fashion design. So the term ‘fashion technology’ seems to have been forgotten in Vietnam.

"Asian countries like Japan, South Korea, Singapore, and Thailand all have domestic fashion brands, while it is difficult for international visitors to come to Vietnam to find a true Vietnamese fashion brand other than in traditional products such as "ao dai", which can be purchased at medium prices."

Truong warned that if Vietnamese fashion houses do not change their mindset, consolidate their brands and create their own designs, they would forever be outsourcers for other countries.

Seedcom founder and CEO Dinh Anh Huan said to remain competitive, Vietnamese retailers should use technology to understand consumer behavior, focus on digital marketing and develop online shopping channels to bring a better shopping experience to customers.

The Vietnam Retailers Association (VRA) estimates there were 200 foreign brands in Vietnam by 2017-end, accounting for roughly 60 percent of the market.

Zara, H&M and Mango are the three most recognised brands in Vietnam, followed by Gap, Forever 21 and Giordano, according to a survey done by market research firm Q&Me in September.

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