VIETNAM: HOTTEST RETAIL MARKET IN SEA

VIETNAM: HOTTEST RETAIL MARKET IN SEA

Southeast Asia is the fastest growing regional economy in the world. Of the 11 countries that make up the region, Myanmar and Vietnam are on a rapid up trajectory due to embargo lifts, a more stable ruling party in government and an increase in foreign direct investment (FDI).

The middle income class in Vietnam is swelling. According to a research conducted by Boston Consulting Group (BCG) on behalf of Center for Consumer and Customer Insight (CCCI), Vietnam’s middle class will double by 2020. To put that into perspective, Vietnam currently records about 13-14 million people in the middle income bracket; by 2020, that bracket will grow to over 33 million people with average per capital income between USD 1,400 to 3,400 per annum.

In a few years, Vietnam’s middle-income group will become two-thirds the size of Thailand’s. This is big and enticing news for retailers and consumer goods companies, particularly in six of the major cities that account for almost 50% of the country’s retail sales: Hanoi, Ho Chi Minh City, Nha Trang, Can Tho, Da Nang, and Hai Phong.

Expanding into Vietnam is no easy venture, since developed cities are fragmented and hard to reach. Logistics continue to be an issue and 100% fully foreign-owned operations still require the approval of the government after a completion of an economic needs test. However, those factors won’t stop regional tycoons and retail operators from going into Vietnam.

Recently, billionaire Charoen Sirivadhanabhakdi, owner of Thai Charoen Corp (TCC), made a USD 740 million purchase of German’s Metro Vietnam chain. The company’s subsidiary Berli Jucker placed in bids for Big C Vietnam after it acquired the chain in Thailand. A buyer has yet to be named for Big C Vietnam, but it is evident that Thai owners and investors are actively pursuing bussinesses in the country, especially in retail.

TCC is not the only Thai company that has entered into the Viet retail space. Santi Bhirombhakdi-linked Singha Asia signed USD1.1 billion worth of deals, boosting the mergers and acquisitions valuation up to USD 4 billion last year. Analysts predict that this trend will continue for Thai tycoons, simply because Thailand has grown stagnant and the opposite is true for Vietnam.

According to Trading Economics, Vietnam’s gross domestic product (GDP) growth rate averages at 6.15% year on year, peaking early 2016 at 7.01 percent.

According to data compiled by Nielsen, Vietnam boasts roughly 1.3 million brick-and-mortar trade stores and accounts for 85% of the sales for fast moving consumer goods (FMCG). In 2015, this sector recorded sales transactions of USD 10 billion. Servicing these 1.3 million stores continue to be problematic for manufacturers and retailers, though not enough to be deterred from expansion.

For retailers and malls investors that are looking to go into the Vietnam market, understanding the mentality of its consumers is crucial. A booming middle-class means that there’s a new group of spenders with an entirely different consumption behavior. Vietnamese are considered sophisticated shoppers.

In the same Nielsen report, it found that Vietnamese lean into the recommendations of retailers, especially when shopping for new brands and products. Vietnam shoppers also prefer speedy service. On average, transactions in the country take a mere 90 seconds, spending 10 seconds placing the order and an additional 20 seconds paying.

If you want to see more about FDI opportunities in Vietnam, contact us: info@fdi-vietnam.com

"Source: eightyquartier.com"