Shifting consumer preferences leading to key changes in retail channels

Mr. Peter Christou, General Manager, Worldpanel Division, Kantar Vietnam

Vietnam’s retail landscape is still largely contributed to by traditional trade, which accounts for more half to the total retail channel value. However, recent years have seen the faster growth of modern trade channels and e-commerce, signaling that they will play a crucial role in shaping the development of Vietnam’s retail market in the years to come. They are gaining popularity, particularly in urban cities, as consumers appreciate the convenience and proximity advantages they offer.

Our data also shows that shoppers are making fewer trips and instead spending more each time. This trend has been sustained after Covid-19 restrictions, indicating a fundamental change in shopper habits. In the current economic context, consumers have become more selective and deliberate in their shopping decisions. Moreover, consumers are not only smarter but also more demanding. These changing shopping preferences present both challenges and opportunities for brands and retailers. To thrive in this evolving landscape, it is crucial for retailers to enhance the overall shopping experience and deliver value through their offerings in each shopping trip.

Fast-moving consumer goods (FMCG) volume growth has been slow due to rising prices and the uncertain economic situation, which adds to the financial pressure constraining shoppers’ budgets. As a result, consumers are looking for ways to save money and cut down on non-essential expenditure, including eating out and entertainment. Furthermore, the competition is intensifying among domestic and foreign players, posing challenges for retailers to differentiate themselves and attract customers in a crowded marketplace. Retailers must gain a deep understanding of the key drivers that influence shoppers’ store choices and their perceptions of different stores.

Looking ahead, Vietnam is currently experiencing the advantages of a golden population structure and a fast-growing consumer base, driven by the country’s strong economic performance, rising income levels, and expanding middle class. The low penetration of several modern trade and online channels creates significant room for growth and innovation in the digital and modern trade sector. Vietnamese consumers are tech-savvy and quick adopters of new technologies, with a 96 per cent e-commerce adoption rate among urban digital users. All of these signs point towards a promising long-term picture for modern retail in Vietnam.

Mr. Nguyen Manh Ha, Supply Chain Planning and Optimization Director, One Mount Distribution JSC

The shifting shopping preferences of consumers in Vietnam, particularly among young urban consumers, have had a profound impact on the retail landscape. As this demographic group becomes increasingly digitally-connected and tech-savvy, their preferences and behaviors have evolved, leading to significant changes in modern retail channels like our technological ecosystem. This includes the development of user-friendly mobile applications, online ordering systems, personalized recommendations, and seamless payment options. By embracing technology, we can provide a more convenient and efficient shopping experience for young urban consumers, aligning with their preferences and lifestyles.

In addition, applying technology in the retail sector has undoubtedly revolutionized the way businesses operate and meet customer needs. In the context of Vietnam, the impacts of technology on the retail market have been significant and transformative. We strongly believe that applying technology in the Vietnamese retail market is a crucial aspect of not only meeting but also exceeding customer expectations and driving positive impacts.

Moving forward, we are committed to cooperating closely with strategic partners in the ecosystem to create multi-value packages and offerings that contribute to the ongoing transformation journey, with the aim of accelerating the process even further.

The estimated increase of $163.5 billion in Vietnam’s retail market between 2022 and 2027 indicates substantial growth potential. As a master distributor, this growth presents an opportunity to expand our product portfolio and capture a larger market share. The rising disposable income and changing consumer preferences in Vietnam create a favorable environment for introducing new products and brands.

With a growing middle class and rising disposable incomes, Vietnamese consumers are also becoming more willing to spend on a variety of products and experiences. This increased consumer spending translates into greater demand for a wide range of products across different sectors. As a master distributor, it’s a good chance for us to tap into this demand by strategically identifying and supplying popular and high-quality products that cater to the evolving preferences of Vietnamese consumers.

Vietnam’s retail market is undergoing a notable shift towards modern retail channels, including supermarkets, shopping malls, and e-commerce platforms. This shift presents opportunities for us to partner with these modern retail channels and provide them with a diverse range of products for their shelves or online platforms. By leveraging our distribution capabilities and network, we can position ourselves as a key supplier and partner to these modern retail channels.

Vietnam has experienced significant growth in internet penetration and smartphone usage, leading to a surge in e-commerce activities. This provides an advantageous opportunity for a master distributor to leverage technology and cooperate with e-commerce platforms, enabling broader market reach and increasing sales. By establishing strategic partnerships and optimizing our distribution processes for e-commerce fulfillment, we can effectively capitalize on the growing trend of online shopping in Vietnam.

However, one prominent challenge we face is the market’s fragmentation, characterized by various interest groups and stakeholders entrenched in long-established practices and traditional business approaches. Transforming the mindset and practices of these stakeholders to embrace modern, transparent methods necessitates a considerable investment of time and effort. This process is gradual and may require several years to achieve substantial change. Successfully navigating these challenges necessitates a comprehensive understanding of the retail market, robust operational capabilities, effective partnerships, and a willingness to adapt to evolving circumstances.

Mr. Lee Hee Seung, General Director, Lotte Shopping Plaza Vietnam Co. Ltd

After experiencing a challenging period due to the Covid-19 pandemic from 2019 to 2022, a positive shift has been observed in people’s shopping habits during the first half of 2023.

With rapidly-changing consumer preferences and expectations, retailers must stay ahead by gaining valuable insights into their customers’ habits, preferences, and needs. By investing in technology and information systems, such as a new mobile app and member system, Lotte is taking a proactive step towards acquiring these crucial insights. However, we recognize that this is an ongoing journey, and to stay at the forefront of the industry, we are planning to make a significant investment in upgrading our Customer Relationship Management (CRM) system.

The current landscape presents a promising opportunity for Lotte Shopping to expand its business activities in Vietnam. While there have been relatively few luxurious international fashion brands in the country until now, the rapid growth of Vietnam’s retail market in recent years has caught the attention of global brands. As the figures indicate, the retail market in Vietnam has been on a steady rise, attracting interest from renowned brands that see the potential of this emerging market.

Notably, many famous international brands have already expressed intentions to establish a presence in Vietnam, with a particular focus on the Hanoi area. This surge of interest from global players highlights the attractiveness and untapped potential of the Vietnamese market.

For Lotte Shopping, this represents a strategic opportunity to seize the momentum and expand its business activities. As more international brands enter the Vietnamese market, Lotte Shopping can leverage its established customer base, innovative technologies, and customer-oriented approach to stand out and thrive in this increasingly competitive landscape.

The increasing opportunities in Vietnam’s retail market will not only attract Lotte Shopping but also a multitude of competitors, both domestic and foreign. As more players enter the market, the competition is likely to intensify, making it crucial for Lotte Shopping and other businesses to stay agile and responsive to the rapidly-changing economic landscape.

Adaptability is key in such a dynamic environment. As Vietnam’s economy continues to evolve, consumer behavior and preferences may shift, influenced by various factors such as technology advancements, social trends, and global events. To thrive in this competitive market, Lotte Shopping must be willing to constantly evolve and innovate, ensuring that its strategies remain relevant and appealing to its target audience.

In terms of expansion, we are excited to announce the opening of Lotte Mall West Lake this month. This marks a significant milestone, as it becomes the second branch of Lotte Shopping in Hanoi, showcasing our commitment to serving the community in this vibrant city. Looking ahead, we have ambitious plans to further extend our presence in Vietnam. Both Hanoi and Ho Chi Minh City present excellent opportunities for growth, and we are actively exploring the possibilities of opening more stores in these key locations.