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Vietnam retail report, 8.2017, euroasiaresearchexperts

Vietnam's retail sector is predominantly characterized by traditional markets and small independent stores, although modern retail has grown significantly from just two supermarkets in the 1990s to thousands today, driven by economic growth, rising middle class, and urbanization. The report highlights key economic indicators such as GDP growth, consumer behavior trends, and the increasing demand for health and wellness products, while also noting a decline in traditional market sales amidst the rise of modern retail. Comparatively, Vietnam's healthcare spending surpasses that of the Philippines, which has a more developed e-commerce market.

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VIETNAM RETAIL REPORT 2F, ParagonPlaza, 162 EDSA MandaluyongCity,Philippines ContactNo. (632)706-0468|info@euroasiaresearchexperts.com www.euroasiaresearchexperts.com
TABLE OF CONTENT I. Overview of Vietnam’s retail sector II. Economic Status III. Retail Market Size IV. Retail Market Players V. Consumer Behavior and Retail Trends VI. Vietnam and Philippines Comparison VII. Conclusion
Like most countries in Southeast Asia, Vietnam’s retail landscape is heavily dominated by its traditional wet markets and small independent stores catering small quantities of goods and products for day to day consumption of shoppers. However, modern retail is a concept that have grown tremendously in the country – from 2 supermarkets in the 1990s to thousands of modern stores to date. The economic growth, rising middle class, urbanization and higher standards and demands for sanitationand hygienekeeps on fueling its growth in Vietnam’sretail industry. OVERVIEW
CURRENT GROSS DOMESTIC PRODUCT According to the latest data by World Bank, the Gross Domestic Product (GDP) of Vietnam started to flourish by 2000. By 2016, Vietnam’s GDP is at 202.616 billion USD. Source: World Bank Indicators, The World Bank ANNUAL GDP GROWTH Vietnam’s GDP is forecasted to grow by 6.3% in 2017, Maintain this growth in 2018, and a minimal decline in the following year (2019) at 6.2%. VIETNAM (2017) 6.3 ECONOMICSTATUS VIETNAM (2016) 202.616 BILLION
The populationgrowth in Vietnam is similar to the trend in the Southeast Asian Nations – it has been on a steady rise for years. The country’s populationis characterized by the large number of young workforce, making labor for foreign investments more cost-efficient. In additionto this, Vietnam’s dependencyratio, or the percentage of people in the workforce keeps on declining – from 75% in the 1990s to 42% in 2016. VIETNAM’S POPULATION GROWTH Source: World Bank Indicators, The World Bank ECONOMICSTATUS
WHAT DRIVES VIETNAM’S ECONOMIC GROWTH? 2016 GDP WEIGHT (%) Source: General Office of Statistics of Vietnam, HSC, TIM ECONOMICSTATUS Trade and Services continue to be the main economic driver for Vietnam at 38.57%. This can be attributed to the strong domestic consumption. The industry sector, at 34.6% continues to contribute a lot, with robust growth on mining, manufacturing, utilities and construction. 15% 8% 16% 5% 6% 39% 11%Agriculture, Forestry, Fishery Mining Manufacturing Utilities Construction Trade and Services Tax Excluded Subsidy
WHAT DRIVES VIETNAM’S ECONOMIC GROWTH? 2016 vs FORECASTED 2017 GDP GROWTH Source: General Office of Statistics of Vietnam, HSC, TIM ECONOMICSTATUS Most sectors are forecasted with a robust growth. However, they are at lower growth rate in comparison to 2016 with the exception of the Mining sector growing from -4% at 2016 to 1.64% by 2017 forecast. -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% Agriculture, Forestry, Fishery Mining Manufacturing Utilities Construction Trade and Services Tax Excluded Subsidy 2017F Growth 2016 Growth
WHAT DRIVES VIETNAM’S ECONOMIC GROWTH? Trades and Services Source: Vietnam General Department of Customs, HKTC ECONOMICSTATUS Exports surged at 15.10% amounting to 44.7 Billion US Dollars. Imports, on the other hand has a growth rate of 24.9% amounting to 46.6 Billion US Dollars. The surge in exports is because of the huge demand for electronics, computers and components driven by the foreign- invested manufacturing sector. Top exports markets of Vietnam in 2016 are US, China and Japan. Exports Imports 4.5 6.9% 44.7 billion 46.6 billion March 2017 YOY Amount USD Whereas, the largest source of Vietnam’s imports are: Chins, Korea and Japan. Most of the imported items in 2016 consisted of machinery, equipment, electronics and computers which is heavily related to export assembly.
MODERN RETAIL CHANNEL SALES (Trillion VND) Source: Euromonitor, USDA Unlike most of its neighboring countries, convenience stores in Vietnam accounts for the lowest sales among retailing channels. In 2015 alone, sales among convenience stores accounted only to 2.3 trillion VND, while hypermarkets accounted to 27.2 trillion VND and supermarket with the highest sales at 39.8 trillion VND. However, it is also worth noting that modern retail sales in Vietnam is in a steady growth every year, growing from 30.9 trillion VND in 2011 to 69.2 trillion VND in 2015 – A 124% growth rate in 5 years. RETAILMARKETSIZE 0 5 10 15 20 25 30 35 40 45 2011 2012 2013 2014 2015 Convenience Stores Hypermarkets Supermarkets
TRADITIONAL RETAIL CHANNEL SALES (Trillion VND) Source: Euromonitor, USDA On the other hand, other grocery retailers (wet markets, food stalls, etc) account for the largest sales among traditional markets. In 2015, other grocery retailers account for 895.6 trillion VND, followed by independent small grocers at 374.6 trillion VND and lastly, food/drink/tobacco specialists at 32 trillion VND. Similar with modern retailing channels, the growth among traditional market channels continue to grow progressively. RETAILMARKETSIZE 0 100 200 300 400 500 600 700 800 900 1000 2011 2012 2013 2014 2015 Food/Drink/Tobacco Specialists Independent Small Grocers Other Grocery Retailers
TRADITIONAL RETAIL VS MODERN RETAIL (Trillion VND) Source: Euromonitor, USDA Despite both channels’ steady growth in the past years, the growth rate of its traditional market is declining in comparison to modern retail. Modern retail experienced a steep growth rate by 2014 at 28%. However declined the following year at 18%. TraditionalRetailing declined from 2012 having the growth rate of 24% down to 8% by 2015. RETAILMARKETSIZE 0% 5% 10% 15% 20% 25% 30% 2012 2013 2014 2015 Modern Retailing Channel Traditional Market Channel
82 outlets Considered as the largest retailer in Vietnam A specialty store in Vietnam offering wide range of imported goods and private brands Japaneseretailer expanding its domain in Vietnam 55 outlets Owned by a private company, second largest retailer in Vietnam 80 outlets Owned by a French Retailing Company present in 16 countries around the world 8 outlets RETAILMARKETPLAYERS 5 outlets SUPERMARKETS AND HYPERMARKETS
RETAILMARKETPLAYERS CONVENIENCE STORES 700 outlets 217 outlets Convenience Store in Vietnam with the highest number of outlets nationwide Malaysian-Invested company expanding its domain mainly around Ho Chi Minh City Second to Vinmart with the most number of outlets 128 outlets
Most of Vietnam’s population still rely on wet markets or traditional retail channels in making their day to day purchases. Primarily,Vietnamesedishesarecomposedmainlyoffresh fruitsand vegetables,makingwetmarketsthemost convenientplacetopurchasefreshgoodsfor everydayconsumption.Inadditionto this, traditionalretailoutlets also poseas a moreviableoption for mostVietnameseshoppers. RETAILMARKETPLAYERS Image Source
However, it is evident that modern retailing continues to flourish in a country heavily dominated by its traditional market. Remarkably, from 2 supermarkets in 1990s, thousands of modern concept retail stores are built around Vietnam and their numbers continue to grow each year. Vietnamese love fresh vegetables and fruits. Thus, modern retailing outlets make it a point to offer fresh products that can compete with goods sold in the wet market. Besides the impeccable look and feel, they assure their consumers that all areas of the store is completely sanitary. RETAILMARKETPLAYERS
The deli section also offers a wide range of cheeses and cold cuts for foreigners or expats and even for the Vietnamese consumers to enjoy. RETAILMARKETPLAYERS
Imported wines and liquors from different continents are also offered, giving the consumers a variety of choices that can be accompanied by cold cuts and cheeses that they purchase. RETAILMARKETPLAYERS
Modern retailing outlets also offer wide range of imported products. With the growing number of tourists and expats in the country, the demand for imported products also continue to grow. In addition to this, Vietnamese consumers are developing a taste and appreciation for imported products. RETAILMARKETPLAYERS
Modern retail outlets also offer private brands/products that can be exclusively purchased in their stores. In this way, they can assure every consumer that the products they sell are specially made to fit the demands and needs of their shoppers. RETAILMARKETPLAYERS Image Source
One key factor why Vietnamese consumers choose to shop in traditional markets is because they can decide to buy ingredients in smaller portions. In response to this, supermarkets are offering RTCs or ready to cook packages that is better suited with the daily needs of an average consumer. RETAILMARKETPLAYERS
Besides food products, non-food products and home appliances are also offered in supermarkets making shopping for house needs easier and possible under one roof. RETAILMARKETPLAYERS
To further improve shopping experience, some stores have in- house bakeries and cafés where consumers can hang out and enjoy with family or friends. RETAILMARKETPLAYERS
The local population’s inclination to make their purchases in the traditional outlets are hinged on four major factors. (1) Traditional outlets are seen everywhere posing convenience and ease of access for consumers. (2) Comparatively lower prices of goods and products to which consumers can still bargain (3) Fresh produce supply source is better at wet markets (4) Traditional retailers offer flexible package sizes for day to day consumption. A. VIETNAM’S POPULATION IS STILL INCLINED TO BUY FROM TRADITIONAL RETAIL CHANNELS CONSUMERBEHAVIOR ANDRETAILTRENDS
CONSUMERBEHAVIOR ANDRETAILTRENDS 94% 6% Traditional Modern According to Euromonitor’s 2016 report, traditional Market accounts for 94% of retail sales while modern accounts to the remaining 6%. However… The growth of sales in Traditional Market is declining compared to Modern Retailers. According to Nielsen, foot traffic on traditional outlets declined. In 2012, 81% of consumers go to traditional outlets while in 2014, it declined to 64%. On the other hand, foot traffic on convenience stores increased from 5% (total number of consumers) on 2012 to 11% on 2014.
B. INCREASED HEALTH CONSCIOUSNESS AND SPEND CONSUMERBEHAVIOR ANDRETAILTRENDS Top 5 concerns in Vietnam 1 2 3 4 5 Health Economy Job Security Increased Utility Bills Work Life Balance Source: Nielsen
CONSUMERBEHAVIOR ANDRETAILTRENDS Health consciousness ranks 1st on top 5 concerns by Vietnamese people according to a research conducted by Nielsen. In addition to this, the latest data released by the world bank proves the growth on healthcare spending in Vietnam (% of GDP). 0 1 2 3 4 5 6 7 8 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: World Bank 2002 2014 4.698 7.067
CONSUMERBEHAVIOR ANDRETAILTRENDS 0 1 2 3 4 5 6 7 8 2011 2012 2013 2014 Vietnam Malaysia Philippines Indonesia Thailand In comparison to its neighboring Asian countries, Vietnam has the highest spending on healthcare particularly due to its high demand from citizens. Spendingon healthcare grew by 241% over the past decade. Source: World Bank ASEAN Healthcare Spending (% of GDP)
C. BEVERAGE TOPS IN CONTRIBUTION AMONG ALL CATEGORIES CONSUMERBEHAVIOR ANDRETAILTRENDS Source: Nielsen 40% 15% 15% 6% 8% 13% 3% Beverage Food Milk Base Home Care Personal Care Cigarette Baby Care 0% 2% 4% 6% 8% 10% 12% Q1 - 15 Q2 - 15 Q3 - 15 Q4 - 15 Q1 - 16 Q2 - 16 Q3 - 16 Q4 - 16 Growth Beverage tops in Contribution among all categories at 40%. Far behind is the second category which is food at 15%.
With the maturing life stages (more and more family are having no dependent children), kids will have less influence in determining purchase priorities. Baby formula or children’s snack and beverage is starting to be bought seldom on retail stores. In 2015 alone, 44% of the total households in Vietnam have no dependent children. This is forecasted to grow up to 60% by 2025. D. KIDS ARE LESS INFLUENTIAL IN DETERMINING PURCHASE PRIORITIES CONSUMERBEHAVIOR ANDRETAILTRENDS
CONSUMERBEHAVIOR ANDRETAILTRENDS Old and Single 74% Empty Nesters 63% Families with dependent kid/s 36% The number of Old and Single among the population has the highest growth rate in Vietnam while Families that have dependentkid/s has the lowest growth rate and is forecasted to even drop further. LIFE STAGES GROWTH 2015 Source: Cimigo
CONSUMERBEHAVIOR ANDRETAILTRENDS Source: Nielsen Baby Care Baby Care Products have the lowest contribution among all categories and continues to decline per quarter. 40% 15% 15% 6% 8% 13% 3% Beverage Food Milk Base Home Care Personal Care Cigarette Baby Care -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% Q1 - 15 Q2 - 15 Q3 - 15 Q4 - 15 Q1 - 16 Q2 - 16 Q3 - 16 Q4 - 16 Moreover…
D. E-COMMERCE IS A RETAIL CHANNEL THAT HALF VIETNAM’S POPULATION IS UNFAMILIAR OF CONSUMERBEHAVIOR ANDRETAILTRENDS Internet Users 50.05 Million Penetration 53% Mobile Internet Subscription 47.19 Penetration 50% Million 94.93 Million Urbanization 31% Population Source: wearesocial
VIETNAM AND PHILIPPINES IN COMPARISON
PERCENTAGE OF THE POPULATION 0 – 14 ARE BOTH DECLINING IN VIETNAM AND PHILIPPINES WHILE 15 – 65 AGE GROUP ARE BOTH ON THE RISE 0 – 14 AGE GROUP. 15 – 65 AGE GROUP Source: World Bank VIETNAM-PHILIPPINES Despite their similarities, it can also be noted that the ratio of adults to children in Vietnam is 3:1 whereas in the Philippines it is at 2:1. This denotes that there are fewer families in Vietnam with dependent children, highly affecting the purchase priorities. 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 1990 1995 2000 2005 2010 2015 2020 PHILIPPINES VIETNAM 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 1990 1995 2000 2005 2010 2015 2020 PHILIPPINES VIETNAM
VIETNAMESE PEOPLE TEND TO SPEND MORE ON HEALTHCARE COMPARED TO FILIPINOS Source: World Bank Based on the data released by the World Bank, among the neighboring countries, Vietnam has the most percentage in its GDP allotted for healthcare, characterized by the population’s demand. Furthermore, health and wellness is a booming sector in Vietnam. COMPARISON 0% 1% 2% 3% 4% 5% 6% 7% 8% Vietnam Indonesia Malaysia Philippines Thailand 7% 5%
PHILIPPINES HAS A BETTER PLATFORM FOR E – COMMERCE COMPARED TO VIETNAM COMPARISON Source: wearesocial Mobile Subscription Penetration Rate 50% Penetration 126% Penetration
Philippines Vietnam Philippines Vietnam 9H 00M 6H 53M 3H 36M 2H 33M On average, Filipinos spend more time on their computers and mobile phones compared to Vietnamese people. This implies the inclination to purchase services or goods online is stronger in the Philippines compared to Vietnam. Averagetime spent via PC or Tablet Averagetime spent via mobile phone COMPARISON TIME SPENT ON INTERNET USAGE Source: wearesocial
TRADES AND SERVICES Vietnam’s GDP growth can be attributed to its strong trade and services sector, further fueled by Foreign Direct Investments and Free Trade Agreements. TRADITIONAL MARKET Traditional Market still rules the retail landscape in Vietnam. However, sales on this channel is declining while modern retail sales is on the rise. CONCLUSION
FAMILIES The number of families with dependent children in Vietnam is declining making baby/kids products have the lowest sales. HEALTH AND WELLNESS Health and Wellness sector in Vietnam’s market is a good place of investment as it is the primary concern of the population. CONCLUSION
E - COMMERCE In comparison, Philippines sets a better platform for E-Commerce to flourish. If Vietnam wants to tap into this market, penetration rates for internet usage should improve. CONCLUSION
END OF REPORT