Mr. Nguyen Anh Duc, Chairman of the Vietnam Retailers Association, General Director of Saigon Co.op Union of Trading Cooperatives, believes that in the context of the export activities not fully recovered, the domestic retail market is predicted to continue to be a strong support for businesses.
Reporter: The Vietnamese retail market has been undergoing many changes recently. Specifically, how is the current retail landscape different from before, sir?
– Mr. Nguyen Anh Duc: In 2023, the total retail sales and consumer services revenue is estimated to reach over 6,200 billion Vietnamese Dong, an increase of 9.6% compared to 2022. In general, the trade and services sector, wholesale and retail trade have shown growth, but the structure of the commercial sector has changed as traditional retail continues to outperform modern retail.
By the end of 2023, modern retail is expected to regain about 24% of the retail market share after maintaining at 16%-18% during the COVID-19 pandemic.
In modern retail, e-commerce is increasing, livestream selling is growing rapidly, and there are significant differences compared to previous years. However, the scale of e-commerce is still small, the market is still immature, domestic operators are relying on competitive factors… and have limited contributions to the overall growth of the retail and service sector.
The second difference is the significant change in the product structure of 2023 compared to 2022. Looking at the proportion of different product sectors in the product structure in supermarkets and hypermarkets of domestic retailers and retailers with foreign direct investment (FDI) and foreign indirect investment (FII), foreign products are present in large quantities and at good prices. This is a warning about the increasing competition pressure right on the “home ground” for domestic production and business enterprises.
Consumer trends have changed, forcing retailers to adapt
The third trend in 2023 is that consumers not only want to buy products but also want better accompanying services. When goods are supplied to the market, consumers always wonder what services are included.
The fourth difference, but not a positive one for the domestic retail market, is that consumer confidence in Vietnam (CCI) has dropped to a low level for the first time. Vietnam is one of the countries with the lowest CCI in the Southeast Asia region. This is one of the factors that impact market changes.
From the perspective of the Vietnam Retailers Association, do you have any recommendations to promote the sustainable development of the retail sector?
– The retail industry in Vietnam has a scale of about 140 billion USD. If there are positive policies, the retail sector will directly impact consumers. The policy of reducing the value-added tax (VAT) rate by 2% is applied until the end of the year, but according to retailers in the association, if the policy is prolonged, it will become ineffective and fail to stimulate demand.
Therefore, other solutions are needed to directly impact and support manufacturers and distributors to help them survive and develop. The state can also have direct price reduction policies for renting premises to create a dynamic market.
On the other hand, policies need to be planned and applied earlier and have a longer and continuous nature so that businesses can survive. In addition, it is necessary to comprehensively plan the supply and demand of raw materials at the national level so that domestic supply sources do not compete with each other but realize their core values.
Moreover, there needs to be cooperation among industries and associations to create an overall boost to the economy rather than local competition within each industry. For example, tourism can collaborate with commerce for development. And to achieve these goals, macro hands are needed to restructure and help enterprises manage risks, avoid falling into crises.
Bring domestic and FDI retail markets closer together
Mr. Nguyen Anh Duc believes that the market is currently strongly divided between FDI and domestic retailers, with only a few businesses still holding 100% domestic capital such as Saigon Co.op, Satra. The contribution ratio of the domestic retail business group is decreasing, accounting for less than 40% of the total retail market share. To prevent the decline in market share, domestic retailers must invest in digitalization, automation, and logistics to increase their internal strength.
As mentioned above, customers nowadays expect more than just the value and quality of the goods they receive when shopping. The advantage of domestic retailers is having a large number of long-standing members. From this advantage, businesses need to provide customers with more benefits and rights. Currently, the marketing department of domestic retailers is optimizing values and enhancing cooperation with businesses in different industries and fields to create an ecosystem for enterprises and increase value-added utilities for customers.
Mr. Nguyen Anh Duc also added that from March 2024, Saigon Co.op will implement a price list program for members. Accordingly, each level of member will be able to purchase discounted products with different discount rates, and higher-level members will receive more benefits.
