SECTOR UPDATE – RETAIL

Sector overview: Vietnam is still acknowledged as a lucrative retail market in the regional investment map. In addition to flurry local retailers, numerous foreign players have penetrated the market given the dynamic market and the government’s openness to foreign investments. Branded and luxury products have increased thanks to rising income and the middle class. The presence of both domestic and foreign retailers provides consumers with more choices but intensifies competition for the whole market. While traditional trade channels still hold an overwhelming market share, trends in modern trade retail and omni-channel have been proving their growing power.  The number of supermarkets and commercial centers in Vietnam has risen rapidly, reaching 1,241 and 258 respectively in 2022, up by 22-23% compared to those in 2018. A great number of store chains of groceries, pharmaceuticals, mobile phones, consumer electronics, etc. have been in the spotlight for their robust expansion.

Despite COVID-19 impacts, Vietnam’s retail sales of goods and services bounced back to reach VND5,673trn in 2022, with 2017-2022 CAGR of 7.5%, including wobble growth in 2020-2021. However, in 5M23, weaker consumer spending has been reported due to unfavorable economic conditions, higher interest rates discouraging consumer finance activity, concerns about income uncertainty and job security, etc. Listed retailers reported much lower growth in 4Q22 and the first months of 2023 (e.g. MWG’s revenue: -21% YoY in 5M23, PNJ: -9.6% YoY in 6M23, FRT: +0% YoY in 1Q23). These companies maintain conservative views on 2023 outlook, especially 1H23.   

Outlook: Despite difficulties in 1H23, the sector outlook is expected to improve gradually towards the end of the year given many forecasts on a better economic picture in the period. Consumer spending is expected to see improvements thanks to softer interest rates – which may restore consumer finance activity, VAT reduction and the government’s solutions to tackle some problems of the property and financial markets, etc. A large and growing population may continue to underpin consumption of staple products, while expansion of middle class may spur growth of discretionary ones. In sum, for a long-term perspective, Vietnam’s retail growth is expected to continue in the following years given a developing economy, large and increasingly connected population, rising urbanization, higher incomes, growing middle class and living standards.