World renowned fashion brands have continuously entered the Vietnamese market, fueled by its high annual average market growth rate of between 15 to 20 percent.
Casual clothing retailer Uniqlo from Japan has recently announced that it plans to open stores in new markets, including Vietnam.
“We want to have stores in all countries [in the region], especially Vietnam, Laos and Myanmar,” said Satoshi Hatase, group senior vice president at Fast Retailing, Uniqlo’s parent.
Analysts are also sure about the opening of Uniqlo’s stores in Vietnam, explaining that many fashion brands such as Zara, H&M and Mango are present in Vietnam and Uniqlo doesn’t want to lose its part, especially when Vietnamese consumers tend to prefer Japanese goods.
In addition, Uniqlo has so far also shifted its production from China to Vietnam to take advantage of low labor costs. The opening of stores in Vietnam thus will help the company have a completed value chain.
Besides Uniqlo, American Forever 21 is also expected to enter the country soon.
Many foreign fashion brands have so far reported good business performance in Vietnam just after a short time of entry to the country.
Mitra Adiperkasa, the operator of Spain’s Zara retail stores in Vietnam, for example, reported revenue of VND950 billion (US$40.87 million) in the first half of this year, up 133 percent year-on-year. With the launch of its cousins – Stradivarius, Pull & Bear and Massimo Dutti – in the Vietnamese market last year, Vietnam has so far become the second largest market of Mitra, only behind its base in Indonesia.
Swedish giant H&M also posted revenue of VND322 billion (US$13.85 million) from four stores in Vietnam in the first half of this year, of which VND175 billion (US$7.52 million) came from the second quarter alone, up 16 percent year-on-year.
According to a report from consulting firm Savills, reasonably priced clothes are the key of the foreign fashion brands to winning Vietnamese customers. By setting prices for selected items at 15-20 percent less than its stores in Malaysia and Singapore, Zara has triggered a craving for fashion in Vietnam while affordable prices have also been the trump card for H&M’s success in more than 53 countries.
Promising market, stiff competition
Dinh Thi My Loan, president of the Vietnam Retailers Association, said that more than 200 foreign fashion brands present in the country occupying more than 60 percent of the market share.
Loan noted that major fashion brands in the world are very interested in Vietnam because of its high annual average market growth rate of between 15 to 20 percent.
According to the Savills report, Vietnam has emerged as one of the most promising markets for fast fashion brands over the past year, and it’s showing no signs of slowing down.
Pham Thai Binh, head of retail at Savills, said that Vietnam’s fast fashion market is moving and shaking at a dizzying speed. The country is in a period of economic transition, and its consumer behavior is changing.
Fast fashion competition in Vietnam is heating up and most of the key players are foreigners, so Binh warned domestic fashion retailers to be more sensitive to changes in consumer behavior in order to stay in the game.
Though the competitive pressure exerts on domestic fashion firms by the increasing presence of world renowned brands is unavoidable, experts also said that it can have positive impacts in the long run as the stiff competition can motivate domestic firms to change their production methods and business practices in order to stay in business.
Dang Phuong Dung, vice chairwoman and secretary general at the Vietnam Textile and Apparel Association (VITAS), said that the emergence of more international brands would compel domestic companies to diversify their products in all market segments.