There remain matters to address but Vietnam’s growing economy continues to catch the eye of luxury names from around the world.
Despite the challenges that were posed by Covid-19, Vietnam’s retail market has been thriving, driven by a positive economic outlook, an increase in the number of high-income individuals, and changing shopping habits among the middle-class population. The World Bank predicts 6.3 per cent economic growth in 2023, with a long-term plan aiming for average growth of around 7 percent to 2030. Such figures indicate that potential continues for luxury brands to tap into.
Estimates from Statista project that Vietnam’s luxury retail market will reach $957.2 million this year, with annual growth of 3.23 per cent to be posted from now to 2028. Rising demand among consumers for luxury goods presents a significant opportunity for brands to expand and invest in the country. As a result, Hanoi and Ho Chi Minh City have both witnessed the arrival of luxury brands such as Dior, Louis Vuitton, Tiffany & Co., and Berluti.
The development of high-end hotels and branded residences has also contributed to attracting a high-spending tourist segment, further enhancing the country’s luxury retail landscape. With the advent of such developments, luxury brands have found new avenues to establish themselves or enhance their presence in existing premium locations.
According to Savills’ reports, luxury hotel developments are boosting the appeal of famous shopping districts. In London, the St. Regis hotel on Conduit Street and Bond Street is elevating the area’s value. Milan’s Portrait Milano hotel on Corso Venezia is attracting luxury brands to set up shops. In Madrid, the debut of the Four Seasons hotel on Grand Via, along with a commercial base, has enticed brands like Louis Vuitton and Jimmy Choo to expand into the area.
“In line with global trends, the upcoming introduction of luxury hotels like Four Seasons, Fairmont, Waldorf Astoria, and Ritz-Carlton in Hanoi is anticipated to create a new upscale shopping hub in the capital, attracting luxury brands to venture into this promising market,” said Ms. Hoang Dieu Trang, Senior Manager of the Commercial Leasing Department at Savills Hanoi.
Ms. Pham Thi Mai Son – CEO Maison RMI
Ms. Pham Thi Mai Son – CEO of Maison RMI shared:
“The fashion retail industry in Vietnam has great potential in the luxury segment, even more so than the mid-tier or mass aspirational segment,” said Ms. Mai Son, CEO of Maison RMI. “According to various forecasts, the fashion retail market is expected to reach some $8.6 billion by 2025, growing at an astounding 8 per cent compound annual growth rate (CAGR). While these rates are hardly surprising given Vietnam’s total economic growth, it really is an exciting time to be working within fashion retail in the country. The fashion industry is very quickly developing to meet the needs of Vietnamese consumers at all price points, and more international brands at all price points are on offer alongside some very talented and attractive local homegrown brands.”
Challenges and opportunities
Despite the immense potential, Vietnam’s luxury retail sector faces specific challenges that require careful consideration. The first challenge relates to location selection for retail outlets. In both regional and global markets, luxury brands typically choose main shopping streets or major shopping centers, where a concentration of large brands exists. However, in Vietnam, finding suitable retail space in prime locations, with adequate space and large storefronts to cater to high-end clientele, remains a challenge.
Ms. Mai Son also considers offline shopping to be important. “The demand to touch, see, and experience high-end brands directly in stores is still necessary for the discerning customer,” she said. “While our e-commerce business continues to grow at a double-digit pace and profitably, unlike many other e-commerce players in the market, we believe our offline stores will still make up the majority of our sales at least for the next ten years.”
Regarding the choice of retail location by upscale brands, Ms. Trang points out that in regional and global markets, brands often choose to establish their stores in prime shopping streets or commercial centers, where major brands are concentrated. Similarly, in Vietnam, brands also select retail spaces on prominent, valuable thoroughfares with large frontages, catering to a high-end customer base. Currently, in Hanoi, Hoan Kiem district remains an ideal location for upscale brands due to its central position and brand recognition assurance. However, the actual supply of suitable spaces in this area is limited.
Additionally, most available retail space in Vietnam does not meet the requirements of luxury brands in regard to store layout, technical specifications, legal transparency, and long-term commitments. “In order to capitalize on the advantages and allure of the Vietnamese market for premium retail, supplementing a reasonable supply is a solution,” Ms. Trang added. “Investors need to focus on building spaces that meet international standards and fulfill the requirements of brands.”
Rise of mid-range luxury brands
Vietnam’s fashion retail sector has enormous potential, especially in the mid-range luxury segment, even more so than the mid-range and mass-market segments. According to various forecasts, the fashion retail market is expected to reach around $8.6 billion by 2025, with a CAGR of 8.6 percent.
This period is particularly exciting for the rapidly-developing fashion retail sector in Vietnam, as the market offers products in every price range to meet diverse consumer needs. Many international and domestic brands have joined the market, attracting customers with high-quality products at reasonable prices.
“Luxury brands will only continue to grow in Vietnam, both in number and in popularity,” Ms. Mai Son said. “That said, we still believe the majority of growth in the fashion retail sector will be in the mass aspirational segment. We can very clearly justify Charles & Keith, Pedro, or MLB growing to 50 stores in Vietnam, but it would be unheard of anywhere in the world for there to be 50 Chanel or Hermes stores in any one country.”
She also said that Vietnam’s luxury retail market is ripe with opportunities for brands that understand and cater to their customers’ needs. To succeed in the market, companies must remain attentive to consumer preferences and invest in creating a seamless customer experience. Understanding the unique characteristics of the Vietnamese market and carefully selecting locations for stores are critical steps in capturing the country’s vast potential.
“The potential in the market is significant for retailers who truly listen to and understand their customers,” she explained. “We pay attention to what consumers are buying from us and overseas to identify which products, collections, and brands work best.”
As Vietnam’s economy continues to grow, the middle-class population expands, and urbanization progresses, new shopping destinations will emerge, not only in major cities but also in previously underserved provinces. Brands that adapt to these changing dynamics and develop effective strategies for the Vietnamese market are likely to thrive in the country’s burgeoning luxury retail sector.
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The interview with CEO Mai Son was conducted by VnEconomy, and released on August 14, 2023. Please read the original article here.
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– Maison Corporation Communication Team –
