The Year in Review: Fast Fashion, Big Money
Dong Khoi got a bit more foot traffic than usual on 9 September of this year when Swedish clothing company H&M’s hallmark opened in Vincom Dong Khoi. Over the course of the store’s opening day, it was reported that some 10,000 fashionistas filed in.
Image source: kenh14.vn
Other highly publicised openings made fast fashion the undeniable trend of 2017, thanks to Zara’s arrival in September and Massimo Dutti’s entry that same month. Uniqlo’s operator Fast Retailing has even been sighted recruiting staff in Hanoi and Saigon last May for a rumoured opening in 2018, and American company Forever 21 is supposedly not far behind.
There’s no doubt about it: fast fashion is taking over the retail market, and the process hasn’t been slow.
Slightly Less Air
For Carey Zesiger, Manager of Business Development for the HCMC-based international fashion distribution company Havang, the openings are interesting, but also a bit worrying. “It’s a limited market, and I think that these big openings [...] may be sucking the oxygen out of the room a bit, and maybe making things harder for some other retail players, especially in the clothing and apparel space,” he said.
Image source: vincom.com.vn
The fast growth of retail in Vietnam, focused primarily on the growing middle class in both Hanoi and Ho Chi Minh City, has caused companies to scramble to appeal to a market increasingly looking to consume. The Ministry of Industry and Trade said that 183 foreign brands were already established in Vietnam, filling the market for food, beverages, business services, hotel sectors and fashion. This number will no doubt increase in 2018.
However, urbanisation has put a crimp in the expansion plans of a few brands. “There’s a lot of construction in downtown Ho Chi Minh City, and that’s tying traffic into knots and making it a little difficult to get around. I think that’s discouraging some people from going shopping,” Zesinger said.
With increasingly affluent residents moving farther away from the CBD, the story isn’t what brands are coming in—it’s where they’ll be located.
It’s a Vincom World
Large-scale retail developers are looking less at Saigon’s increasingly congested downtown, and more at Districts 2 and 7 and provinces outside of Saigon. Companies like the Japanese Aeon, Korean Lotte and Vietnamese Vincom have been spreading across the cityscape and, slowly, the country.
In particular, Zesiger is keeping a close eye on Vincom: “They’re definitely leading the way in terms of new retail developments, and everyone’s eager to see how that plays out.”
According to a presentation given by Vincom to attract potential investors, it differs from Aeon and Lotte primarily thanks to its all-tier distribution strategy. While Aeon’s target market is currently people who make approximately US$5,000-US$20,000 per year, and Lotte’s market is geared towards earners who take home over US$20,000, Vincom provide retail opportunities for consumers at all pay levels, from below US$3,000 (Vincom+) to over US$20,000 (Vincom Centres) and everywhere in between.
Image source: vincom.com.vn
Vincom estimates that could account for US$100 billion in potential retail revenue. It currently operates 41 shopping centres around Vietnam; in 2018, it plans to expand this number to 56 in a variety of different provinces previously untouched by this level of retail.
Vingroup’s retail group solidified its dominance in November this year, when Vincom Retail made its debut on the Ho Chi Minh Stock Exchange with record-breaking sales of US$709 million, ultimately placing the net worth of the company at US$3.4 billion.
“Clearly, [Vincom has] been successful at securing locations and also quite successful at funding those developments, and doing that on a rather large scale,” Zesiger said.
Banner image source: vincom.com.vn