International retailers’ interest in Vietnam’s fast-growing retail market stems from the country’s young demographic, increasing middle and affluent class, and rising tech-savvy consumers, according to a note by Jones Lang LaSalle (JLL) Vietnam.
Foreign Retailers Make Inroad into Vietnam
A series of famous retailers from Japan, Thailand, Korea and France have flocked to Vietnam, hoping to penetrate the market.
In 2014, Thailand-based Berli Jucker
’s acquisition of Metro Cash & Carry Vietnam for an enterprise value of EUR655 million signaled the entry of the Thai retailer into Vietnam. Later, Central Group, another Thai giant, acquired Nguyen Kim Trading JSC – Vietnam’s top electronics retailer and Big C
Vietnam – the second largest supermarket chain in term of store number in Vietnam.
In October 2015, Emart, the top South Korean retailer, officially marked its entrance with a $60-million shopping center in northern Ho Chi Minh City. Also from South Korea, Lotte Mart is quite successful with 11 supermarkets, a number expected to increase to 60 stores by 2020.
Most Japanese investors consider the success of Aeon in Vietnam a praiseworthy case in overseas investment. Aeon has four malls in Vietnam and expects to reach 20 malls before 2020. Also from Japan, Takashimaya arrived in July 2016 as anchor tenant of downtown HCMC’s Saigon Centre retail mall.
Adding to three Simply Mart stores in HCMC, AuchanSuper, a major retail brand from France, is planning to open another 17 supermarkets by end-2017 in HCMC and 20 stores by 2020 in North Vietnam.
Thanks to increasing disposal incomes, big fashion brands such as Gap, Mango and Topshop have become the top choice of many young Vietnamese. In September 2016, Zara opened its first flagship store in HCMC. H&M will reportedly enter Vietnam early next year.
Young Demographic with High Potential Growth
With 90 million people, Vietnam has attracted retailers with its relatively young population – 70% are aged between 15 and 64 years – who promise to be a key driver of robust market growth. Vietnam’s urban population is expected to grow 2.6% annually from 2015 to 2020, the highest rate among regional peers.
Increasing Middle and Affluent Class (MAC)
“Increasing disposable incomes, rapid urbanization and rising living standards make Vietnam one of the most dynamic emerging economies in South East Asia,” says Trang Bui, commercial leasing director at JLL Vietnam
According to Boston Consulting Group, Vietnam has the fastest growing MAC in the region, which will double in size between 2012 and 2020, from 12 million to 33 million. MAC consumers, whose income is 15 million dong ($714) or more a month, will be a key group of potential customers for retailers.
More Technology Involvement in Retail
Vietnam e-commerce is set for strong growth thanks to its growing consumer and online population. According to the Nielsen’s report, nine out of ten consumers in Vietnam (91%) own smartphones as personal ownership, compared to 82% in 2014 and the rapid up-take of connected devices, especially smartphones and tablets are instrumental in media consumption shifting.
“Significantly increasing in amount of the credit card holders also has impact on change in consuming behavior. It is observed that people now are more willing to spend as they can afford more with credit and it tends to make shopper less canny,” Trang Bui adds.
Additionally, increasing international arrivals and continuously improving infrastructure are also factors that make Vietnam an alluring market for retailers.
Overall, as penetration of foreign retailers into Vietnam has increased, fierce competition in the retail playground has become more intense. This will put the retail market to the test and only retailers having the right positioning to meet market demand will gain market share.