Insights:
- Vietnam’s retail sector is projected to grow at over 12% annually through 2029, driven by a young population and rising incomes.
- Vietnamese shoppers are rapidly adopting e-commerce and digital payments.
- Consumers prioritise health, sustainability, and brand loyalty, rewarding companies aligning with their values.
Due to several advantageous factors, Vietnam’s retail industry is now going through a period of rapid growth. These include a younger and more active population, rising earnings, urbanization, and shifting consumer preferences. When taken as a whole, these elements position the industry as one of the most promising engines of economic expansion in the following years.
Projected growth and key drivers
Vietnam’s retail sector is poised for significant expansion. Let’s explore the key factors fueling this exciting growth and what it means for businesses.
Vietnam’s retail market
Experts in the field are excited about the future of Vietnam’s retail market. They anticipate tremendous development potential in the upcoming years, driven by several favourable variables.
Between 2024 and 2029, independent forecasts from companies such as Tien Phong Securities Corporation and Mordor Intelligence indicate a steady CAGR of about 12%. This points towards a vibrant and thriving retail landscape in Vietnam.
What’s driving this exciting growth? Here are some key observations:
- Economic prosperity and a growing middle class: Economic growth in Vietnam is largely responsible for the rapid expansion of its middle class. There is growth in purchasing power and purchasing ability, leading to a growing demand in many retail industries.
- Embracing the digital age: Vietnam is rapidly progressing towards digital payments, and the government is vigorously pursuing this shift. This move towards a cashless world where more than 40% of consumers already rely on banking apps to shop is driving and allowing for a more efficient and less opaque retail environment.
- Modernizing the shopping experience: The emergence of new retail formats (supermarkets, convenience stores, and online retail) facilitates shopping that is both convenient and more accessible, particularly in rural locations that were previously neglected.
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Capitalizing on Vietnam’s demographic advantages
For retailers, Vietnam’s distinct demographic environment offers a wealth of potential. Over 100 million people live in the nation, and over 70 per cent are under 40. This youthful, tech-savvy, upwardly mobile, and aspirational consumer demographic drives the demand for various goods and services.
Retailers will be well-positioned in Vietnam’s dynamic market if they adjust to this generation’s changing needs and preferences.
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Evolving consumer trends
Vietnam’s shoppers are evolving, with new priorities and preferences shaping the retail landscape.
- Health and Sustainability:
In recent years, Vietnamese consumers have become more aware of health and sustainability issues. This change is affecting how they shop.
With humanity’s increasing health awareness, there is a demand for environmentally friendly products of good quality with minimal environmental impact. This change in consumer behaviour is evident in many domains, such as food, beverages, cosmetics and household products.
Consumers want brands that claim to be sustainable practices, i.e., organically sourced, minimizing packaging waste, and responsibly sourcing materials. This perception shift indicates an emerging trend toward a responsible way of life and more on health for oneself and the future of the Earth.
- Brand loyalty:
Consumer loyalty to known brands is increasing, so how consumers shop is changing. Customers are getting out of the habit of searching for the lowest price and instead putting a higher value on things.
Product quality, brand image and customer satisfaction are essential to buying decisions. Consumers want to purchase brands that fulfill their quality requirements while satisfying their values and lifestyles.
Thus, companies emphasizing engagement, transparency, and trustworthiness are better positioned to play in this evolving market.
Leading retail enterprises and their strategies
Many leading retail companies are well-placed to take advantage of the growth in the sector. These companies are changing their strategy to meet new market trends and customer needs.
- MWG (Mobile World Investment Corporation): MWG focuses on strategic restructuring and operational efficiency to enhance performance. The company is also strengthening its grocery chain, Bach Hoa Xanh, and consumer electronics brand, Erablue, to cater to the growing demand in these segments.
- Digiworld: Digiworld anticipates robust growth driven by increased consumer spending and confidence. The company desires to see the potential positive impact of foreign direct investment in and of doing so by governments’ policies (e.g., cut of Value Added Tax (VAT) on certain goods and services).
- Other key players: The other key players in the Vietnamese retail market are FPT Retail (FRT), Masan Group (MSN), and Phu Nhuan Jewelry JSC (PNJ). These companies are not just considering their own characteristics and reshaping their strategy but also using the favourable market environment.
Expert opinions and future outlook
Industry experts share a positive outlook for the future of Vietnam’s retail sector.
Mr. Hoang Xuan Trung, Head of Corporate Clients at Citi Vietnam, points out that the demographic advantage and the rising affluence of the middle class are significant factors driving retail demand in the coming years.
Ms. Dang Thuy Ha, Director of Customer Behaviour Research at NielsenIQ Vietnam, notes that consumers increasingly prioritize quality-of-life improvements, creating valuable opportunities for retailers to expand their product offerings.
Mr. Nguyen Viet Duc, Head of Digital Business at VPBank Securities, anticipates a rebound in retail stocks, fueled by growing demand, higher consumer spending, and the overall momentum of economic recovery.
Conclusion
Vietnam’s retail industry is poised for a bright future, driven by a combination of favourable factors, including strong economic growth, a young and dynamic population, rising incomes, increasing urbanization, and evolving consumer behaviour. The sector is expected to play a crucial role in the country’s economic development, providing significant opportunities for domestic and international businesses.
