With less income, Dang Hoang has been forced to cut down on three regular expenses: eating out, coffee, and fashion since the beginning of the year.
Dang Hoang (31 years old) works in the advertising industry in Ho Chi Minh City. For the past six months, instead of buying branded clothes like before, he has only hunted for sales on livestreams at cheaper prices to wear. He has also saved money on coffee by switching from buying luxury to mid-range beverage chains.
However, he cut down the most on eating out. "I prioritize cooking at home and reduce the frequency of eating out, partly because my income is lower," he said.
Dang Hoang is not alone. A report by market research firm NielsenIQ Vietnam said that 62% of consumers surveyed in the first quarter chose to cook at home to save money, while 32% said they reduced their eating out. The proportion of respondents choosing these saving methods has been increasing steadily since the middle of last year. In addition, 16% of respondents said they reduced their grocery purchases and 50% did not buy luxury goods, up 6 and 8 percentage points, respectively, compared to the third quarter of 2023.
Businesses in the retail and service industries have clearly felt the thrifty spirit of Vietnamese people over the past half year. Han Sovy, Director of External Relations at Cosmodern, an e-commerce platform specializing in selling locally designed fashion (local brands), admitted that purchasing power has slowed down since the middle of last year.
"The big and well-known names are still selling, but much slower than before. Some small, newly established brands have temporarily stopped selling," he said.
Providing training and gym services, PCS Sports and Events Company said its business results in the first half of 2024 showed signs of decline. "People are tightening their spending on non-essential activities such as exercising," said Trong Nhan, founder and CEO.
According to the second quarter survey report released earlier this month by the Ho Chi Minh City Business Association (Huba), in addition to more than 57% of businesses operating stably, 30.4% said their revenue decreased. Among the main difficulties pointed out, "decreased consumer demand" received the highest consensus, at 64%.
The decrease in purchasing power has caused inventories to increase, reaching 34%. "Trade and retail sales have not increased much due to weak demand and reduced incomes. In general, businesses are facing difficulties due to lack of markets," a Huba representative reported at the 6-month socio-economic meeting of the Ho Chi Minh City People's Committee on July 1.
Also at this session, Director of the General Statistics Office Nguyen Khac Hoang said that consumption in the second quarter showed signs of slowing down compared to the first quarter. Since 2019, consumption in Ho Chi Minh City has increased by only 3% after excluding price increases, half of the level before the Covid-19 pandemic.
Foreign businesses operating in Vietnam are also cautious. Specifically, the Business Confidence Index (BCI) recorded by the European Chamber of Commerce in Vietnam (EuroCham) decreased slightly from 52.8 in the first quarter to 51.3 in the second quarter. "Spending and business activities showed positive signs but the developments were not uniform across sectors," EuroCham's report stated.
In the first six months of the year, total retail sales of goods and consumer services revenue still grew by 5.7%, after excluding inflation, according to the General Statistics Office. However, growth has slowed down compared to the first half of 2023, when it increased by 8.8%.
SSI Securities pointed out that retail data showed that consumption during the April 30 holiday was not too sudden. Meanwhile, the rate of underemployment among working age people and unemployment among young people in the second quarter both increased slightly. These labor data can affect household income.
Vietnamese spending is expected to improve in the second half of the year, but requires businesses to adapt and stimulate demand. PCS CEO Trong Nhan predicts that the situation at the end of the year will change positively but not significantly. He chooses to focus on improving service quality and human resources expertise to retain and attract customers.
Han Sovy said that brands on the Cosmodern platform previously had common prices of around one million VND per product. "Some brands plan to launch more reasonably priced collections, combined with promotions and offline sales at flea markets," he said.
Meanwhile, Ms. Nguyen Cao Ngoc Dung, Senior Manager in charge of market development for retail measurement services at NielsenIQ Vietnam, recommends that retail businesses need to have "5 rights" regarding points of sale, products, prices, display forms and demand stimulation activities.
The company’s research shows several trends, such as Vietnamese consumers becoming more familiar with new brands and products, but not as eager to experience them as before. Meanwhile, they are very concerned about prices, especially price changes for the products they choose to buy. In addition, customers also tend to increase spending at convenience stores and minimarts.
In addition to local consumers, the purchasing power from the recovery of tourism is also a channel that can be exploited. According to the General Statistics Office, international visitors to Vietnam in the first half of the year reached more than 8.8 million, up 58.4% over the same period in 2023 and more than 4% compared to before Covid-19.
On the Klook Vietnam service booking platform, the demand for pre-booking by tourists to Vietnam in the first 6 months increased 1.7 times compared to the same period in 2023. Seizing this opportunity, Klook Vietnam CEO Nguyen Huy Hoang said that the platform continues to stimulate summer demand with 1,000 promotions for more than 10 destinations. They also join hands with card issuers, banks, and e-wallets to offer discounts and promotions on weekends.
From a macro perspective, in the economic locomotive of Ho Chi Minh City, where Dang Hoang lives, works and spends his daily expenses, Director of the General Statistics Office Nguyen Khac Hoang said that to stimulate consumption, "people must have income, and visitors must have a place to spend". Therefore, more solutions are needed than promotional events.
In a meeting earlier this month, in addition to directing departments and branches to increase public investment disbursement and remove difficulties for businesses to boost the economy in general, Chairman of the Ho Chi Minh City People's Committee Phan Van Mai asked the Department of Tourism to find solutions to retain international visitors. That is, the city evaluates tourism effectiveness not by the number of arrivals but by the number of nights stayed and spending. "Guests stay in Ho Chi Minh City on average 3 days in their 12-15 day trip to Vietnam, so how can we increase their stay here to 5 days?" he gave an example.
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