Retail sector forecast to maintain growth, but challenges persist

The retail sector is expected to maintain growth in the remaining months of 2023 because most retail businesses have appropriate solutions to increase purchasing power.

According to Tran Duy Dong, head of the Domestic Market Department under the Ministry of Industry and Trade, the main goal set for this year is to promote the strong development of the domestic market, striving to increase the total retail sales of consumer goods and services to 8 - 9 percent.

According to retailers, Vietnam's economy is forecast to maintain growth in 2023, but it still faces many difficulties. Especially, competition in the retail market is predicted to be more intense with the participation of new retailers and operation expansion of existing domestic and international retailers.

Meanwhile, many shops in big cities are closed, and many retail spaces in busy business streets are hanging signs for lease. Many supermarket chains continuously reduce prices as well as carry out trade promotion programs to promote consumption in the context of many consumers tightening their belts.

A recent survey by the auditing firm PwC Vietnam has shown that Vietnamese consumers are more cautious in their spending habits from now until this year-end. About 62 percent of Vietnamese consumers say they expect to cut non-essential spending. While 54 percent of Vietnamese respondents say they will spend less on luxury items, followed by travel (42 percent) and consumer electronics (38 percent) because cost increases are prohibitive.

In that context, the retail enterprises in Vietnam have had new and effective ways to increase their purchasing power. Among the methods of stimulating consumption, the important solution is to cut costs in the supply chain, thereby reducing the prices of the goods.

Representatives of some supermarkets in Ha Noi say that consumers no longer go shopping as many times as before and they are more interested in essential items, discounts, and promotions. Therefore, the supermarkets must maintain thousands of essential items at 10-50 percent discount to ensure stability in the purchasing power.

The WinMart/WinMart+ system has implemented trade promotion programs two times a month with discounts of up to 50 percent applied to many categories and also has a non-profit booth for farmers to sell their products.

Vu Vinh Phu, an expert in the retail market, told Journalists & Public Opinions newspaper that the prices of some goods items had increased in the past few months, especially essential items such as sugar, cooking oil, instant noodles, and eggs.

There were a number of objective conditions to make the prices of the goods rise, such as the increase in prices of electricity, water, and textbooks, as well as tuition fees, airline fares, and the cost of seasonal tourism. 

However, the price of input products such as gasoline and oil had decreased by 20 percent to 30 percent for many months, and the freight cost had also dropped.

Phu said that if the price increase at present could not be controlled and even if that situation got worse, it would certainly inhibit the increase in domestic purchasing power.

Vietnam has many domestically produced goods items and imported goods, especially an abundant supply of agricultural and food products meeting domestic consumption and export. But the increase in goods prices will cause difficulties for the domestic market, according to Phu.

Therefore, Phu suggested that the State should supplement the documents on commodity price management when there are sudden price increases that cause market instability, besides the list of goods items under the State management in price.

It should continue to promote the distribution of goods on the domestic market. Production and business enterprises should have close linkages in supply chains to reduce unreasonable intermediaries while supplying goods for shops at trading centers and supermarkets, he said.

The State needed to invest in the development of infrastructure such as roads and ports, modernize the transport means, and build a logistics system to reduce the cost of circulation of goods.

It should also organize trading floors for agricultural products and foods to ensure transparency in trading goods, and focus on the national reserve of essential goods, he added. 

Retail sales up

Total retail sales of consumer goods and services increased 10.4 percent year on year to almost VND3.53 quadrillion (US$149 billion) in the first seven months of 2023, compared to a rise of 15.7 percent during the same period of 2022, reported the General Statistics Office (GSO).

Goods retail sales were estimated at about VND2.78 quadrillion during the period, accounting for 78.7 percent of the total and rising 9 percent from a year earlier. 

In particular, retail sales of food went up 12.9 percent, cultural and educational products 10.1 percent, apparel 8.8 percent, household tools, and equipment 3.6 percent, and vehicles (except for automobiles) 1.7 percent.

Meanwhile, accommodation and restaurant services generated about VND377.3 trillion in revenue, making up 10.7 percent of the total and rising 16.3 percent.

Tourism revenue soared 53.6 percent to VND18.6 trillion, as July was the peak month of summer tourism. Earnings from other services stood at VND356.2 trillion, equivalent to 10.1 percent and up 13.8 percent year on year.

Source: VNS