Retail brands compete in the Vietnamese market

Brands seize the opportunity to enter the market

According to the General Statistics Office, in the first 11 months of 2023, the total retail sales of goods and consumer service revenue nationwide at current prices is estimated at VND 5,667 trillion, up 9.6% over the same period in 2022, of which revenue from accommodation and food services increased by 15.3%, and tourism revenue increased by 50.5%.

Retail sales of goods in the first 11 months of 2023 are estimated at VND4,420 trillion, accounting for 78% of the total and increasing by 8.6% over the same period last year (excluding the price factor, which increased by 6.8%). Of which, the group of cultural and educational items increased by 14.7%; food and foodstuffs increased by 11.4%; clothing increased by 7.6%; household appliances, tools and equipment increased by 6.3%; and means of transport (excluding cars) decreased by 3.3%.

Real Estate - Retail brands compete in the Vietnamese market, shopping malls attract brands — In Vietnam, the high-end retail segment is still vibrant, attracting many brands (Illustration photo).

According to observations from the Commercial Leasing Department, Savills Hanoi, the Vietnamese market in general and Hanoi in particular, is becoming an ideal destination for international brands, from fast fashion to luxury and high-end retail segments.

Ms. Hoang Nguyet Minh, Senior Director, Commercial Leasing, Savills Hanoi commented: “Since the post-Covid-19 period, Vietnam has emerged as a potential market with strong appeal. The increase in domestic consumption is considered one of the factors driving the growing interest of international brands in this market.”

According to Ms. Minh, another important factor that makes the retail market in Vietnam attractive is that compared to neighboring countries such as Singapore, Thailand, and Indonesia, the number of international brands present in Vietnam is still limited. This creates a great opportunity for brands that want to expand their market, especially when they are looking for their first steps here.

In particular, Hanoi is attracting attention as a hot spot for retail development thanks to its rapid urbanization, large population, high population density, increasing number of middle-income households and a large working-age population. These strong fundamental factors have created huge retail demand for the capital market.

The market also recorded a more vibrant high-end retail segment with expansion activities and new store openings. High-end brands use a one-store strategy in prime locations. In Hanoi, the Hoan Kiem area, especially on Ngo Quyen, Ly Thai To and Trang Tien streets, has continuously welcomed the appearance and expansion of high-end to luxury brands from 2021 to present, such as: Louis Vuitton, Dior, Berluti, Tiffany & Co., Maje, Longchamp or most recently Piaget, Watches of Switzerland...

One of the reasons why the market attracts famous brands is that the number of super-rich people in Vietnam has doubled and the number of rich people has increased by 70% in the past 5 years, and is expected to continue to skyrocket in the next 5 years. In addition, the sales prospects of luxury brands in Vietnam also contribute to creating momentum for continued expansion and attracting new brands to the Vietnamese market.

However, the current difficulty for retail brands, especially high-end retail, is the supply of premises. Ms. Minh shared: “Currently, the supply that meets the requirements of high-end brands in Hanoi is only 3,500m2 of floor space. Meanwhile, the demand for expansion and new openings of high-end brands in Vietnam is increasing. The number of high-end products and brands in Vietnam is still too small compared to the markets in Bangkok, Singapore or Indonesia in the region. The lack of supply leads to price competition and pushes up the rental price of premises on Trang Tien axis, an area not on the walking street.”

Ms. Minh analyzed: “The premises in Trang Tien area in Hanoi are currently divided into two groups. The first group, in the area where luxury brands such as Louis Vuitton and Dior are concentrated, and the streets are not pedestrian streets, have high rental prices, the same as the rental prices in Dong Khoi area in Ho Chi Minh City. The second group in the pedestrian street area has rental prices that are only 1/3, or even 1/4 of the first group.”

Retail rents on the first floor or street frontage in the central area of Hoan Kiem, major streets such as Trang Tien, Ly Thai To, Ngo Quyen, recorded rents 20% higher than before Covid-19 and will continue to increase in the future due to lack of retail supply. Stores that have rented premises since before Covid-19 also faced many difficulties when landlords increased prices and had to compete for space with newly opened brands or those needing to expand in this central area of Hoan Kiem, Ms. Minh analyzed.

Shopping malls in the race to attract brands

Senior Director, Commercial Leasing, Savills Hanoi said that domestic and foreign retailers are moving into shopping malls. With the advantage of being developed more systematically than renting small townhouses, shopping malls are doing better and better in building a tenant portfolio, upgrading services, amenities, and a clear legal corridor to support retail customers. At the same time, the old quarter, which is concentrated with many townhouses and small businesses, will have difficulty finding tenants to fill the gap during this period.

However, there are still some significant challenges as the number of shopping malls in Hanoi is still not enough to meet the needs of international brands. Therefore, the emergence of new shopping malls in the future will be a decisive factor, not only creating space for new brands but also promoting competition and diversification in the retail market. The Hanoi market, with its untapped potential, will certainly be an attractive destination for the expansion of international brands in the coming time.

Commenting on the retail market in 2024, Ms. Minh said: “The retail market in 2024 and 2025 will be more and more vibrant, as Vietnam is being evaluated as a key market in Southeast Asia for international retailers to expand their operations, leading to a large market demand. The market will also welcome new high-quality supply for the commercial center segment in Hanoi in the next 3 years. Meanwhile, the townhouse and retail podium segments of apartment buildings will face difficulties in leasing, and rental prices will hardly increase according to the general price level of commercial centers due to the specific scale, services, and tenant base of each project.”

N.Giang

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