Vietnam Retail Industry Outlook to 2028

Vietnam Retail Industry Overview

• The retail Market in Vietnam reached a market size of USD 250 Bn in 2023, driven by robust economic growth, increasing urbanization, and rising disposable incomes.
• Key players in the Vietnamese retail Market include Lotte, Aeon, Vin Mart, Big C, Saigon Co.op, Circle K, Tiki dominating the market through a combination of extensive distribution networks, strong brand presence, and strategic partnerships.
• Masan Group's 2023 acquisition of a 20% stake in Phuc Long Heritage for USD 15 million highlights the trend of strategic acquisitions to diversify portfolios. This allows Masan to leverage Phuc Long's brand and expand in the beverage segment.

Vietnam Retail Current Market Analysis

• Mobile World dominates the market with over 3,000 retail outlets and an annual marketing budget exceeding $100 million, capturing a significant share in key segments such as electronics and gadgets.
• The apparel segment remains a dominant force in the market, with retail sales reaching $10 billion in 2023, buoyed by fashion-conscious consumers and the proliferation of international brands like Zara, H&M, and Uniqlo.
• Sales data indicates a notable uptick in grocery retailing, with premium grocery products witnessing a 20% increase in sales, reaching $2 billion in 2023, attributed to changing lifestyle patterns and the growing preference for premium and organic food products.

Vietnam Retail Industry Segmentation

The Vietnamese retail market can be segmented based on various factors. Here are three key segmentation types with their sub-segments and estimated market share ranges:

By Retail Format: Vietnam Retail Industry segmentation by retail format is divided into traditional retail, modern retail and e-commerce. In 2023, the modern retail segment dominated Vietnam's retail market due to urbanization, rising disposable incomes, and changing consumer preferences for convenience and quality. Enhanced shopping experiences, better product variety, and the proliferation of malls and supermarkets have attracted more consumers, cementing modern retail's dominance.

By Product Category: Vietnam Retail Industry segmentation by product category is divided into food & beverages, personal care & household goods and apparel, footwear & accessories. In 2023, the food and beverages segment dominated Vietnam's retail Market due to rising consumer demand for convenience, quality, and diverse culinary options. Urbanization and increasing disposable incomes have driven the growth of supermarkets and convenience stores, making food and beverages the most sought-after products.

By Region: The Vietnam Retail industry is segmented by region into major cities (Hanoi, Ho Chi Minh City, Da Nang), secondary cities & towns and, rural areas. In 2023, major cities like Hanoi, Ho Chi Minh City, and Da Nang dominated Vietnam's retail Market with half of the market share due to higher population density, urbanization, and greater disposable incomes. These cities are hubs for commercial activities and modern retail formats, attracting both local and international retailers.

Vietnam Retail IndustryCompetitive Landscape

• Investment in Technology by Mobile World Group: In 2023, Mobile World Group invested USD 10 million in AI and machine learning to enhance customer service and inventory management. This aims to streamline operations, reduce costs, and improve customer satisfaction.
• Expansion of International Brands: IKEA announced its entry into Vietnam in 2022, planning to open its first store in Ho Chi Minh City by 2025. This brings a globally recognized brand to the market, increasing consumer choices and competitive pressure on local retailers.
• Growth of Local Brands: In 2023, local footwear brand Biti's expanded by opening 50 new stores nationwide, focusing on high-quality, affordable products. This expansion shows the growing appeal of local brands, capturing market share from international competitors.

Vietnam Retail Industry Analysis

Vietnam Retail Industry Growth Drivers:

• Increase in Disposable Incomes: Vietnam's economic development has led to a steady rise in disposable incomes, with the average per capita income expected to reach VND 72 million annually by the end of 2024. This increase empowers consumers to spend more on diverse retail products, driving retailers to expand offerings and enhance customer experiences to attract this growing consumer base.
• Expansion of E-commerce: Vietnam's e-commerce sector, flourishing with over 70% internet penetration and 68 million online shoppers from a total population of 100 million in 2023, is set for significant growth in coming years. The appeal of convenience, variety, and competitive pricing on online platforms attracts a diverse demographic. This surge is prompting traditional retailers to integrate digital channels, thereby revolutionizing the retail landscape.
• Young and Dynamic Population: Out of total of 100 Mn populationover 50% of its population is under 35 years of age. Vietnam boasts a young, tech-savvy demographic driving demand for modern retail formats. This group favors branded products, fashion, and technology, presenting retailers with opportunities to target them through innovative marketing and tailored product offerings.

Vietnam Retail Industry Challenges:

• Infrastructure Limitations: Despite growth, Vietnam's retail infrastructure faces logistical challenges and supply chain inefficiencies, ranking 39th globally in logistics performance. These issues can cause delivery delays, increased costs, and inventory management problems, especially for businesses expanding into rural areas.
• Regulatory Environment: Retailers in Vietnam navigate a complex regulatory landscape with frequent policy changes. In 2024, new data protection and cybersecurity regulations will impact e-commerce, requiring additional investments in compliance. These hurdles can be resource-intensive, particularly for smaller retailers and new entrants.
• Intense Competition: Vietnam's retail market is highly competitive, with domestic and international players like VinCommerce and AEON constantly expanding and innovating. This competition necessitates continuous investment in customer service, pricing strategies, and innovation, potentially straining profit margins and operational efficiency.

Vietnam Retail Industry Government Initiatives:

• National Retail Development Strategy (2021-2030): This strategy aims to develop a modern retail system by 2030, focusing on infrastructure development, digital transformation, and supporting local businesses to enhance retail market efficiency and competitiveness.
• E-commerce Development Plan (2021-2025): Launched to boost online retail, this plan aims to improve digital infrastructure and provide incentives for e-commerce startups. It seeks to increase online shopping participation, enhance digital payment systems, and establish comprehensive legal frameworks.
• Support for Small and Medium Enterprises (SMEs): Recognizing SMEs' role in retail, the government offers tax incentives, credit access, and capacity-building programs to enhance their competitiveness and enable expansion in the retail market.

Vietnam Retail Future Market Outlook

The Vietnam Retail Industry is expected to show significant growth by 2028 driven by digitalization, and sustainable initiatives. E-commerce platforms will continue to grow, with retailers investing heavily in online infrastructure to meet evolving consumer preferences.

Future Market Trends

• Omni-channel Retailing: The integration of online and offline channels will rise, offering consumers seamless shopping experiences. This trend will drive investments in digital infrastructure, with retailers developing advanced e-commerce platforms and mobile apps to complement physical stores.
• Sustainability Initiatives: Sustainability will become increasingly important, with retailers focusing on eco-friendly products and practices. Consumers will prioritize sustainability, prompting retailers to adopt green initiatives like reducing plastic use and implementing energy-efficient technologies, appealing to environmentally conscious buyers.
• Growth of Private Labels: Private labels will gain traction in Vietnam as retailers seek to offer exclusive, competitively priced products. These labels will provide higher margins and be perceived as good value, leading retailers to expand their private label offerings and drive customer loyalty.