Commercial activities and domestic goods circulation have recovered
According to a report by Euromonitor, brand and product quality are still among the key factors in Vietnamese consumers’ purchasing decisions. 26.1% of Vietnamese consumers frequently buy from famous brands, while 35.8% are willing to buy less but choose higher quality products.
These strong foundation factors have created a huge demand for retail in the domestic market, becoming a lucrative land for retailers. This is also an opportunity for businesses to build brands and expand distribution channels domestically.
In general, by 2023, the total retail sales of goods and consumer service revenue at current prices is estimated at 6,231.8 trillion VND, an increase of 9.6% compared to the previous year (2022 increased by 20%), excluding the 7.1% price increase factor (2022 increased by 15.8%). Retail sales of goods in 2023 are estimated at 4,858.6 trillion VND, accounting for 78% of the total and increasing by 8.6% compared to the previous year (excluding the 6.9% price increase factor).
Among them, the group of cultural and educational goods increased by 14.4%; food increased by 11.7%; household goods, tools, and equipment increased by 7.5%; clothing increased by 7.1%; while means of transport (excluding cars) decreased by 1.4%.
Retail sales of goods in 2023 compared to the previous year in some localities also recorded an increase, such as in Quang Ninh increased by 12.2%; in Binh Duong increased by 11.4%; in Hai Phong increased by 10.4%; in Dong Nai increased by 9.1%; in Can Tho increased by 8.4%; in Ho Chi Minh City increased by 7.8%; in Hanoi increased by 7.1%; in Da Nang increased by 5.9%.
Consumer service revenue in 2023 is estimated at 673.5 trillion VND, accounting for 10.8% of the total and increasing by 14.7% compared to the previous year. Revenue from travel services in 2023 is estimated at 37.8 trillion VND, accounting for 0.6% of the total and increasing by 52.5% compared to the previous year.
The Ministry of Industry and Trade stated that in 2023, although commercial activities and domestic goods circulation have partially recovered compared to the years affected by the Covid-19 pandemic, it has not yet reached the growth rate before the pandemic when the total retail sales and consumer service revenue in previous years achieved over 10%, higher than the growth rate in 2023.
Lack of supply of premium retail space
Since the post-Covid-19 period, the Vietnamese market has become an ideal destination for international brands, emerging as a potential market with strong attractiveness. The increase in domestic consumption is considered one of the factors driving the increasing interest of international brands in the Vietnamese retail market.
At the same time, Vietnam is also a fast-urbanizing country, with a large population, a high population density, an increasing number of households with average incomes, and a large labor force. In addition, the Vietnamese retail market also attracts famous brands due to the doubling of ultra-rich people in Vietnam and a 70% increase in the number of rich people in the past 5 years, which is expected to continue to increase sharply in the next 5 years.
Ms. Hoang Nguyet Minh, Director of the Commercial Leasing Department at Savills Hanoi, said: “Another important factor that creates the attractiveness of the retail market in Vietnam is that compared to neighboring countries such as Singapore, Thailand, and Indonesia, the number of international brands present in Vietnam is still limited. This creates a great opportunity for brands that want to expand their market, especially when they are looking for their first steps here.”
According to Ms. Minh, the domestic retail market has seen more activity in the high-end retail segment with the expansion and opening of new stores. Premium brands use a strategy of opening one store in prime locations. For example, in Hanoi, the Hoan Kiem area, especially on Ngo Quyen, Ly Thai To, and Trang Tien streets, has continuously welcomed the appearance and expansion of high-end and luxury brands from 2021 until now. These can be mentioned as Louis Vuitton, Dior, Berluti, Tiffany & Co., Maje, Longchamp, and most recently Piaget, Watches of Switzerland…
However, the current difficulty for retail brands, especially high-end retail, is the supply of retail space. Ms. Minh shared: “Currently, the supply meets the requirements of high-end brands in Hanoi as a whole has only reached 3,500 m2. While the demand for expansion and new openings of high-end brands to Vietnam is increasing. The number of high-end items and brands in Vietnam is still very small compared to the markets of Bangkok, Singapore, or Indonesia in the region. The lack of supply leads to price competition and pushes up rents in the Trang Tien axis, which is not part of the pedestrian street.”
Expectations for full recovery in 2024
Forecasting the retail market in 2024, economic experts said that the domestic retail market is a “lucrative” land for retailers as the average income of people is increasing, the middle class is growing rapidly, and the consumption rate compared to Vietnam’s GDP is also high compared to countries in the region, over 70%.
Currently, in Vietnam, on average every 100,000 people need 1 hypermarket and 1 shopping center, every 10,000 people need an average-sized supermarket, and every 1,000 people need 1-3 convenience stores. These are potential factors and favorable conditions for distribution businesses to expand market share and have a lot of room for development.
In addition, in the recent period, the Government has had many policies to stimulate the economy, in which retail businesses and consumers benefit from: reduced interest rates, reduced taxes, fees, etc. From there, the pressure from high loan costs and large inventories compared to the previous year is expected to decrease thanks to gradually improving macroeconomic conditions.
The impetus from the support policies of the Government is also one of the important bases for strengthening the morale of businesses, overcoming difficult times, and positively improving the profit rates of retail businesses in the last months of 2023.
Economic experts forecast that the growth of the retail market in the second half of 2024 will recover as before the Covid-19 pandemic. In the medium and long term, the Vietnamese retail market is evaluated as an attractive market with great potential for development. The market scale is forecasted to increase to 350 billion USD in the coming years.
