Business Trends in Vietnam in 2020: Quang Thai, CEO of DTX Asia

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, CEO of DTX Asia shares what’s on his business outlook for 2020.

What was the brightest spot in your industry, and for your team, in 2019?

In 2019, the retail sector saw a year-on-year growth of 12.5%, which was largely due to the growing upper-and middle-income segment concentrated in first-tier cities. Though largely seen as traditional and quite fragmented, the retail sector still offers many opportunities for innovative retail concepts.

E-commerce stands a real chance of getting a 6% slice of the total retail market pie. Pushing for new solutions in mass consumer experience, e-commerce is at the same time pushing the boundaries of the entire Online-to-Offline (O2O) model. Also quite a few new tech companies entered the market offering enhanced and automated operational, tracking, analytical and purchasing solutions.

As for DTX Asia, we’ve been loyal to the O2O model, having Direct-to-Consumer(DTC) brands at the forefront of our company structure. We played around with multiple distribution tactics to optimize on unit economics of each channel. Now, having found the right model and with the core team in place, we’re ready to scale and expand into other product categories that have synergies with our existing customer base.

Given the current economic headwinds, in what ways will your industry adapt to changing conditions in 2020?

These days consumers have an unprecedented variety of brands to choose from. I’m a firm believer that as a brand differentiator, user experience comes before product innovation and distribution channels. I believe this will remain the case in the coming years.

It might come as a surprise to many. From the early days of e-commerce till now, the percentage of consumers who prefer brick-and-mortar experience has actually risen to 86.3%.

The reality is that in the physical retail sector, online channels have served well as a means of driving awareness, but in-person experience in a physical store is much superior in converting these audiences not only into customers, but into brand advocates. If executed well, of course.

In today’s climate of skyrocketing digital ad cost and the pandemic we’re going through, within the first half of 2020 retailers had to get creative with acquisition methods and use of channels.

There is certainly a limit to what can be automated while leveraging technology and building a sustainable DTC brand. But I am confident we’ll be seeing a greater amount of automation towards curating more relevant, personalized and instantly accessible content, which in turn will gradually drive customer acquisition costs lower.

For 2020, within the O2O model, online marketing will remain the focus. Much more expense and brainpower will go towards content creation to build more authentic and transparent brand equity.

Transactions and product receivals for the next half of 2020, however, will be steered towards physical stores with brands investing in systems that allow them to personalize experiences for different buyer types. This is crucial to businesses since there is no one-size-fits-all experience for consumers.

How will the typical customer profile need to change in 2020, in your business?

We have a strong belief in the young generation. GenY and GenZ customers have definitely raised the bar when it comes to expectations. They want superior experience and are uncompromising.

These digital-savvy young consumers are very aware of social issues, from sustainability and gender equality, to diversity and the COVID-19 pandemic, of course. They rally around causes that benefit the greater good and expect brands to do the same. We will see a big wave of brands demonstrating authenticity and altruistic values to connect with this generation on an emotional level, especially in this tough time.

Having said that, brands must understand that in the digital era, it’s not just the Millenials and the Gen Z cohort who are actively shopping online. Most age groups have online presence, so segmenting by age and demographic is no longer relevant.

Retailers that opt for large inventories understand this well, since fragmented markets still offer many opportunities for building customer loyalty across many age groups. We will soon be seeing brands shifting from “marketing to age groups” to “marketing to tribes” with shared passion points, beliefs and values.

General economic outlook in your sector for 2020 onwards: positive, cautiously positive or negative? What sort of bounce will your industry see after the pandemic passes?

Although it’s incredibly difficult to estimate the exact impact of the coronavirus, we know that most affected industries are tourism, electronics, insurance and agriculture, since the supply chains between China and Vietnam were hugely disrupted.

Due to the shift in demand during the outbreak, F&B, apparel, cosmetics and entertainment industries are also severely affected. In Q1 2020, most retailers are making plans to source local manufacturers as their alternative option. But since almost 60% of Vietnam’s materials and garments are imported from China, the scarcity is leading to significantly higher cost of goods for most retailers.

A good sign, however, is that we are noticing enterprises take aggressive actions towards creating innovative sales channels and technologies to ramp up online distribution. Because of the crisis, what would have taken years of research and development, is now implemented in a matter of days. The risk of not investing in R&D is probably much higher than anyone can anticipate.

Looking at Q3 2020, I would divide retail businesses into three main categories according to their approach to the crisis and their performance:

• Those who didn’t make it: mostly traditional retailers that solely depended on offline distribution.
• Those who barely made it: retailers who made their way into online transition and have efficiently optimized their operational activities and online metrics.
• The striving ones: retailers who not only transitioned frictionlessly to online channels, but also built higher brand loyalty through their commitment to community and society during the outbreak.

Across the board, what sort of businesses and leaders do you expect to emerge from this crisis?

Again, with so much change happening across all industries, this insecure and fragile time should be the moment for businesses to step up and become role models.

From donations to the Ministry of Health to taking part in community initiatives to doing our part to raise awareness about the disease — all acts of kindness are greatly appreciated by the public.

During a sensitive time such as this, consumers are more alert and take notice of businesses that are selfless and altruistic rather than stuck in their ways and narrow-minded. Therefore, businesses that are mindful of this have to take their chance to contribute and build loyalty among consumers.

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