Savills retail expert said that many international retail brands are looking for opportunities to expand their business activities, stemming from the positive signals of the economy and the potential of domestic consumption.
Having accompanied many big brands and corporations such as Apple, Lululemon, and Victoria Secret’s, Mr. Nick Bradstreet, Head of Retail Asia – Pacific at Savills, shared the level of interest in the company’s international businesses in the region.
According to the representative of Savills, Thailand and Vietnam are two prominent markets in Southeast Asia. Many global retailers, especially those with offices in Singapore, are researching investment opportunities in the two countries. However, Thailand’s retail industry has been significantly affected by the epidemic factor. The reason comes from the decline in retail sales for international visitors in the two years of Covid-19.
Meanwhile, Vietnam has strong domestic demand. Vietnam’s retail industry is less dependent on foreign factors. Moreover, difficulties in international mobility have changed the consumption habits of Vietnamese people. Because they could not fly abroad, they got used to shopping in the country.
This is reflected in Vietnam’s retail consumption indexes when there is a recovery starting from the end of 2021. Generally in the first 7 months of 2022, total retail sales of goods and service revenue consumption increased by 16% over the same period last year. It can be seen that the domestic retail industry is gradually catching up with the growth rate in the pre-Covid-19 period. Vietnam’s economy maintained a good growth momentum at 6.4% in the first 6 months of 2022. These are positive signals to attract retail brands to learn and build confidence about the potential for growth and development of the country.
Mr. Nick Bradstreet, Head of Retail, Asia-Pacific at Savills.
Mr. Nick Bradstreet commented: “The Vietnamese market has the advantage to jump higher than the big markets in Southeast Asia such as Singapore and Thailand. Most of the famous international brands are already present in these places. From low-end brands like H&M and Zara to high-end brands like Louis Vuitton and Dior, all have 5 to 6 stores in Singapore and Bangkok, while these brands have only opened about 1 to 2 stores in major cities of Vietnam. This is an opportunity for brands and brands to come to Vietnam and expand the market.”
In the past year, in big cities, there are more retail brands opening new or increasing the number of stores. The affordable segment serving mass demand such as supermarkets, convenience stores, home appliances, health services, and dining are all doing well and are continuing to expand. Many new brands are also entering the market with online stores before opening brick-and-mortar stores such as Sephora, Perfect Diary and Maje.
In the higher-end segment, Statista estimates show that the luxury goods market in Vietnam in 2022 will grow by 34% year on year and will continue to grow by 4% annually through 2025. However, businesses have difficulty finding suitable premises.
Brands in this segment often target locations where high-end customers are concentrated, usually in the central area. According to expert Savills, they have a habit of setting up shops in shopping centers on “expensive” streets, such as IFC Mall of Hong Kong or IAPM Mall of Shanghai. However, the standard supply in Vietnam is still very limited.
Currently, there is only one building located in a prime location right in the heart of the city, at the corner of the intersection of four main roads Nguyen Hue, Dong Khoi, Le Loi and Le Thanh Ton in District 1 and gathering many brands from far and wide famous slag.
Considering the Hanoi market, the central area of Hoan Kiem district currently lacks suitable space for high-end brands. Research from Savills shows that rents in this area have also become more competitive, with some streets recording a 15% increase between 2020 and 2021.
According to Mr. Nick’s share, the biggest obstacle businesses face in the process of entering the market lies in the condition of the premises. “The lack of space at the center that matches the brand and technical criteria complicates the store opening process. This makes luxury brands hesitate to make decisions. Therefore, when entering a new market, they often look to an intermediary to act as a bridge with investors”.
Savills expert said that the solution for the Vietnamese retail industry to attract international brands, especially in the high-end segment, lies in the supply issue. Investors need to pay attention to building premises that meet international standards. Besides retail townhouses, the market needs to add a high-end commercial center in the downtown area. These projects need to be professionally designed and operated to meet strict requirements from international brands.