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Emerging economies in Asia are growing at a rapid pace compared to developed economies and Vietnam is among the rapidly growing economies in Southeast Asia. Vietnam’s growing retail market is an indicator of the country’s economic transformation and offers lucrative growth opportunities for local as well as global companies. Market research and consultancy firm Mordor Intelligence projects Vietnam’s retail market to register a CAGR of over 10% during the period 2021 and 2026.
Many regional and global retail multinationals are eying a piece of Vietnam’s retail market to take advantage of the promising sector. For instance, Thailand’s Central Retail wants to expand its footprint in Vietnam by more than double. The retail arm of Central Group plans to invest 30 bn baht ($790 m) to increase its presence in Vietnam’s retail market from 340 stores to 710 stores by 2026.
Foreign investments in Vietnam’s retail market
Central Retail plans to cover 55 of Vietnam’s 63 provinces by 2026 and increase its sales to 100 bn baht during the period. Since the launch of the first Central Retail store in Vietnam in 2012, the Thai company’s operations have increased steadily. Vietnam’s retail market is Central Group’s biggest source of revenue outside of Thailand.
The latest data from the Vietnamese Ministry of Industry and Trade shows that there are more than 800 supermarkets, 150 shopping centres and 9,000 traditional markets in the country.
Aside from Central Retail, Japan’s Aeon is also seeking a piece of Vietnam’s retail market. The Japanese company’s plans include launching 100 supermarkets in Vietnam by 2025. Sumitomo Corp. plans to expand its operation of Japanese-style supermarket chain FujiMart in Vietnam. Currently, FujiMart has three supermarkets in Hanoi.
Lotte, the South Korean retail giant, wants to launch more Lotte Marts in Vietnam. The Lotte Group exited the Chinese market in March 2019 and now considers Vietnam to be its third key market after South Korea and Japan.
What is driving Vietnam’s retail market?
While many economies were severely hit by the Covid-19 crisis and are yet to recover from the economic slump due to the pandemic, effective management of the pandemic helped Vietnam to recover faster. Vietnam achieved an average growth rate of about 7% between 2012-2019, but the country’s GDP growth slumped to 2.9% in 2020 and to 2.6% in 2021, owing to the impact of the Covid-19 pandemic. Nevertheless, Vietnam was among the few economies globally to be able to avoid an economic contraction in 2020. Vietnam’s economy gained momentum in the first half of 2022 with the lifting of restrictions. The country’s GDP increased 7.7% year-on-year in the second quarter of 2022, due to a surge in manufacturing. Moreover, the services sector has rebounded, and the reopening of borders in April 2022 provided a boost to tourism and retail sales recovered.
Technavio, a global market research firm, said Vietnam’s retail market is expected to grow by $82.70 bn during 2022-2026, progressing at a CAGR of 10.13% during the period. Similarly, information from the General Department of Tourism on August 1 said that in the first seven months of 2022, Vietnam welcomed 954,000 international visitors, an increase of nearly nine times over the corresponding period last year.
The World Bank expects Vietnam’s economy to expand by 7.7% in 2022, with exports and industrial production growing by 15.7% and 19.1%, respectively. At the same time, private consumption is expected to grow by 7.2%.
Vietnam’s consumer spending
As per the General Statistics Office of Vietnam, consumer spending in the Southeast Asian country increased to 4,736 tn dong (~$198 bn) in 2021 from 4,270 tn dong a year ago. Analysts at Trading Economics expect consumer spending to reach 5,067 tn dong by the end of 2022. In the long-term, consumer spending in Vietnam is projected to be around 5,321 tn dong in 2023 and 5,645 tn dong in 2024. The private consumption rate of Vietnam at 68% of GDP is the second highest in the ASEAN region.
A report by Fitch Solutions projects solid growth in consumer spending in Vietnam in 2022 and forecasts real household spending to grow by 5.7% year on year. The increase in consumer spending over 2022 will occur with a wider recovery in the Vietnamese economy. Meanwhile, Fitch’s forecast for real household spending of 2,805 tn dong ($121.3bn) over 2022 will be 8.3% higher than the 2,591 tn dong in the pre-Covid-19 era in 2019.
