Supermarkets lead growth in Vietnam’s evolving retail scene

One-stop shopping experience poses challenges for the prevailing majority of mom-and-pop shops.

CHANGES are shaping up in Vietnam’s retail landscape, particularly with the rise of modern retail channels such as supermarkets, hypermarkets, and convenience stores.

Retail Asia interviewed Tam Tran, head of markets group at KPMG Vietnam and Cambodia, on the impact of a noticeable slowdown in consumer spending and expansion rate in this retail segment in 2023.

He cited inflationary pressures from real estate and financial markets, as well as weakening export markets globally, for this slowdown, but noted how supermarkets continued to grow. However, this was at a reduced rate, with estimated growth rates hovering between 5% and 7% the past year.

“Supermarkets really bring convenience for the consumers. They’re putting a lot of products under one roof,” said Tam. He said these stores offer a one-stop shopping experience, allowing consumers to easily compare products and prices, thereby reducing shopping time.

Additionally, supermarkets’ stringent quality control measures have instilled confidence in consumers regarding the safety and quality of products on display.

However, the growing popularity of supermarkets and modern retail channels poses challenges for traditional local vendors, including small mom-and-pop shops, which account for up to 90% of Vietnam’s retail structure.

“The shift of consumers moving away from traditional retailers to the modern retailer might [cause] some of these traditional retailers to shut down. But that's part of the trends I guess,” said Tam.

Rise of mini supermarkets

Mini supermarkets and convenience stores have also gained popularity in urban centres like Ho Chi Minh City and Hanoi, driven by the convenience and accessibility they offer to consumers with busy lifestyles.
 
Tam said that, in Vietnam, convenience is uniquely defined, often tied to the ability to park a motorbike close to the store. This has led to the proliferation of mini supermarkets and convenience stores in neighbourhoods, offering quick and hassle-free shopping experiences.

Additionally, centralised procurement by convenience store chains allows them to offer competitive prices, attracting cost-conscious consumers.
 
Recognising the importance of these channels, Tam said some brands are increasingly partnering with mini supermarkets and convenience stores to launch exclusive promotions and products, leveraging their popularity to reach a wider audience.

E-commerce’s influence

E-commerce has also seen explosive growth in Vietnam over the past decade, with sales accounting for up to 20%–30% of total retail sales in 2023, depending on the product category.

The expert noted that the COVID-19 pandemic further accelerated the adoption of e-commerce as lockdowns and social distancing measures prompted consumers to shop online.

Despite the convenience offered by e-commerce, traditional brick-and-mortar retailers, such as convenience stores, have responded by expanding their offerings and improving customer experiences. Many convenience stores now operate 24/7, catering to late-night shoppers and busy professionals.

Also, Tam said partnerships with e-commerce platforms enable convenience stores to offer online shopping with in-store pickup options for high-value items such as mobile phones and laptops.

Sustainable shift

As Vietnam’s middle-income class grows and consumer preferences evolve, Tam said there is a shift towards more sustainable and ethical purchasing decisions.
 
“We are seeing that the consumer, the consumer nowadays, despite their young Gen Z millennials, they actually have reference to a more sustainable and ethical buying,” he told Retail Asia.

Consumers, particularly Gen Z and millennials, are increasingly prioritising eco-friendly products and health and wellness considerations in their buying decisions.

He said brands must adapt to these changing consumer preferences by incorporating sustainability and ethical considerations into their business models, ensuring relevance and competitiveness in Vietnam’s dynamic retail scene.