Consumers tighten wallets, retail industry faces difficulties

The consumer outlook report from VNDirect Securities Corporation shows that the pent-up consumption trend during the pandemic is gradually decreasing in the context of rising interest rates and a weakening Vietnamese dong making consumers tighten their purse strings.
Consumers tighten wallets, retail industry faces difficulties ảnh 1 Consumers shop at a Co.opXtra supermarket in HCM City. (Photo: VNA)
Hanoi (VNS/VNA) - The consumer outlook report fromVNDirect Securities Corporation shows that the pent-up consumption trend duringthe pandemic is gradually decreasing in the context of rising interest ratesand a weakening Vietnamese dong makingconsumers tighten their purse strings.

Besides, the report said that the fading of the “wealth effect” - thepsychological phenomenon that refers to a change in consumer spending patternsfollowing a rise in the value of unrealised assets.

All investment channels including the stock, property, bond, and digital assetmarkets enjoyed a robust rise last year.

As all these markets have entered a sharp correction this year which scaleddown the unrealised asset value, thus denting consumer spending power. Mostlabour-intensive industries are facing headwinds.

The country’s export growth is expected to decelerate amid weakening globaldemand, thus textile, footwear, aquaculture, and wood processing have to scaledown their production.

With signals from the market, large retailers are slowing down or postponingtheir business expansion amid growing concerns over a downturn.

MWG’s An Khang pharmacy chain expansion has been delayed since the thirdquarter of this year.

The number of Bach Hoa Xanh and Circle K stores also saw a reduction to provethe caution of retail chains to the current market status.

Thus, listed consumer companies tend to maintain better financial health shapewith low leverage and net cash position.

VNDirect expects Vietnamese consumption will be hit hard in the first half ofnext year and gradually recover to growth momentum from the third quarter as risinginterest rates slow down as the Fed rate gradually eases; a graduallystabilising macroeconomy in Vietnam, helping to increase people's confidence inconsumption; and the recovery of consumption in the EU and the US regions tobring back orders to Vietnamese industrial zones.

In addition, the National Assembly passed a Resolution in November on the statebudget estimate for next year with the base salary to be increased by 20.8%compared to the current 1.8 million VND (75 USD) per month from July 23, whichcan increase the income of the cadres and civil servants in Vietnam.

VNDirect said that the current Vietnamese retail market in general still had apositive trend.

According to General Statistics Office, total retail sales of goods andservices grew a healthy 25.3% year-on-year in 10 months, largely thanks to thelow base last year.
If excluding the pricefactor, retail sales rose 16.8% year-on-year, even higher than the pre-pandemiclevel.

Vietnam resumed international flights from the first quarter, and revenue fromtourism doubled last year, recovering to 78% of the pre-pandemic level.

Google data showed thatthe country’s mobility to retail and recreation has exceeded the pre-pandemiclevel by 4.6%, and mobility to grocery and pharmacy has increased by 27.5%compared to pre-pandemic.

According to Statista, Vietnam’s personal luxury goods market reached 976million USD last year and is expected to grow 6.7% per annum to 1 billion USDby 2025.

Another report by Knight Frank said that there were about 72,135 individuals inVietnam who had liquid assets of more than 1 million USD last year.

Analysts said that theretail market was entering a period of "symbiosis" of mutual benefits.

Foreign enterpriseswhen entering the Vietnamese market often look for a local partner.

Domestic partners areenterprises that understand the market, culture and business environment tochoose a site, devise a development strategy in accordance with consumertastes, and contribute to the success of investors.

Experts said that inthe long term, the Vietnamese retail market was also driven by other factors,in which the strength of the domestic market with 100 million people and adeveloping middle class were factors that attract many foreign investors.

When foreignenterprises see the potential retail market, domestic enterprises are alsotrying to take advantage of their home-field strengths to make a breakthrough.

The Vietnam RetailersAssociation said that although the retail market in the country has had theparticipation of many foreign investors, the enterprises holding market sharewere still mainly domestic brands such as Masan and MWG.

It can be seen that thepicture of the retail industry is bright with competition between domestic andforeign enterprises.

And in this fiercecompetition, Bui Ta Hoang Vu, Director of HCM City Department of Industry andTrade, said that domestic retailers should have a very methodical developmentstrategy to keep market share, and maintain the existing advantage.

In addition, Vu said that in order to compete effectively in the new situation,domestic retailers needed to be more proactive in the digitalisation process.

If not applying information technology through e-commerce, they would lose ahuge advantage, he added. /.
VNA

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