People are still tightening their purse strings.

Consumer purchasing power has not improved, so supermarket shopping carts are still mainly necessities and promotional items.

A survey by Vietnam Report last September showed that about 40% of respondents did not feel their financial situation would improve in the final months of the year. This sentiment was also reflected in the purchasing power at large retailers, where the shopping basket was mainly necessities and promotional items.

According to MM Mega Market representative, in the first 9 months of the year, consumer demand increased by about 5-6% compared to the same period last year. Although the number of shopping bills increased by 9%, the value of each shopping basket remained at the same level. Specifically, the average shopping basket of each household remained at about 800,000 VND with products mainly being necessities.

Similarly, Saigon Co.op also reported increased sales thanks to weekly promotions. The average bill at Co.opmart is between VND400,000 and VND500,000, unchanged from last year. Instead of shopping for a wide variety of items like before, customers are now focusing on big promotional products with gifts.

The weak purchasing power of the people has led to a decrease in the demand for loans. Ms. Tran Khanh Hien, Director of Research at MB Securities Company, said that the credit growth of consumer finance companies alone is currently lower than the whole industry, while in times of economic stability, it is double the growth.

According to Ms. Dinh Thi Thuy Phuong - Director of the Department of Trade and Service Statistics (General Statistics Office), although the growth rate of total retail sales of goods and consumer service revenue in the first 9 months of this year (at current prices) increased by 8.8% compared to the same period in 2023, it has not yet reached the level of the pre-Covid period (increased by over 10%). The increase in the first 9 months of this year is still 2.5 percentage points lower than the average of the first 9 months of the years (2015-2019). This reflects that domestic consumer demand has recovered but is not high.

After excluding the price factor of the CPI, real consumption growth since the beginning of the year has not been able to bounce back strongly from the 5% threshold, according to data from financial services provider AFA Capital. This is a modest figure despite receiving support from more than 12.7 million international visitors in the first 9 months, up 43% compared to the same period last year.

Investment, export and domestic consumption are the three main driving forces of economic development. However, investment and export factors are having to shoulder and compensate for domestic consumption to accelerate the economy.

Mr. Huynh Hoang Phuong, an independent financial analyst, found that the growth rate of consumption was lower than GDP in the first 9 months of the year (6.18% and 6.4% respectively).

During periods of economic stability such as 2015-2019, consumption grew by an average of 7% per year, higher than the figure for the first nine months of this year. Consumption is an important component of GDP, accounting for more than 60% in Vietnam and about 60-70% in the US. It reflects consumer demand, is the basis for developing private investment and creates future economic prospects.

The reason for low consumption is that people's confidence in the future economy is not good or their jobs and income are affected, according to experts.

Many large-scale promotional programs have been launched to stimulate shopping and connect supply and demand. However, from the perspective of a distribution unit, Mr. Ha Ngoc Son, Deputy General Director of Saigon Trading Company (SATRA), realized that extending the promotional program would reduce its appeal. He said that the duration could be shortened to only about 1 month, half a month or even 1 week, but it needs to be done simultaneously, with a wide communication program for consumers to know. Thus, Mr. Son believes that it will create a synchronous spreading effect.

On e-commerce platforms, the discount periods are also spread out over many months with the highlight being the double days (for example 8/8, 9/9...). Therefore, Mr. Nguyen Binh Minh, Executive Committee Member of the Vietnam E-commerce Association, commented that the year-end promotion period will only mobilize the remaining potential demand. Therefore, instead of waiting for people's consumption and income to improve, he suggested that the solution should come from the retailers themselves.

"The increasing commitment to users will motivate them to spend money even when it is not necessary," Mr. Minh emphasized. One of the solutions that is being implemented and needs to continue to develop in the future is identification in e-commerce. Supporting order cancellation even when the goods have been delivered will also help reduce buyers' doubts about the goods and limit disputes.

Ultimately, the core is that consumer income needs to be improved to create excitement in spending. According to Dr. Nguyen Quoc Viet, Deputy Director of the Institute for Economic and Policy Research, it is necessary to focus on sustainable development of the private economic sector to create jobs and income for people. This will contribute to the policy of increasing the basic salary by 30% and increasing the regional minimum wage by 6% from July 1 to have a broad and effective impact.

To do this, Mr. Viet believes that by 2025, the Government should not immediately increase taxes and fees when fiscal policy shifts from loose to tight. Because then businesses will have to increase input costs or raise selling prices, which will inadvertently create a negative impact on the current consumer stimulus policy.

Source