2:35:23 PM | 4/9/2020
This judgment comes from a survey into businesses and consumers, as well as research on media reputation of businesses, conducted by Vietnam Report in 2019.
In recent years, Vietnam's retail industry has enjoyed rapid growth. The compound annual growth rate (CAGR) in the 2013-2018 period was 10.97%. Total retail sales are expected to rise to US$180 billion in 2020, an increase of 26.6% from 2018.
Vietnam’s retail industry has achieved high growth in recent years, driven by its large population of more than 97 million (according to the latest data in 2019) and its young population structure (60% of the population aged 18-50). In addition, according to the World Bank (WB), Vietnam’s household spending is forecast to rise by 10.5% annually on average together, coupled with a robust growth of the middle class. The strong rise of digital retail and e-commerce channels will also be very evident in the coming time.
In this context, two Vietnamese retailers - Vincommerce, with VinMart and VinMart+ systems, and Mobile World Investment Corporation with Dien May Xanh brand - scored the top reputation positions for two consecutive years. Consumer and expert surveys showed that VinMart is highly appreciated for the variety of goods, product quality, after-sales and customer care, while Mobile World Investment Corporation is highly appreciated for its finance and brand.
Consumer and business surveys as well as research on media reputation of businesses conducted by Vietnam Report in 2019 showed some trends in Vietnam's retail industry.
Although the retail industry has great potential for development and has very fierce competition with the presence of many foreign and domestic retailers, many players, both domestic and domestic, were forced to leave the market. In particular, foreign retailers have gradually grasped Vietnamese consumers’ tastes and habits in order to adjust their appropriate business strategies to compete with domestic rivals.
In a retailer survey conducted by Vietnam Report in September 2019, factors related to competitive environment and competition strategies were said to have a significant impact on operations of all retailers for at least three years to come.
Additionally, applying Industry 4.0 achievements to meet consumer needs and tastes is forcing retailers to make essential changes in order to survive in today's fiercely competitive environment. In fact, the Fourth Industrial Revolution or Industry 4.0 in the retail sector is taking place quietly and offering many development opportunities for Vietnam with breakthrough changes from diverse, effective and fast service standards based on digital technology platforms.
According to recent statistics released by Appota, Vietnam is among the top 20 countries with the most internet users in the world, with 49 million people connected to the internet. The number of people using only smartphones to access the internet in Vietnam, particularly aged 18-34, accounts for a very high rate compared to those using computers or other devices. Furthermore, Vietnam is highly mobile connected. 55% of Vietnamese owned a smartphone and eight out of 10 Vietnamese people will use smartphones by 2020 (according to Google APAC) and 46% own personal computers. This is one impetus for the increasing popularity of e-commerce in Vietnam.
Notably, with a much-improved investment environment that aimed to provide favorable conditions for investors, domestic and foreign retailers are tending to expand their operations in Vietnam through M&A, franchising and other cooperation models to maximize their market size in a country with nearly 100 million consumers.
Many gigantic M&A deals, such as the EUR655 million M&A deal of Metro Cash & Carry Vietnam (including 19 distribution centers and related real estate) and the US$1.14 billion Big C Vietnam deal (32 supermarkets/hypermarkets). In addition, the market witnessed a strong rise of domestic investors. Typically, Vingroup carried out many M&As with famous retail chains VinatexMart, OceanMart, Maximark and Fivimart; BRG Group purchased into Intimex and Hapro; Saigon Co.op bought Auchan chain (France). In the coming time, Vietnam is expected to continue to be a bright spot for M&A in the region and the retail industry will still be one of the most attractive industries to M&A investment flows.
In the context of increasingly fierce competition, communication encrypted data showed that retailers appear modestly in the media (only 26% of businesses surveyed have at least one presence a week), with relatively modest information coverage (24.2% of correspondents reach 12/24 topic categories).
By information quality (positive - negative ratio to total information), 48.4% of enterprises achieved a safety rate of 10%. By the source of information, the rate of information cited from companies or their senior leaders is still very modest, at 11.6%, while media sources account for an overwhelming share of with 88.4%.
According to the World Bank's forecast, household spending will increase by 10.5% per year on average, fueled by the strong growth of the middle class. Currently, about 70% of Vietnam's population is economically secure, of which 13% belong to the world middle class. Incomes of these classes grew rapidly, by about 20% a year, in 2010-2017. Since 2014, an average of 1.5 million Vietnamese have joined the middle class every year, indicating that households will continue to climb higher on the economic ladder after escaping poverty. Economic growth, improved living standards and the rise of the middle class are a solid foundation to spur retail growth in the future.
In addition, Vietnam has the fastest urbanization rate in Southeast Asia. So the retail industry is expected to have much potential for growth in the coming period. However, difficulties and challenges from constantly changing consumer demands are requiring retailers to have flexible policies to adopt technology-enabled competition trends to match modern consumer habits in a market with a young population like Vietnam.
By Anh Mai, Vietnam Business Forum
Vietnamese
