VIETNAMRETAIL REPORT

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TABLE OF CONTENT

I. Overview of Vietnam’s retail sector

II. Economic Status

III. Retail Market Size

IV. Retail Market Players

V. Consumer Behavior and Retail Trends

VI. Vietnam and Philippines Comparison

VII. Conclusion

Like most countries in Southeast Asia, Vietnam’s retail landscape is heavily dominated by itstraditional wet markets and small independent stores catering small quantities of goods andproducts for day to day consumption of shoppers. However, modern retail is a concept that havegrown tremendously in the country – from 2 supermarkets in the 1990s to thousands of modernstores to date.

The economic growth, rising middle class, urbanization and higher standards and demands forsanitation and hygiene keeps on fueling its growth in Vietnam’s retail industry.

OVERVIEW

CURRENT GROSS DOMESTIC PRODUCT

According to the latest data by World Bank, the GrossDomestic Product (GDP) of Vietnam started to flourishby 2000. By 2016, Vietnam’s GDP is at 202.616 billionUSD.

Source: World Bank Indicators, The World Bank

ANNUAL GDP GROWTH

Vietnam’s GDP is forecasted to grow by 6.3% in 2017, Maintain this growth in 2018, and a minimal decline in the following year (2019) at 6.2%.

VIETNAM (2017)

6.3

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VIETNAM (2016)

202.616 BILLION

The population growth in Vietnam is similar to the trend in the Southeast Asian Nations – it has been on a steady rise for years. The country’s population is characterized by the large number of young workforce, making labor for foreign investments more cost-efficient. In addition to this, Vietnam’s dependency ratio, or the percentage of people in the workforce keeps on declining – from 75% in the 1990s to 42% in 2016.

VIETNAM’S POPULATION GROWTH

Source: World Bank Indicators, The World Bank

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WHAT DRIVES VIETNAM’S ECONOMIC GROWTH?

2016 GDP WEIGHT (%)

Source: General Office of Statistics of Vietnam, HSC, TIM

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Trade and Services continue to be the main economic driver for Vietnam at 38.57%. This can be attributed tothe strong domestic consumption. The industry sector, at 34.6% continues to contribute a lot, with robust growthon mining, manufacturing, utilities and construction.

15%

8%

16%

5%6%

39%

11%Agriculture, Forestry, Fishery

Mining

Manufacturing

Utilities

Construction

Trade and Services

Tax Excluded Subsidy

WHAT DRIVES VIETNAM’S ECONOMIC GROWTH?

2016 vs FORECASTED 2017 GDP GROWTH

Source: General Office of Statistics of Vietnam, HSC, TIM

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SMost sectors are forecasted with a robust growth. However, they are at lower growth rate in comparison to2016 with the exception of the Mining sector growing from -4% at 2016 to 1.64% by 2017 forecast.

-6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%

Agriculture, Forestry, Fishery

Mining

Manufacturing

Utilities

Construction

Trade and Services

Tax Excluded Subsidy

2017F Growth 2016 Growth

WHAT DRIVES VIETNAM’S ECONOMIC GROWTH?

Trades and Services

Source: Vietnam General Department of Customs, HKTC

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Exports surged at 15.10% amounting to44.7 Billion US Dollars. Imports, on theother hand has a growth rate of 24.9%amounting to 46.6 Billion US Dollars.

The surge in exports is because of thehuge demand for electronics, computersand components driven by the foreign-invested manufacturing sector. Top exportsmarkets of Vietnam in 2016 are US, Chinaand Japan.

Exports

Imports

4.5

6.9%

44.7 billion

46.6 billion

March 2017

YOYAmount USD

Whereas, the largest source of Vietnam’s imports are: Chins, Korea and Japan. Most of the imported items in2016 consisted of machinery, equipment, electronics and computers which is heavily related to exportassembly.

MODERN RETAIL CHANNEL SALES (Trillion VND)

Source: Euromonitor, USDA

Unlike most of its neighboring countries, convenience stores in Vietnam accounts for the lowest sales amongretailing channels. In 2015 alone, sales among convenience stores accounted only to 2.3 trillion VND, whilehypermarkets accounted to 27.2 trillion VND and supermarket with the highest sales at 39.8 trillion VND.However, it is also worth noting that modern retail sales in Vietnam is in a steady growth every year, growingfrom 30.9 trillion VND in 2011 to 69.2 trillion VND in 2015 – A 124% growth rate in 5 years.

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5

10

15

20

25

30

35

40

45

2011 2012 2013 2014 2015

Convenience Stores Hypermarkets Supermarkets

TRADITIONAL RETAIL CHANNEL SALES (Trillion VND)

Source: Euromonitor, USDA

On the other hand, other grocery retailers (wet markets, food stalls, etc) account for the largest sales amongtraditional markets. In 2015, other grocery retailers account for 895.6 trillion VND, followed by independentsmall grocers at 374.6 trillion VND and lastly, food/drink/tobacco specialists at 32 trillion VND.Similar with modern retailing channels, the growth among traditional market channels continue to growprogressively.

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2011 2012 2013 2014 2015

Food/Drink/Tobacco Specialists Independent Small Grocers Other Grocery Retailers

TRADITIONAL RETAIL VS MODERN RETAIL (Trillion VND)

Source: Euromonitor, USDA

Despite both channels’ steady growth in the past years, the growth rate of its traditional market is declining incomparison to modern retail. Modern retail experienced a steep growth rate by 2014 at 28%. However declinedthe following year at 18%.Traditional Retailing declined from 2012 having the growth rate of 24% down to 8% by 2015.

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0%

5%

10%

15%

20%

25%

30%

2012 2013 2014 2015

Modern Retailing Channel Traditional Market Channel

82outlets

Considered as the largest retailer in Vietnam

A specialty store in Vietnam offering wide range of imported goods and private brands

Japanese retailer expanding its domain in Vietnam

55 outlets

Owned by a private company, second largest retailer in Vietnam

80outlets

Owned by a French Retailing Company present in 16 countries around the world

8outlets

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5outlets

SUPERMARKETS AND HYPERMARKETS

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CONVENIENCE STORES

700 outlets

217 outlets

Convenience Store inVietnam with thehighest number ofoutlets nationwide

Malaysian-Investedcompany expanding itsdomain mainly aroundHo Chi Minh City

Second to Vinmart withthe most number ofoutlets

128 outlets

Most of Vietnam’s population still rely on wet markets or traditional retail channels in making their day to daypurchases.

Primarily, Vietnamese dishes are composed mainly of fresh fruits and vegetables, making wet markets the most convenient place to purchase fresh goods for everyday consumption. In addition to this, traditional retail outlets also pose as a more viable option for most Vietnamese shoppers.

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Image Source

However, it is evident that modern retailingcontinues to flourish in a country heavilydominated by its traditional market.Remarkably, from 2 supermarkets in 1990s,thousands of modern concept retail stores arebuilt around Vietnam and their numberscontinue to grow each year.

Vietnamese love fresh vegetables and fruits.Thus, modern retailing outlets make it a pointto offer fresh products that can compete withgoods sold in the wet market. Besides theimpeccable look and feel, they assure theirconsumers that all areas of the store iscompletely sanitary.

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The deli section also

offers a wide range of

cheeses and cold cuts for

foreigners or expats and

even for the Vietnamese

consumers to enjoy.

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Imported wines and liquors from different continents are also

offered, giving the consumers a variety of choices that can be

accompanied by cold cuts and cheeses that they purchase.

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Modern retailing outlets also offer wide range ofimported products. With the growing number oftourists and expats in the country, the demandfor imported products also continue to grow. Inaddition to this, Vietnamese consumers aredeveloping a taste and appreciation forimported products.

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Modern retail outlets also offer privatebrands/products that can be exclusivelypurchased in their stores. In this way, they canassure every consumer that the products theysell are specially made to fit the demands andneeds of their shoppers.

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Image Source

One key factor why Vietnamese consumerschoose to shop in traditional markets isbecause they can decide to buy ingredients insmaller portions. In response to this,supermarkets are offering RTCs or ready tocook packages that is better suited with thedaily needs of an average consumer.

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Besides food products, non-food products and home appliances

are also offered in supermarkets making shopping for house

needs easier and possible under one roof.

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To further improve shopping experience, some stores have in-

house bakeries and cafés where consumers can hang out and

enjoy with family or friends.

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The local population’s inclination to make their purchases in the traditionaloutlets are hinged on four major factors. (1) Traditional outlets are seeneverywhere posing convenience and ease of access for consumers. (2)Comparatively lower prices of goods and products to which consumers can stillbargain (3) Fresh produce supply source is better at wet markets (4) Traditionalretailers offer flexible package sizes for day to day consumption.

A. VIETNAM’S POPULATION IS STILL INCLINED TO

BUY FROM TRADITIONAL RETAIL CHANNELS

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94%

6%

Traditional Modern

According to Euromonitor’s 2016 report, traditionalMarket accounts for 94% of retail sales whilemodern accounts to the remaining 6%.

However…

The growth of sales in Traditional Market is declining compared to ModernRetailers. According to Nielsen, foot traffic on traditional outlets declined. In2012, 81% of consumers go to traditional outlets while in 2014, it declined to64%. On the other hand, foot traffic on convenience stores increased from5% (total number of consumers) on 2012 to 11% on 2014.

B. INCREASED HEALTH CONSCIOUSNESS AND SPEND

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Top 5concerns in

Vietnam

1

2

3

4

5

Health

Economy

Job Security

Increased Utility Bills

Work Life Balance

Source: Nielsen

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DSHealth consciousness ranks 1st on top 5 concerns by Vietnamese people according to a research conducted by

Nielsen. In addition to this, the latest data released by the world bank proves the growth on healthcarespending in Vietnam (% of GDP).

0

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6

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8

2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: World Bank

2002

2014

4.698

7.067

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1

2

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4

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6

7

8

2011 2012 2013 2014

Vietnam Malaysia Philippines Indonesia Thailand

In comparison to its neighboring Asian countries, Vietnam has the highest spending on healthcare particularlydue to its high demand from citizens. Spending on healthcare grew by 241% over the past decade.

Source: World Bank

ASEAN Healthcare Spending (% of GDP)

C. BEVERAGE TOPS IN CONTRIBUTION AMONG ALL CATEGORIES

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Source: Nielsen

40%

15%

15%

6%

8%

13%

3%

Beverage Food Milk Base Home CarePersonal Care Cigarette Baby Care

0%

2%

4%

6%

8%

10%

12%

Q1 - 15 Q2 - 15 Q3 - 15 Q4 - 15 Q1 - 16 Q2 - 16 Q3 - 16 Q4 - 16

Growth

Beverage tops in Contribution among all categories at 40%.Far behind is the second category which is food at 15%.

With the maturing life stages (more and more family are having no dependentchildren), kids will have less influence in determining purchase priorities. Babyformula or children’s snack and beverage is starting to be bought seldom on retailstores.

In 2015 alone, 44% of the total households in Vietnam have no dependentchildren. This is forecasted to grow up to 60% by 2025.

D. KIDS ARE LESS INFLUENTIAL IN DETERMINING

PURCHASE PRIORITIES

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Old and Single

74%

Empty Nesters

63%

Families with

dependent kid/s

36%

The number of Old and Single among the population has the highest growth rate in Vietnam while Familiesthat have dependent kid/s has the lowest growth rate and is forecasted to even drop further.

LIFE STAGES GROWTH 2015

Source: Cimigo

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Source: Nielsen

Baby Care

Baby Care Products have the lowest contribution among allcategories and continues to decline per quarter.

40%

15%

15%

6%

8%

13%

3%

Beverage Food Milk Base Home Care

Personal Care Cigarette Baby Care

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Q1 -15

Q2 -15

Q3 -15

Q4 -15

Q1 -16

Q2 -16

Q3 -16

Q4 -16

Moreover…

D. E-COMMERCE IS A RETAIL CHANNEL THAT HALF VIETNAM’S

POPULATION IS UNFAMILIAR OF

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Internet Users

50.05Million

Penetration

53%

Mobile Internet

Subscription

47.19

Penetration

50%

Million

94.93Million

Urbanization

31%

Population

Source: wearesocial

VIETNAM AND PHILIPPINES

IN COMPARISON

PERCENTAGE OF THE POPULATION 0 – 14 ARE BOTH DECLINING IN VIETNAM AND PHILIPPINES WHILE 15 – 65 AGE GROUP ARE BOTH ON THE RISE

0 – 14 AGE GROUP. 15 – 65 AGE GROUP

Source: World Bank

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Despite their similarities, it can also be noted that the ratio of adults to children in Vietnam is 3:1 whereas in thePhilippines it is at 2:1. This denotes that there are fewer families in Vietnam with dependent children, highly affectingthe purchase priorities.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

1990 1995 2000 2005 2010 2015 2020

PHILIPPINES VIETNAM

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

1990 1995 2000 2005 2010 2015 2020

PHILIPPINES VIETNAM

VIETNAMESE PEOPLE TEND TO SPEND MORE ON

HEALTHCARE COMPARED TO FILIPINOS

Source: World Bank

Based on the data released by the WorldBank, among the neighboring countries,Vietnam has the most percentage in itsGDP allotted for healthcare, characterizedby the population’s demand. Furthermore,health and wellness is a booming sector inVietnam.

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N

0%

1%

2%

3%

4%

5%

6%

7%

8%

Vietnam Indonesia Malaysia Philippines Thailand

7%

5%

PHILIPPINES HAS A BETTER PLATFORM FOR E – COMMERCE

COMPARED TO VIETNAM CO

MP

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N

Source: wearesocial

Mobile Subscription

Penetration Rate

50%Penetration

126%Penetration

Philippines Vietnam Philippines Vietnam

9H 00M 6H 53M 3H 36M 2H 33M

On average, Filipinos spend more time on their computers and mobile phones compared to Vietnamesepeople. This implies the inclination to purchase services or goods online is stronger in the Philippinescompared to Vietnam.

Average time spent via PC or Tablet

Average time spent via mobile phone

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TIME SPENT ON INTERNET USAGE

Source: wearesocial

TRADES AND SERVICES

Vietnam’s GDP growth can be attributed to its strong trade and servicessector, further fueled by Foreign Direct Investments and Free TradeAgreements.

TRADITIONAL MARKET

Traditional Market still rules the retail landscape in Vietnam. However,sales on this channel is declining while modern retail sales is on the rise.

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FAMILIES

The number of families with dependent children in Vietnam is decliningmaking baby/kids products have the lowest sales.

HEALTH AND WELLNESS

Health and Wellness sector in Vietnam’s market is a good place ofinvestment as it is the primary concern of the population.

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N

E - COMMERCE

In comparison, Philippines sets a better platform for E-Commerce toflourish. If Vietnam wants to tap into this market, penetration rates forinternet usage should improve.

CO

NC

LU

SIO

N

END OF REPORT