From a local investor perspective, we have seen significant growth in retailers in clothing (such as Blue Exchange), electronics (Nguyen Kim, Mobile World and FPT) and coffee (Trung Nguyen).
Foreign investors are also entering the market with AEON from Japan opening its first mall while Starbucks has seven outlets and M&S have just announced the opening of their first store.
The opportunity is indeed large but, as the motorbike dynamic shows, there are some Vietnamese idiosyncracies at play. Some of the common themes that come across from discussions with various local and foreign Retail leaders are:
- Time Horizon
Be flexible with your return on investment. One fast food chain has increased its business plan from a three year to an eight year return. A Mall operator has a ROI horizon of 10 years - something many listed companies may struggle with.
- Cash is King
Over 95 per cent of the transactions, even in the most advanced stores, are cash. Credit card penetration is growing but from a very small base (3 per cent penetration) and consumers have not got used to the idea of using a debit card for day to day shopping. Even in the auto-sector, less than 10 per cent of cars are purchased with credit.
- Wet Market to Mall to Digital
The ready mix of shopping experiences have spoilt the Vietnamese consumer. The ability to enjoy the street life of wet markets, the comfort of a mall or the convenience of digital will only serve to spread the growth of the Vietnamese consumer. For someone like me who loves 'street life', one can only hope that the Mall culture doesn't come at the expense of the wet market. At present it doesn't look likely.
We can see the growth of online spending through our own ANZ Credit Card business. Overall spending online is growing at 35 per cent year on year. Again, it is off a small base but in a few years this will become very meaningful.
- Location Discovery
This appears to be a specific pain point, especially for retailers looking to expand into Hanoi. Finding the right building, in the right location at the right price appears to stretch the patience of most retailers. This is something that will evolve (as people get used to the negotiation process) but at present it does cause clear frustration to many looking to expand.
So where are the second Cities?
After Hanoi and Ho Chi Minh, the growth of cities such as Hai Phong, Danang and Can Tho has clearly allowed them to establish themselves as contenders. Ho Chi Minh has “satellite” centres such as Dong Nai and Binh Duong - large export related manufacturing hubs which are also fast growing. However, it is clear that more centres will evolve as the level of urbanisation continues to grow.
The mood of the consumer has proved to be a major driver of behaviour. We have seen the Vietnamese consumer display a fairly volatile mood over the past seven months. The ANZ Roy Morgan Consumer Confidence Index demonstrates this.