Consumer habits need to be met to reach the potential for Vietnam’s retail market.
The retail market is looking rosy. In fact Vietnam holds AT Kearney’s 2017 Retail Development Index sixth position. The annual report looks at retail markets worldwide for their potential now and going forward. Vietnam’s position high up in the charts suggests the consumer confidence for the country. Team this with the expanding e-commerce market, the constant improvement in infrastructure and trade liberalisation and it is easy to see the growth for both Hanoi and Ho Chi Minh City. Particularly when it is far behind if compared to neighbouring Bangkok, Singapore and Kuala Lumpur which are shopping meccas in their own rights.
However Savills note the challenges that are faced in order to assist with this growth. The real estate firm has noted that there is only 2 percent of retail space in the centre of Hanoi. A result of high land prices, limited supply and height restrictions. In Ho Chi Minh City this is slightly higher at 13 percent. Nevertheless location is often cited as a reason for a successful retail hub. Making it easy for businesses to trade and customers to shop.
At the same time Vietnam is entering a new chapter in the progress of its economy. Consumers are acting in a different manner. Mass fashion has proved to have the strongest growth within the sector. This is even when prices locally are not too far from global averages illustrating the increase, and strength, of the middle class. For the luxury sector as well as jewellery, prices can be anywhere between 20 and 50 percent higher than global averages. A result of taxes. One segment of the market that is growing includes entertainment, cinema and food and beverage.
Those in the retail industry are attempting to adapt. New projects are concentrating on consumer needs. But landlords need to take note of trends such as amusement parks, entertainment attractions, and offline shopping.
Expert opinion
Savills have identified this era in retail stating that, “The market here is full of potential and opportunities. And now is a fantastic time for retail, but not quite yet the time for retail property developers to start popping the champagne and rubbing their hands in glee. The key retailer challenge in rising cities is how to grow. Prime areas tend to be safe bets but have a higher cost, while lower cost emerging areas present greater uncertainties Retail landscapes of cities continue to change, and better quality projects displace previous industry leaders”.
They advise that those wanting to be a part of Vietnam’s retail industry need to make sure that they work alongside a reputable developer. A prime location is also key. Adequate research and planning is required in order to meet consumer needs and in order to adapt to their changing shopping habits.