Overview of the retail market in Vietnam
With an annual growth of 10% over the last 5 years, Vietnam’s retail sector surpasses its ASEAN peers’ such as Malaysia, Philippines or Thailand and was ranked 11th on the 2016 Global Retail Development Index (GRDI). Based on these strong figures, Vietnam’s retail market is forecast to continue to thrive, and will reach $109 billion worth of sales by the end of 2017. In this article, BDG explores different factors that contribute to the fast development of the retail market in Vietnam.
Young population, rise in disposable income and favorable policies are considered to be the main drivers for the robust retail market growth in Vietnam. Statistics from the Economist Intelligence Unit showed that more than two thirds of the total population of 90 million in Vietnam is currently aged between 15 and 64, which indicates great demand for a variety of retail products and services. Despite this, the number of supermarkets and shopping centers are still inadequate. According to the Ministry of Industry and Trade, there are currently 700 supermarkets, 125 shopping centers and 8600 traditional markets operating in Vietnam, meaning that each supermarket and shopping center is supplying for approximately 130,000 and 720,000 individuals respectively. Thus, various opportunities are still available for growth in the retail industry in Vietnam, especially in the modern retail market.
The purchasing power of Vietnamese consumers are likely to increase due to a significant rise in disposable income over the last decade. In 2013, the total personal disposable income and total consumer expenditure reached $127 billion and $111 billion respectively, marking an 80% increase from 2008. The figure is forecast to continue to grow in the following years and this will be likely to boost the growth in consumer retail spending.
Another key driver lies at the favorable legal policies that Vietnam government has been implementing. Having become an official member of WTO in 2007, Vietnam has been able to widen the door for a large number of foreign retailers to invest in Vietnam. For instance, under the WTO agreement, from January 2015, foreign retailers were allowed to establish businesses with 100% foreign capital. Vietnam also shows great effort in cutting tariff and other trade barriers after participating in different FTAs, a topic BDG already wrote about. The favorable political and economic environment has supported the investment of a number of foreign retailers such as Central Group, Metro, Aeon Mall, Lotte and CJ Group in Vietnam. Although the presence of new foreign entrants may become a significant threat to the domestic retailers, it will be likely to increase the competitiveness in the industry and benefit Vietnamese customers with potentially higher products quality and lower prices.
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