Fashion Frenzy: Retailers in Vietnam

By: Keely Burkey

Everywhere you look in HCMC’s District 1, there’s a new store opening. Remember when Zara, the Spanish fashion retailer, set up shop in Vincom Shopping Mall last September? If you dared to visit the store during its opening week, you probably spent more time in a queue than trying on clothes. Inside Retail Asia wrote that Zara “unofficially” made more than $246,000 in its first day, much more than anticipated.

zara crowded

It’s no wonder that many more mid-priced and mass-market retailers are following in Zara’s wake. It’s been reported that Mango, GAP, Topshop, H&M and Uniqlo are all getting ready to make their own marks on HCMC in 2017. While this is welcome news for Saigon’s legions of fashionistas, it also spells big changes for clothing retail.

The Land of Silk and Money

There are several reasons for this sudden popularity.

First of all, the middle class is growing, and it’s growing fast. Consulting firm PwC’s 2015-16 Outlook for the Retail and Consumer Products Sector in Asia found that the proportion of households earning more than $10,000 per year will rise from 2 percent in 2014 to around 20 percent in 2018. That’s a pretty big jump, and a significant one when you think about the demographics at play.

Vietnam has a young population, and it’s the young professionals who are the major target for these fast fashion brands. Deloitte Singapore’s Retail in Vietnam report stated that in 2014, 70 percent of consumers were between 15 and 64 years old. Meanwhile, almost 60 percent of Vietnam’s population is under 35 years old.

The sheer number of millennials is catching the eye of foreign retailers. And when you factor in where most of millennials are making money – namely Ho Chi Minh City and Hanoi – it’s no surprise that the vast majority of foreign retailers are playing it safe and catering exclusively to these urban areas.

family vietnam

Given these factors, a pyramid of consumers has emerged, as outlined in the Understanding Market Trends and Consumers in Vietnam report published by Singapore-based brand growth and communication company Louken Group.

At the top, you have the premium, niche market: people who buy products for social status and have a generous disposable income. Many of them do their shopping abroad, making it a difficult clientele to curate domestically.

The second tier is the mid-market: middle income consumers who want quality products with a pleasing design sold at an affordable price. This is the market Zara has tapped into with such success.

At the bottom are the mass market customers. They want fast fashion that is cheap and can be bought often. This is most of the Vietnamese population because, come on, who can resist a good deal?

And what company can resist demographics with so much potential? It doesn’t hurt that recent international agreements have made it easier for foreign companies to do business here, especially the World Trade Organisation (WTO) agreement Vietnam signed in 2007.

Before 2008, international companies were only allowed 49 percent of capital in joint ventures. But as of 2009, fully foreign-owned companies could operate in the Vietnamese market independently. And since January 2015, foreign retailers can set up businesses with 100 percent foreign capital. No more need to franchise or partner with a domestic company. Hence, the fashion flood.

Domestic Concerns

With the growing middle class and prime market conditions, it would seem to be a perfect time for Vietnamese retailers to get in on some of the action as well. Even better is the fact that most Vietnamese consumers want domestic products.

sales growth vietnam

In the Louken Group’s report, 71 percent of Vietnamese consumers surveyed believe that local products are of high quality, and 80 percent prefer domestically produced garments. Jackpot, right?

Not necessarily. As Carey Zesiger, manager of business development for the international fashion distribution company Havang told us, “Increasingly in recent years, we’ve had cases where our brands are producing in factories in Vietnam, and since the label says ‘Made in Vietnam’, you would think it would be easy [to acquire them], and it should be low-tax or no tax. That’s not always the case.

“Depending on the situation, depending on the paperwork, depending on the licensing of the factory and their tax status, there have been cases where we’ve had to export products that are made in Vietnam to Singapore, re-import them and pay full duty for a product that’s made in Vietnam.”

This complicated system seems to be a by-product of the country’s focus on developing its export economy, sometimes at the expense of its own businesses and consumers. And while there is a movement for the Vietnamese textile and garment sector to develop business in the domestic market, in particular for textile brands like Nha Be, Viet Tien, Hanosimex and Duc Giang, the export-heavy regulations and international free trade agreements are leaving the door wide open for foreign retailers.

The Future

Will we see Ho Chi Minh City reach the retail dimensions of powerhouse cities like Singapore or Hong Kong?

Zesiger has his doubts: “Singapore and Hong Kong are dependent to a large extent on tourism. They are hubs for tourists, travellers, people in transit, business, and so a lot of retail activity there is driven by inbound tourism.” Vietnam, and particularly Ho Chi Minh City, is quite different.

“Let’s face it,” Zesiger continues, “Vietnam is not going to be a destination for people to come and do their duty-free shopping, because the duties are high and the selection is not so broad.”

Instead, Zesinger sees retail growth to be long-term and based on developing the domestic market. That means supporting and helping the middle class to grow. Right now, with a GDP per capita of just $1,325, there’s a lot of room for growth.

Company to Watch: AEON Company Limited

With so many different companies emerging onto the market, it’s difficult to keep them all straight. Here’s one company that’s been working particularly hard to crack the Vietnamese demographic. Keep an eye on AEON; you might be seeing the name even more in the future.

eaon vietnam

Who?

AEON Company Limited is a retailing group from Japan. Reportedly founded in 1758, AEON has one of the longest histories in retail development in Asia. An international operation with 16,498 companies spread across Asia, AEON has turned an eye towards Vietnam.

What?

As the largest retail company in Japan, AEON deals in retail of all forms, with a special focus on mall supermarkets. So far, AEON has opened four shopping malls in Vietnam (two in Hanoi and two in the Ho Chi Minh City area) and 54 supermarkets throughout the country. AEON’s shoppers are middle class, and the company thrives on offering consumers solid brands at carefully controlled prices.

When?

AEON Vietnam first began in 2009 as a representative office and acquired a business licence from the People’s Committee of Ho Chi Minh City in 2011, when it began constructing the AEON Shopping Center in Tan Phu Celadon. By 2020, AEON hopes to own 20 outlets in Vietnam (10 near HCMC and 10 near Hanoi).

Why?

Vietnam’s rising middle class and younger population are attractive to foreign investors. This is especially true for Japanese companies, which have been struggling domestically due to increased international competition, a cost-conscious and ageing population, and a declining birth rate.

Where?

While most retailers have traditionally built in either Ho Chi Minh City or Hanoi, AEON is one of the first to build a major foreign-invested shopping mall in an outlying province – Binh Duong, about two hours north of Saigon. Though it has had offers to build in medium-sized cities like Danang, Nagahisa Oyama, the head of AEON’s Vietnam unit, has stated that it’s too soon for provincial developments.


Choosing the Right Web Design for Your Business

By: City Pass Guide

A website is the base for all online activities of your business. However, having a badly designed website can be worse than having no site at all. To maintain a successful online presence in Vietnam’s competitive environment, you need to adhere to the one and only commandment of design:

Form Follows Function

The online environment in Vietnam is often colourful, confusing, cluttered and chaotic. Don’t fall into that trap. To set up a profitable website for your business, you need to think about the purpose first. What do you want to use your website for? Or rather, what will your customers want to do on your website?

Case 1: My customers just want my contact information.

In theory, a Facebook profile is enough for this purpose, but your own digital business card looks more professional. And when you own your own domain name, you can and should use it for your email address.

 

Case 2: My customers want some information about my company and our products/services.

A small website with a short introduction and one page per service or product, held together by an easy-to-use navigation system, should be enough.

 

Case 3: I want to keep my customers up to date with promotions, events and company news.

This calls for a small content management system, or CMS. A CMS is where you log in and change pages or add new posts. Usually people have a section of fixed pages on their website and an extra “blog” section, where customers can follow their updates. This is the best option for restaurants.

Case 4: I want to sell my products online.

Shop plugins are available for every major CMS. These are easy to use, cheap and versatile. However, often it is not exactly what you imagine, remember that you can hire a developer to customise the product. Be careful! Customers are entering sensitive data like credit card information, so make sure the security is top-notch. Nothing ruins your online reputation faster than a security leak.

Case 5: I want to be Number One and dominate the search results.

Now we’re talking! The design still follows the function of your project, but create a code as slim as possible to make the pages load quickly and efficiently. It is also imperative to follow the prime online commandment here: Content is King. Effective SEO is necessary as well, to keep on top of Google.

In the past it was easy to fool search engines into ranking your site higher – all you had to do was list your keywords a hundred times per page. Nowadays, programs like Google are much smarter and spamming will harm your business beyond repair. Your only chance is to create content your visitors love to read and pass on to others. For quality content creation, you either have to be multi-talented, hire somebody, or buy content from a third party. But beware, many companies are still stuck in 2005 and will sell you generic content that gets you nowhere. Choose wisely!

 


Tips on Starting a Business in Vietnam

By: City Pass Guide

Whether you want to start an LLC, JSC, franchise or any other sort of local entity in HCMC, there are myriad problems – from cultural precautions to transparency to taxes – that ultimately drive away the uninitiated.

How do you even begin to enter this exciting, yet wild territory?

LLC or JSC?

For the purposes of brevity, we’ll look at two particular local entities: the jointly-owned foreign-Vietnamese LLC, and the JSC. The following information has been gathered with the aid of the Healy Consultants PLC website.

Joint-venture LLC – There are two shareholders in a joint-venture limited liability company: a foreigner and a local. This entity allows entry into many industries and foreign ownership can range from a maximum of 49% to 99%. These companies are required to have an appointed local legal representative, a capital account at a local bank, and a Foreign Investment Certificate (FIC).

Also required is a registered local address, a certificate of deposit from a local bank for the share capital ($50,000), and yearly audited financial statements.

This entity is best for foreign business owners who want access to partially restricted industries, and when the business owner has a local partner they trust. It takes about three months to set up.

JSC – For a joint stock company, there must be three shareholders of any nationality, although one of them must be appointed as the legal representative of the business. If that representative is a foreigner, they will be required to get a work permit and show proof of at least one year of management experience.

In addition, requirements include a bank certificate as proof of the funds available for investment ($10,000), the opening of a capital account with a local bank, an FIC, and annual submission of audited financial statements.

A JSC is a useful entity for anyone looking to start a business with more than two partners. The lower investment requirements are also a plus. It takes about two months to set up.

Labour and Tax

Kenneth Atkinson, the Executive Chairman at Grant Thornton Vietnam, pointed out two big factors to keep in mind:

The tax regime and labour laws are the two most important things to keep in mind. Both are quite complex. In the context of taxes, structuring your investments from a tax-planning perspective is very important. You have to ask yourself questions like, are you investing from your personal name? Are you investing through a corporate structure? What double tax treaties exist that make it beneficial to invest from, say, Singapore, instead of Hong Kong or the U.K. What is the impact of those regulations if you exit the business through a sale?

A thorough read of the Labour Code (vietnamlegal.com.vn is a useful resource) is a must, and when it comes to local taxes, Grant Thornton’s 2016 Doing Business in Vietnam report has a great overview of tax requirements.

 

Cultural Mindfulness

If you’re coming from an Asian country, you’re likely to understand the cultural ways here better than Westerners. Gone are brash negotiations, rapid-fire contracts and cutting to the chase. Vietnam in general is a long-term game that requires patience above all else.

The client meetings at karaoke bars (now slowly being overtaken by beer club meetings), the formal business cards exchange, the contract-over-drinks approach, the sheer politeness of it all – it’s all part of getting to know you as a person. People do business with whom they trust, and foreigners here seem to like these practices enough to uphold the local business culture. As Mr. Atkinson points out: “I actually prefer being handed a business card rather than some American guy flicking it across a table at me.” A final story from Mr. Atkinson:

In 1999, we had a fairly big project with the Asian Development Bank and the Ministry of Finance. I first went to dinner with these guys at the introduction of a Vietnamese friend. We had an enjoyable dinner and a few bottles of wine. Once it ended, my friend said they liked me, but they didn’t know Grant Thornton. So I said to one of the guys, What football team do you support? He said, Manchester United. I said, That’s great because we’re the auditors to Manchester United. Then two bottles of brandy appeared on the table and we stay there for another hour and a half. In the end we actually got the job.


CBRE Vietnam Honored for Lead Real Estate Consulting in Vietnam

By: CBRE

CBRE Vietnam Leads the Market in Real Estate Consulting in Vietnam

On October 24th, 2018, CBRE was ranked as the top real estate consulting company globally for 54 different categories across North America, Latin America, Europe, Africa, and Asia Pacific at the Euromoney Award - one of the most prestigious awards in the real estate industry.

CBRE

In Asia Pacific, CBRE received 11 major awards including:

- Vietnam: Agency - Letting/sales
- Vietnam: Research
- Vietnam: Overall
- Australia: Research
- Australia: Overall
- India: Overall
- Japan: Agency - Letting/sales
- Japan: Overall
- Singapore: Agency - Letting/sales
- Singapore: Property Value
- Singapore: Overall

Mr. Steve Swerdlow, Chief Executive Officer of CBRE Asia Pacific stated: “The diversity and reach of our Asia Pacific platform continues to receive consistent recognition from the industry and most importantly, our clients. At the center of this proud achievement remains our people, who continue to deliver the world-class services expected of CBRE in Asia Pacific each and every day.”

This year also marked also a significant milestone for CBRE Vietnam - our 7th consecutive year as the leading real estate consulting company in Vietnam, as named by Euromoney, for three categories:

- Agency – Letting/Sales
- Research
- Overall

Ms. Dang Phuong Hang, Managing Director of CBRE Vietnam, shared: “CBRE is deeply knowledgeable about the Vietnam real estate market, because of our world-class experts. This allows us the ability to provide the most critical and accurate information to our clients, thereby committing our best to fully meet any and all consulting needs".

With 15 years of experience in the Vietnam market and the highest awards in the real estate industry for the past 7 years, CBRE Vietnam is continually developing and always striving to be better than the rest.

CBRE Vietnam is Led by:

Ms. Dang Phuong Hang, Managing Director of CBRE Vietnam Ltd., with more than 23 years of real estate experience;

Ms. Duong Thuy Dung, Senior Director Professional Services, with more 11 years attached to CBRE in collaboration with more than 320 national and international clients;

Ms. Nguyen Hoai An, Branch Director of the Hanoi Office, handles more than 300 customers in the North and Central of Vietnam;

Mr. Richard Colville, Director and National Business Line Leader - Asset Services, has managed more than 86 projects with 2.5+ million square of real estate floors;

Ms. Ho Thi Kim Oanh, Director of Valuation & Advisory Service and National Business Line Leader, with more than 20 years in industry and in collaboration with CBRE, has evaluated more 3000 real estate projects;

Mr. Le Trong Hieu, Director of Office Services National Business Line Leader, is the manager of more than 50 large-scale projects with over 1 million square meters of office and industrial real estate.

CBRE

With a team of over 700 leading experts in Vietnam, CBRE allows clients to reach their optimal benefits and cash flow with their investments, achieve advance profitability, and reduce risk to the lowest level in a volatile business environment. CBRE serves clients with high-class international standards.

The Euromoney Property Awards is a prestigious award that was initiated in 1992 and takes place annually, aiming to survey the performance of real estate consultants, developers, investment managers, and banks around the world to identify the best in the industry. Industry professionals from more than 75 countries participated in this year’s survey.

For more information on the 2018 Euromoney Real Estate Awards, please go to www.euromoney.com.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offersa broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com

Image source: cbrevietnam.com


Vietnamese or Foreign Bank ‒ Which Is the Better for Your Business?

By: Keely Burkey

While foreign banking institutions had branches and representative offices in Vietnam starting in the late ‘80s, much of the landscape consisted of the State Bank of Vietnam (SBV), which originally operated as both a private and commercial bank.

In 1990, the SBV produced four offshoot state-owned commercial banks (SOCBs), each focusing on particular sectors of business: Vietinbank took care of the industrial business, Agribank focused on the agricultural money, international trade was taken on by Vietcombank and infrastructure development was handled by BIDV.

If only it were still so simple!

 

Credit: andersreisen

The World’s Banks Beckon

When Vietnam joined the WTO in 2007, foreign credit unions could begin to apply for 100 percent ownership in Vietnam, an attractive prospect for countries like South Korea, which was (and still is) investing billions of dollars in Vietnam every year. As Maxfield Brown, Editorial and Research Specialist at Dezan Shira & Associates told us,

“The big foreign banks that are in the country, they’re primarily focused on the commercial perspective on the biggest investors. They want to make sure that they’re targeting Nike when it comes into the country.”

Right now there are seven foreign banks operating independently in Vietnam:

As more multinational companies enter the market, more foreign banks are vying to be the eighth, Citibank in particular.

However, there are many more foreign banks that operate as representative branches – 49, according to the SBV’s website – and they offer most of the same services, depending on your needs.

Foreign banks are definitely a cause for worry for domestic banks, but not as much as you might think. For one thing, local banks know the market better than any foreign bank could, and name recognition goes a long way in Vietnam.

This has prompted some foreign banks to become strategic investors instead of direct competitors. This option is becoming ever more attractive as the investment cap has been increased from 15 percent to 20 percent thanks to the recent adoption of Decree 01.

Japan, which has no independent bank in Vietnam but is the second-largest foreign direct investment (FDI) presence, is the best example of this. Brown considers this a long-term plan, and a good one at that:

“Over time the threshold for investments is going to go up, and maybe 10 or 15 years down the line they might own those banks outright.”

Credit: mapio.net

But What About You?

So, say you’re opening a business and you’re trying to find the right bank that suits your fledgling company’s needs. You might think that a foreign-owned bank, which has more capital, a better reputation and international experience than a Vietnamese bank, is the way to go. Well, you’re probably wrong.

It all depends on the needs of your business. If you control a large company with sales overseas, sure, a foreign bank is probably your best bet. They’ll offer you more international coverage and provide easier ways to ship money back to your home base, if it happens to be abroad.

Credit: alotrip

However, if you’re looking to open a small or medium-sized enterprise (SME) in Vietnam, a domestic bank is probably a better choice. As Brown reasons,

“If you don’t need to send your money out of the country all the time, and if you’re perfectly happy growing your business domestically, then Vietnamese banks are going to be much more interested in retaining your business.”

You might receive more attention than you would at a larger, international bank, since these banks are often subject to reporting requirements in their home markets that can slow the delivery of key services in Vietnam. Here are Asiamoney’s Cash Management Poll 2016 winners for the top banks for small businesses, both foreign and domestic.

 


How to obtain a temporary resident card in Vietnam?

By: City Pass Guide

What are the cases in which a foreigner can obtain a temporary resident card in Vietnam?

- He/she is member of diplomatic missions, consular offices, representative offices of international organisations of the UN, intergovernmental organisations in Vietnam, or the spouse, child under 18 years of age, housemaid that comes along during his/her term of office. In this case, he/she will be issued with a temporary resident card NG3.

- He/she has a visa of type LV1, LV2, ĐT, NN1, NN2, DH, PV1, LĐ or TT. In these cases, he/she will be issued a temporary residence card NG3.

What do the codes of common visa types in Vietnam mean?

NG3: Issued to members of diplomatic missions, consular offices, representative offices of international organisations affiliated with the UN, representative offices of intergovernmental organisations and their spouses, children under 18 years of age, and housemaids during their term of office.

LV1: Issued to people who come to work with units affiliated with Vietnam’s Communist Party; the National Assembly, the government, Central Committee of Vietnamese Fatherland Front, the People’s Supreme Court, the People’s Supreme Procuracy, State Audit Agency, ministries, ministerial agencies, governmental agencies, the People’s Councils, the People’s Committees of provinces.

LV2: Issued to people who come to work with socio-political organisations, social organisations, Vietnam Chamber of Commerce and Industry.

ĐT: Issued to foreign investors in Vietnam and foreign lawyers practising in Vietnam.

DH: Issued to people who come to study or serve internships.

V1: Issued to journalists who have permanent residency in Vietnam.

: Issued to people who come to work.

TT: Issued to foreigners who are parents, spouses or children under 18 years of age of foreigners issued with LV1, LV2, ĐT, NN1, NN2, DH, PV1, LĐ visas, or foreigners who are parents, spouses or children of Vietnamese citizens.

What are the documents needed to obtain a temporary resident card in Vietnam?

The main required documents needed for the temporary resident card are:

- A written request from the inviting entity
- A declaration bearing a picture
- The passport
- Papers proving your status (such as: Proof of residence registration with ward police where the applicant lives; Work permit (if applicable); Certificate, business registration certificate, licence of establishment of representative office, company branch (including announcement of activation), certificate of seal registration. In the case of family members, proof of relation can include a marriage certificate, birth certificate, or family book).

Note that any papers that are not in Vietnamese must be translated and notarised or legalised according to Vietnamese regulations.

Where can you apply for a temporary residence card?

According to the 2015 Immigration Law, an application for the NG3 temporary residence card must be made to the competent authority of the Ministry of Affairs while applications for other types of temporary residence card must be made at the immigration authority in the same administrative division in which the inviting entity is based or residing.

Therefore, for other temporary residence cards than NG3, your documents need to be filed with the Immigration Department. The government fee varies according to the duration of the temporary resident card, such as: one year: US$80; one to two years: US$100; two to three years: US$120.

How long does it take to obtain a temporary resident card in Vietnam?

Theoretically, the time frame for processing is between five and seven working days.

What is the address of public authority that you need to know to obtain immigration papers?

Immigration Department
Office of the Ministry of Public Security
254 Nguyễn Trãi, D1; +84 28 3920 2300

Immigration Department
Office of the HCMC Public Security
196 Nguyễn Thị Minh Khai, D3; +84 28 3829 9398


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