Vietnam Market Watch: Retail Investment Projections, Foreign E-Commerce Preferences, and Hanoi Logistics

Foreign investment to rise in retail sector

According to a recent Economist Intelligence Unit study, foreign investors are showing a growing interest in the country’s retail sector. The sector grew 13 percent from 2012 to 2016 driven by a growing middle class, young demographic, and an increase in consumer spending. Clothing brands, supermarket chains, shopping center developers, and convenience store chains are already investing heavily in the sector. The retail market is expected to reach US$179 billion (VND 3,580 trillion) by 2020, according to the Industry and Trade Ministry.

Consumer spending at modern chains compared to traditional retail shops is expected to rise from the current 25 percent to 40 percent by 2020. Foreign convenience stores already hold a 70 percent market share in the country. Industry experts have cautioned the government that the growing presence of foreign retail chains can affect local production and domestic retailers. However, few experts have suggested that foreign retail chains will increase competition and efficiency of the domestic retailers, suppliers, and manufacturers. Foreign retailers will have to maintain competitive prices to retain customers and will not only provide foreign-made goods but also local goods if suppliers can provide the quality at competitive prices.

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Online shoppers prefer overseas websites

According to a recent Vietnam E-commerce Association (VECOM) report, Vietnamese online shoppers prefer overseas websites more than local sites. Shoppers believe that websites such as eBay and Amazon offer better product diversity, service quality, return policies, and quality products than local players. Unlike international companies, most Vietnamese e-commerce websites do not offer basic services such as free delivery or free return. The report also suggests local firms to invest more in activities such as consumer-focused market research.

The Vietnam E-Commerce and Information Technology Agency predicts 30 percent of the population to shop online by 2020. The agency functioning under the Ministry of Industry and Trade also forecasts revenue share of online retail in the retail sector to rise from 2.8 percent in 2015 to 5 percent by 2020. In 2015, Vietnam’s e-commerce market grew by 37 percent to US$4 billion (VND 90.93 trillion), almost 2.5 times that of Japan. In the next few years, local players will need to make changes to stay competitive in the country’s online market, predicted to be one the fastest growing e-commerce market in the world.

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Vinalines to develop logistics center in Hanoi

The Vietnam National Shipping Lines (Vinalines), a state-owned enterprise, is planning to develop a logistics center in Hanoi in accordance with the government’s 2020 development strategy. The center planned to be built at the Phu Dong Port in Gia Lam district will connect major seaports such as Haiphong, Dinh Vu and Lach Huyen through the Dinh Vu inland waterway system. Once built, the center will handle the north’s transportation demand and help in reducing logistics costs and pollution. 

The Ministry of Industry and Trade is developing the logistic industry to cater to the regional and global markets and meet the growing domestic demand. By increasing the capacity and developing ports and waterways, the government expects the logistics industry to contribute 5 percent to the GDP and achieve a growth rate of 15 to 20 percent by 2020. 

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An Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

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