International retail brands are looking to expand in Viet Nam, thanks to the country’s increasing wealth, soaring economic performance, and rising domestic consumption. On a recent visit to Viet Nam, Nick Bradstreet assessed the country’s great retail outlook.
Asia presents enormous potential for luxury retail. Before the pandemic, China, Hong Kong, and Macau saw enormous growth. However, continued lockdowns and zero-Covid policies have luxury retailers looking to Southeast Asian markets, which have reopened and are thriving.
Savills retail expert, Mr Nick Bradstreet, Head of Asia Pacific Retail, recently visited Viet Nam and gave his insights into the country’s retail landscape. Having worked with brands like Apple, Lululemon, and Victoria’s Secret, Nick is well-versed in supporting international brands within Asian markets.
Thailand and Viet Nam are particularly bright emerging markets in Southeast Asia. Many international retailers, especially those with offices in Singapore, are looking to expand in both countries. Given that Vietnamese customers became accustomed to buying luxury products in Viet Nam during the pandemic and disposable income is on the rise, domestic demand is high.
In H1/ 2022, retail sales of goods and services (RSGS) increased by 16% YoY. The Vietnamese economy grew by 6.4% in H1/2022, which further boosts it appeal with international brands.
Mr Nick Bradstreet noted: "Viet Nam has great competitive advantages. In Singapore and Thailand, brands like Zara and even luxury brands like Louis Vuitton and Dior have five or six stores in large cities. However, they only have one or two in Ha Noi or HCMC. This presents great opportunities for brands looking to enter or expand.”
Many international retailers have comprehensive expansion plans. For example, after opening its first store in 2019, Uniqlo now has 12 stores throughout the country. Maje, Perfect Diary, and Sephora plan to enter Viet Nam but will launch online platforms before building brick-and-mortar stores.
Luxury brands often place their stores in central areas with a concentration of high-end customers. Examples include IFC Mall in Hong Kong, IAPM Mall in Shanghai, or Nguyen Hue Street in Ho Chi Minh City. However, one problem Viet Nam faces is that it does not have enough high-end shopping centres that meet the standards of luxury retailers.
In Ho Chi Minh, one of the few properties catering to luxury brands is Union Square. The property is in District 1 at the intersection of some of the city’s main roads, including Nguyen Hue, Dong Khoi, Le Loi, and Le Thanh Ton.
At the end of 2021, Ha Noi did not have enough room for luxury brands looking to expand in Hoan Kiem. High demand and limited supply also resulted in a 15% YoY rent increase in the last quarter of 2021.
Nick noted that insufficient high-quality supply is hindering luxury brands entering Viet Nam. He said: “Limited supply complicates opening procedures. Luxury brands are hesitant to make decisions and frequently resort to an intermediary to contact landlords when entering a new market.”
Recently, Savills supported Louis Vuitton and Dior find their flagship stores in Ha Noi. LVMH Group chose Savills to source the location and liaise with the landlord. To deliver a space suited to LVMH Group, Savills worked with the landlord and combined several smaller properties into a large space. Because of the complexity of the project, the negotiations took over a year.
Nick commented on how Viet Nam can entice more international brands. He said: “Retailers want well-designed and managed properties with a dynamic tenant mix. They also want landlords to advertise and promote the spaces to draw in traffic. While it might be harder for local developers and landlords because they are unknown on the international scene, relationships are essential to attracting international retailers.”
Conclusion
If you are looking for retail spaces, advisory services, or landlord consultancy, our experts at Savills Retail can help you, no matter your need. For more information, please contact Ms Hoang Nguyet Minh.
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