The Future Of Retail In Vietnam | Vietcetera

The Future Of Retail In Vietnam

Vietnam aims to have over half of the 96 million population shopping online by 2025 – a trend only accelerated by the pandemic.

Opinion | The Future Of Retail In Vietnam

In the wake of the pandemic pressures, retailers are racing to keep up with the accelerated tech takeover. | Source: Shutterstock

Hesperus Mak is the Head of Strategic Planning at TBWA\Vietnam.

Retail is a lucrative yet challenging sector in Vietnam, and presents a huge opportunity for brands looking to develop and grow across the region. 

With a young tech savvy population and the fastest growing middle class in Southeast Asia, Vietnam’s retail consumption is valued at US$180 billion and is projected to see more than 10% growth in the next five years.

By 2025, Vietnam’s e-commerce market size is expected to be second only to Indonesia in Southeast Asia. The government’s five-year transformation strategy aims to have over half of the 96 million population shopping online by 2025 – a trend only accelerated by the pandemic.

However, a great e-commerce strategy does not guarantee success. There is still an insatiable demand for physical retail, especially after months stuck at home. In 2020, when Uniqlo and Muji opened new stores in Vietnam, there were huge queues of shoppers waiting to explore and experience the brands.

But to stay ahead, more contemporary retail concepts are needed to engage the modern and young Vietnamese population. The pandemic has also forced retailers to adopt and embrace omni-channel operations that provide seamless experiences between digital and physical worlds. Some foreign retail businesses have struggled to adapt, including Malaysia’s Parkson Retail Asia and Korea’s Lotte Mart, which have both closed stores in the past two years.

Here are three trends that are playing a growing role in Vietnam’s future of retail:

Flex Retail 

The surge in e-commerce spending is forcing retailers to rethink the future of physical stores. Brick and mortar stores will need to expand their roles. 

Physical retail stores need to step up their game amidst changing consumer behavior. | Source: Shutterstock

Local retail giant Vincom is looking to enrich physical shopping by wrapping entertainment and arts around the whole experience and attract more visitors. This includes a full entertainment complex in Phu Quoc Island, and a contemporary art center in Hanoi. The Phu Quoc island project is called a ‘sleepless city’ – Vietnam’s first 24hr shopping, dining, and entertainment experience – a travel destination and a shopping paradise combined as one. 

It’s just one example of a growing number of businesses now using physical spaces to carry multi-purposes.

Phuc Long, a coffee and tea chain, is launching a new business model called E-Office – a  co-working space allowing full use of office equipment, while offering its drinks at a preferential price. But flex retail is not limited to the big players. Toong, a local co-working space is also disrupting the sector, creating one of the trendiest cultural spaces, with regular art exhibitions and film screenings. 

Meanwhile, as sustainability becomes increasingly important, not only to businesses but also to consumers, we’re seeing brands bring these practices into the retail space. H&M recently launched Looop in its flagship Stockholm store, the world’s first in-store recycling system turning old garments into new ones. Looop shreds old garment and knits a new one from the old fibres right in front of the consumers eyes, and encourages people to recycle their old clothes (from any brand) at its stores.

As environmental concerns continue to grow, we are also seeing local examples of recycling advocates in Vietnam. A new café has opened in Ho Chi Minh City, after initial success in Hanoi, that incentivizes patrons to bring in recycling materials by offering discounts on drinks. The venue is decorated in recycled objects and customers can also make their own recycled items while enjoying the coffee.

The possibilities of the flex-retail spaces are limitless, but it is crucial for these experiences to be connected to the core brand values of the business in order to truly resonate with customers.

Tech Tightrope  

In the wake of the pandemic pressures, retailers are racing to keep up with the accelerated tech takeover. For example, Alibaba Group and private equity firm Baring Private Equity Asia are investing US$400 million in Vietnam’s retail giant Masan Group to boost Lazada’s competitiveness in the online grocery business.  

E-commerce presents opportunities and challenges, which industry players must understand and take head on. | Source: Shutterstock

Without doubt, brick and mortar stores will continue to be essential in consumers’ lives, but we are beginning to see the next generation of retail technology unfold – bridging the gap between ecommerce and in-store shopping, and working behind the scenes to enable a more intuitive, intelligent and sensorial shopping experience. 

A leader in this space is Sephora, who’s sales associates can access customer profiles that detail someone’s loyalty points, in-store purchases, online browsing and purchasing patterns, and even past interactions with salespeople. Associates then use this information to make product recommendations and customize the in-store experience—an approach that has proven to boost loyalty. 

Vietnamese tech startup Palexy is also using video camera, facial recognition and AI technology to help retail clients analyze customer behavior and their in-store journey.

However, while Vietnamese customers are optimistic about the use of technology, some are increasingly aware of the need for better digital wellbeing. According to Global Web Index, around one-third of Vietnamese track their screen time or set time limits, so to balance their day with non-digital activities and minimize the impact on their health. This, coupled with the growing data-privacy concerns, means retailers need to be extra careful in balancing between obtrusive tech and customer convenience.

The key is greater transparency on boundaries of what is collected, while clearly outlining the benefits and added value that customization will bring. Only then, will users become more willing to hand over their data and let brands into their lives.

Networked Commerce 

A growing peer-to-peer marketplace is disrupting the traditional buyer-to-seller relationship. 

With 93% of internet users having smartphones, many Vietnamese now turn to social media for discovery, buying and selling of products, especially within the fashion category. As this behavioral trend continues, more and more brands are connecting with consumers through conversational commerce, including L’Oreal and Pepsi who have explored using Facebook Messenger to accept orders, resulting in a more convenient and natural buying experience. 

To succeed in social commerce, brands also need to create a more seamless network and empower people to become active players. 

The products sold on Mio are provided by suppliers who have a tie-up with the platform, and it allows people – mostly rural women – to register as its agents and become micro-entrepreneurs. | Source: Mio 

As traditional retail is still the norm in Vietnam, the next frontier of transformation will be rural. Social ecommerce startup Mio is building a reseller and logistics network in smaller and rural cities in Vietnam that are usually underserved by e-commerce platforms. The products sold on Mio are provided by suppliers who have a tie-up with the platform, and it allows people – mostly rural women – to register as its agents and become micro-entrepreneurs. It will provide them with training in selling and order management skills, besides ensuring product quality and reasonable prices. The agents use social media channels such as Facebook, TikTok, Instagram, and Zalo to reach end consumers.

Brands looking to expand into social commerce, should first take time to understand how users interact on different social platforms – their mood, mindset and purpose when using each one will be different. The customer journey should be native and seamless for customers to feel comfortable purchasing via these channels, with natural discussions and endorsements from people they know going a long way.

The new chapter for retail is here. It’s paramount to become omni-channel and adapt to new ways of fulfilling orders, but ultimately, the brands that succeed will be those who invest in understanding changes in consumer behavior and cultural shifts, and look ahead for the next wave of disruptive demand. 

For more global trends, check out TBWA\Backslash’s latest report  – The Future of Retail: https://www.backslash.com/futureof