How can retail businesses take advantage of opportunities?

Know how to choose its own path; the Vietnamese retail industry has reaped much success. Photo: Internet

Huge retail market

According to Vietnam Report, in recent years, Vietnam's retail industry has been growing rapidly. The compound growth rate (CAGR) in the period 2013-2018 was 10.97 percent. Total retail sales are also expected to reach US$180 billion by 2020, equivalent to an increase of 26.6 percent from 2018.

According to the World Bank's forecast, household spending will increase by 10.5 percent per year on average, together with the strong growth of the middle class. In the population of more than 97 million people (according to figures in 2019), the young population structure (60 percent of the population aged 18-50) is approximately 70 percent of the Vietnamese population. On the economic front, 13 percent of the world is middle class. These income classes are growing rapidly – about 20% per year during 2010-2017. Since 2014, an average of 1.5 million Vietnamese have joined the middle class every year.

However, the difficulties and challenges from constantly changing consumer demands are requiring businesses to have flexible policies to adapt to technology-based competitive trends to match modern consumption habits.

Choose their own way

In the Top 10 Prestigious Retailing Companies in 2019 announced by Vietnam Report on October 10, it is worth noting that there are two Vietnamese retail businesses – Vincommerce and General Trading Services Joint Stock Company and Mobile World Investment Joint Stock Company – ranking first in two categories, including FMCG, supermarket and durable goods, electronics, refrigeration, gold and silver. These are the two companies with the highest reputation scores and have maintained top position for two consecutive years. Vincommerce tops the group of fast-moving consumer goods and supermarkets thanks to VinMart and VinMart + systems, while Mobile World leads the group of durable goods, electronics, refrigeration, and gold and silver thanks to the Green Electronics brand.

According to a survey by Vietnam Report, VinMart is highly appreciated for the variety of goods, the quality of products and after-sales service, while Mobile World is highly appreciated for finance and brand name.

The reason why these two businesses succeed is that they know how to choose their own path. Instead of confronting foreign retail chains with modern models (trade centers) and financial potential, Vietnamese businesses have chosen their own path of building convenience store chains. This chain of small and medium-sized stores is very convenient to arrange in many places, like residential areas, while still meeting traditional shopping needs.

The survey by Vietnam Report showed that up to 98 percent of retail businesses said that all sales come from shops and agents. In 2018 and the first half of 2019, the market has witnessed the opening of hundreds of new convenience stores and supermarkets to meet increasing consumer demand in major cities across the country. Currently, Vietnam's retail market has more than 3,000 convenience stores (doubling over the previous two years), more than 8,000 markets and 2.2 million retail businesses. It is expected that in the fourth quarter of 2019 and throughout 2020, many businesses will continue the trend of developing retail chains in the country.

Leveraging Industry 4.0

According to recent statistics released by Appota, Vietnam is among the top 20 countries with the most internet users in the world, with 49 million people connected to the internet. The number of people who only use phones to access the internet in Vietnam, especially between the ages of 18-34, accounts for a very high proportion compared to the number of people using computers or other devices. Furthermore, Vietnam is a country with a high mobile connection: 55 percent of Vietnamese own a smartphone and it is predicted that by 2020, there will be 8 mobile phone users in every 10 Vietnamese people (Google APAC) and 46 percent of people owning a computer. This is the motivation for the trend of online trading in Vietnam in general to increase.

Some popular online consumption items.

The above data shows that the strong application of Industry 4.0 achievements of consumers is changing and tends to expand. In fact, the fourth industrial revolution in the retail sector is quietly taking place and creating many development opportunities for Vietnam with breakthrough changes from diverse, effective and fast service standards based on digital technology.According to a survey by Vietnam Report on user’s behavior, among the categories of goods that consumers often use online channels to buy mostly belong to three main categories: travel reservations, airline tickets, hotels (accounting for rate of 54.4 percent); clothing, footwear (41.2 percent) and household appliances (38.2 percent).

When answering the main trend of retail industry in the next three years, Vietnam Report's survey shows that Vietnamese enterprises are aware of the top three main trends, which are environmentally-friendly products; focus on customer experience and more involvement of artificial Intelligence such as sales robots and automatic payment (accounting for 63.64 percent of the response rate).

However, in this context, foreign businesses have also gradually grasped Vietnamese consumers' tastes and habits to adjust appropriate business strategic directions.

Therefore, Vietnamese retail businesses must change to survive in this fierce competitive environment. In addition to good strategic planning, focusing on good management and reputable brands, Vietnamese retail businesses need to make good use of Industry 4.0 to promote their strengths in culture and experience, at the same time linked with each other and with industry associations.