by M.Dung/Quynhlan, Customsnews 05/11/2021, 02:18

Retail industry: Challenging before the wave of Covid-19

In a recent report on the retail market and the Top 10 Reputable Retail Companies Ranking in 2021 published on October 22, 2021, Vietnam Assessment Report Joint Stock Company (Vietnam Report) has pointed out that the retail industry is one of the industries most strongly affected by the Covid-19 pandemic but also shows a quick recovery compared to other industries.

Retail sales growth by month (YOY%). Source Vietnam Report

Retail sales growth by month (YOY%). Source Vietnam Report

Ups and downs month by month

In 2020, although the Covid-19 pandemic began to spread, the destruction was not heavy, Vietnam's retail market still maintained an increase of 6.8% compared to the previous year, retail sales of goods reached more than VND3.9 trillion.

However, entering 2021 with the return of the 4th wave, according to data from the General Statistics Office, retail sales of goods in the first nine months of 2021 is estimated at VND2,779.7 trillion, down 3.4% compared with the same period last year. In August alone, retail sales fell 8% month-on-month and down 25.3% year-on-year, but there was a slight increase of nearly 4.5% in September as social distancing measures were loosened in many provinces.

It is worth mentioning that this impact is not uniform, for durable goods such as gold, silver, gems, electronics, refrigeration, 71.43% of businesses assessed that they were seriously affected, and 28.57% of businesses saw moderately severe impacts.

For the group of essential consumer goods, food and daily necessities, only 16.67% of enterprises assessed the impact as serious; 58.33% assessed that the impact was moderately severe and 25% of the enterprises rated the impact as little or insignificant.

In general, there are four difficulties that the retail industry encountered in the fourth wave of the Covid-19 pandemic, that is being more cautious in consumer spending (89.47%); supply chain disruptions in business and difficulties in transportation (78.95%); ensuring safety for employees and customers (73.68%); meeting the sudden increase in demand for online purchases (57.89%).

Particularly, the fourth difficulty is said to be both a challenge and an opportunity for food and essential needs. At the time of social distancing, online orders at stores and supermarkets sometimes increased by five to seven times, forcing businesses to quickly adapt. However, due to objective factors such as many localities applying Directive 16, websites and apps were overloaded, many orders are blocked, they can't deliver the same day as before, and discount codes are faulty.

Due to the increase in orders, shortage of packaging staff, drivers and regulations on supermarket operating hours, up to 2.94% of respondents were disappointed in the performance of online retailers in relation to product availability or prompt delivery.

Outlook for the last months of 2021

Experts and retail businesses in Vietnam Report's survey said that there are four external factors that will most affect the results and strategies of businesses in the future, that is the ability to control the pandemic and vaccine coverage rate; behavioral change and consumer approaches; consumer income and expenditure levels; the development of e-commerce and the trend of online shopping.

Comparing these four factors with the current context, income is affected and consumers are more cautious in spending to see the growth momentum of the retail industry. Retail sales in the last months of the year mainly come from the online sales channel with groups of fast-moving consumer goods, food, health care and groups of products serving the needs of studying and working online.

In the long term, Vietnam's retail market is driven by other factors as a country with a population of nearly 100 million people, ranked among countries with the strongest middle class development over the decade, and become an attractive destination for many foreign investors.

Overcoming the Covid-19 wave has shown a quick recovery of the retail industry, there will inevitably be expectations for the boom of the market after social distancing directives are lifted, retail stores are reopened, and vaccination rates increase in big cities. Statistics of the securities company Agriseco show that the retail industry ranks third in the groups of stocks with high profitability after the pandemic is under control with an average of 27.7%, standing above a number of industry groups such as: financial services (25.9%), oil and gas production (23.8%), and banking (21.3%).

However, in order for the retail industry to recover quickly, experts and businesses said that, in addition to supporting solutions including: support to stimulate consumer demand (68.42%); additional support through credit support packages, investment incentives and tax incentives (63.16%); support and advice for small and medium-sized retail businesses in the process of digital transformation (47.37%), the government needs to supplement policies to support and manage the online business market (78.95%) to create a healthy competitive environment, in addition to supporting the development of commercial infrastructure, especially digital trade infrastructure such as distribution centers, logistics centers, warehouses, cold storage.