A fruit vendor at a market in Hanoi. — AP
HANOI: The consumer outlook report from VNDirect Securities Corp shows that the pent-up consumption trend during the pandemic is gradually declining due to rising interest rates and a weakening Vietnamese dong making consumers tighten their purse strings.
The report added that the “wealth effect,” a psychological phenomenon referring to a change in consumer spending patterns as the value of unrealised assets rises, was fading.
All investment channels, including the stock market, property market, bond market and digital asset market, enjoyed a robust rise last year.
As all these markets have entered a sharp correction this year, which has scaled down the unrealised asset value, this will dent consumer spending power. Most labour intensive industries are facing headwinds.
The country’s export growth is expected to decelerate amid weakening global demand. Textiles, footwear, aquaculture and wood processing have to scale down their production.
Large retailers are slowing or delaying business expansion in response to market signals, owing to growing concerns about a downturn.
MWG’s An Khang pharmacy chain expansion has been delayed since the third quarter of this year.
The number of Bach Hoa Xanh and Circle K stores also saw a reduction, proving the caution of retail chains in the current market situation.
Thus, listed consumer companies tend to maintain better financial health with low leverage and a net cash position.
VNDirect anticipates that Vietnamese consumption will be hard hit in the first half of next year before gradually resuming growth momentum in the third quarter. A gradually stabilising macroeconomy in Vietnam will help boost consumer confidence, and a recovery in consumption in the European Union and the United States will help bring orders back to Vietnamese industrial zones.
In addition, the National Assembly passed a resolution in November on the state budget estimate for next year with the base salary to be increased by 20.8% compared to the current 1.8 million Vietnamese dong (US$75 or RM332) per month as of July 23, which would increase the income of workers and civil servants in Vietnam.
VNDirect said that the current Vietnamese retail market in general still had a positive trend.
According to the General Statistics Office (GSO): “Total retail sales of goods and services grew a healthy 25.3% year-on-year (y-o-y) in the first 10 months of this year.”
This was thanks to the low base last year.
If excluding the price factor, retail sales rose 16.8% y-o-y, even higher than the pre-pandemic level.
Vietnam resumed international flights in the first quarter, and revenue from tourism doubled, recovering to 78% of the pre-pandemic level.
Google data showed that the country’s mobility to retail and recreation has exceeded the pre-pandemic level by 4.6%, and mobility to groceries and pharmacies has increased by 27.5% compared to the pre-pandemic level.
According to GSO, Vietnam’s personal luxury goods market reached US$976mil (RM4.3bil) last year and is expected to grow 6.7% per year to US$1bil (RM4.42bil) by 2025.
In another report, Knight Frank said that there were about 72,135 individuals in Vietnam who had liquid assets of more than US$1mil (RM4.4mil) last year.
According to analysts, the retail market is entering a period of “symbiosis” of mutual benefits. Foreign enterprises entering the Vietnamese market often look for a local partner.
Domestic partners are enterprises that understand the market, culture and business environment to choose a site, devise a development strategy in accordance with consumer tastes and contribute to the success of investors.
Experts said that in the long term, the Vietnamese retail market was also driven by other factors, including the strength of the domestic market with 100 million people and a developing middle class, which were factors that attracted many foreign investors.
When foreign enterprises see the potential retail market, domestic enterprises are also trying to take advantage of their home-field strengths to make a breakthrough.
The Vietnam Retailers Association said that although the retail market in the country has seen the participation of many foreign investors, the enterprises holding market share are still mainly domestic brands such as Masan and MWG. — Viet Nam News/ ANN
It can be seen that the picture of the retail industry is bright with competition between domestic and foreign enterprises.
And in this fierce competition, Bui Ta Hoang Vu, director of Ho Chi Minh City’s Industry and Trade Department, said that domestic retailers should have a methodical development strategy to keep market share and maintain the existing advantage.
In addition, Vu said that in order to compete effectively, domestic retailers needed to be more proactive in the digitalisation process.
If they did not apply information technology through eCommerce, they would lose a huge advantage, he added.
