The retail landscape in Vietnam has undergone a significant transformation over the past few years, shaped by evolving consumer behaviours. This evolution has been further accelerated by the COVID-19 pandemic, which has not only changed the way consumers shop but also prompted retailers to adapt and innovate.

This report will delve into the changing dynamics of consumer preferences that are shaping the retail landscape as well as implications for brands and retailers in Vietnam.

Post-Covid consumer behaviour shift: Less frequent shopping, higher spend per trip

One of the notable shifts in post-COVID consumer behaviour is the decline in shopping frequency. This trend had existed before Covid but intensified during social restrictions and maintained post-Covid. Furthermore, it is observed not only in urban areas but also in rural regions, indicating a nationwide change in consumer habits. As lifestyles become busier, consumers are optimising their routines by shopping less often while focusing on more substantial shopping trips.

This presents both challenges and opportunities for retailers. While reduced foot traffic poses challenges, retailers can leverage this trend by focusing on enhancing the overall shopping experience, ensuring each visit is valuable and memorable.

The evolving retail landscape

Over the past five years, the retail landscape in Vietnam, particularly in urban areas, has witnessed significant changes. Traditional channels such as street shops, wet markets, and general trade outlets have seen a decline in their contribution, paving the way for the growth of modern trade and online platforms.

One remarkable development is the impressive rise of online retail, with penetration increasing from 2% in 2018 to 7% in 2023. Within the modern trade sector, certain channels have emerged as growth leaders, including minimarkets and specialty stores focusing on mom and baby or health and beauty categories, as well as pharmacy outlets.

In contrast, in rural areas, general trade remains dominant, with traditional channels still playing a crucial role. However, there is a gradual shift in consumer preferences, with modern trade and online platforms gaining traction, albeit from a smaller base. This indicates a potential for further growth and transformation in the retail landscape across Vietnam, as consumers in both urban and rural areas increasingly embrace modern retail formats and online shopping options.

Outstanding Consumer Behaviors Shaping the Retail Landscape

1. Consumers are Smarter and More Demanding:

Consumers today have higher expectations when it comes to their shopping experiences.

However, rural and urban shoppers have different drivers when choosing a store. In urban areas, they prioritise factors such as product assortments, store accessibility, and layout. A well-designed and organised store helps streamline navigation, reduce shopping time, and enhance overall convenience. In rural areas, shoppers are seeking stores with a wide range of new product offerings.

Furthermore, shoppers’ decision-making processes seem to take longer as they require more information about promotions, nutrition facts or product origin before making a purchase. To cater to these demands, online and offline retailers are investing in creating rich sources of product information, including ingredients, origin, prices, promotions, and video demonstrations.

2. Shopper Disloyalty: No Ties to One Store

Consumer loyalty to a single store is eroding. Shoppers are no longer confined to a single store for all their purchases. They have a destination in mind for each of the products they want to buy. As a result, the buying journey and shopper expectations greatly differ across product categories.

With an increasing number of options to choose from, shoppers are exploring diverse shopping channels, leading to a decline in the dominance of top modern trade retailers. The competition is fiercer, with various players vying for market share, including emerging modern trade retailers, e-commerce platforms, and specialty stores. Brands and retailers need to adapt to this trend by offering specialised experiences and collaborating to retain customer traffic and loyalty.

3. Exposure to New Experiences

Online shopping has become more than just a trend; it's a fundamental shift in consumer behaviour.

The adoption of eCommerce has grown rapidly, with a boost from the pandemic-induced accelerations. The penetration rate of online shopping has reached 50% among urban households and is rising exponentially in rural territories, accompanied by an increase in shopping frequency.

What does it mean for FMCG brands and retailers

The evolving landscape calls for a strategic transformation for retailers:

• Channel Evaluation: Brands must meticulously evaluate the roles that different channels play in the shopping journey. Understanding which channels drive equity, volume, and revenue is crucial for effective strategy development.

• Assortment Optimisation: A crucial aspect of navigating the changing retail landscape is optimising product assortments across various channels. Retailers must ensure that the right products are available in the right places, enhancing the shopping experience and convenience for shoppers.

• Execute with Excellence: It's vital to acknowledge that what works effectively in one channel may not translate seamlessly to another. This underscores the importance of tailoring strategies and promotions to specific channels. For instance, promotions that resonate well in physical stores might not be as impactful online. Understanding and catering to the unique needs of shoppers across diverse channels will pave the way for a superior shopping experience.

• Innovation and Flexibility: In a rapidly evolving landscape, retailers must embrace innovation and maintain an agile business model. Adapting to changing consumer demands and trends will be instrumental in achieving sustained growth.

As Vietnamese consumers become more discerning and open to new experiences, brands and retailers must not only cater to their immediate needs but also create experiences that resonate on a deeper level.

By aligning strategies with consumer behavior, optimising product offerings, and tailoring experiences to different channels, retailers can not only weather the challenges of change but emerge as leaders in a transformed retail landscape.

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This report is a special publication in Kantar’s Brand Footprint 2023 series, a study that annually assesses the performance of the most chosen brands globally and across different markets. To see the most chosen brands in Vietnam in 2023, click here. To access the Global Brand Footprint 2023 report and brand Rankings, visit Kantar's global Brand Footprint site.