INVESTOR RELATIONS

On September 22, 2023, Vietnam Report Joint Stock Company (Vietnam Report) officially announced the Ranking of the Top 10 Reputable Retail Companies in 2023.

The top 10 reputable Retail Companies in 2023 are built on scientific and objective principles. Companies are evaluated and ranked based on 3 main criteria: (1) Financial capacity shown on the most recent year's financial statements; (2) Media reputation is assessed using the Media Coding method - coding articles about the company on influential media channels; (3) Survey of research subjects and relevant parties will be conducted in August 2023.

Retail closely follows the rhythm of macroeconomic movements

Moving in sync with the slow growth momentum of the macro economy, since the fourth quarter of 2022 until now, the Vietnamese retail market has experienced gloomy months. Profits of businesses in the industry are under heavy pressure from weak demand as people's income is negatively affected by the difficult export situation, stagnant production and business activities, combined with the burden of the high-interest rate environment and tightened credit by consumer finance companies.

Entering the last months of 2023, along with positive signs, with each month being more positive than the last month for the economy, two-thirds of businesses in the industry expect that the retail market situation will somewhat improve. improved compared to the first half of the year, although the recovery is not really clear and the speed is quite slow. Meanwhile, the remaining one-third of businesses have a more negative view, saying that with the negative impact of the period of weak consumption and the market having many unfavorable factors, difficulties will persist. Therefore, the recovery takes more time and is likely to take until the second half of 2024 to return to normal.

The wind is reversible in the last months of the year

For the rest of the year, in general, the pressures on retail businesses are quite similar to the first half of the year. The story of weak purchasing power and negative effects from the stagnation of the economy cannot be resolved overnight and continue to be two main concerns with consensus of 100.0% and 92%, respectively. 9% of businesses. Meanwhile, the heat from the fiercely competitive environment in the industry, reflected in price wars in the first half of the year, has subsided in the second half but is still among the top 3 biggest challenges.

Market developments show that pressure on exchange rates has increased recently, with the impact of the opposite direction of domestic and foreign monetary policies as well as excess dong liquidity due to credit growth. weak. Faced with this situation, 42.9% of retail businesses expressed concern and identified exchange rate fluctuations as a major difficulty affecting business operations in the last 6 months of the year. However, the sudden increase in volatility of the foreign exchange market is forecast to be only short-term. The difference between domestic and foreign currency interest rates will gradually narrow as the US Federal Reserve (Fed) enters near the end of the cycle of tightening monetary policy and Vietnam's internal factors such as foreign direct investment capital (FDI) still grows relatively stable (the level of investment capital implemented in the first 8 months of 2023 increased by 1.3% over the same period in 2022), the trade balance of goods from the beginning of the year to now is estimated Trade surplus was 16.26 billion USD and credit growth was boosted in the last months of the year, in the context of production gradually recovering.

Although there are still certain concerns about inflation risks, interest costs, high operating costs or large inventories, the proportion of businesses that rate these as the biggest challenges facing in the first half at the end of the year decreased compared to the first 6 months of the year. Typically, the pressure from high interest costs and large inventories over the same period is expected by businesses to subside in the last two quarters of the year, thanks to macroeconomic conditions gradually improving as many policy decisions are made. launched to stimulate the economy and support retail businesses as well as consumers.

Figure 3: Top 6 difficulties for retail businesses in 2023

Source: Vietnam Report, Retail Business Survey, August 2023

It can be said that the thrust of the Government's support policies is one of the important bases for stable expectations to overcome difficult times, leading to more positive profit margins in the second half of 2023. retail businesses. The State Bank's continued reduction of operating interest rates for the fourth time can help gradually restore consumer credit after bad debt is controlled as well as partially reduce the debt pressure of retail businesses in the second half. by the end of 2023. Along with that, the policy of increasing the base salary for officials, civil servants, public employees and the armed forces from July 1, 2023 and reducing VAT from 10% to 8% will contribute to increasing the economic demand, thereby directly affecting the expected sales of retail businesses in the coming time. Businesses will reduce the pressure to increase commodity prices, while increasing customers' purchasing power.

In addition, when the consumer price index (CPI) gradually cools down in the US - Vietnam's largest export market, the consumer burden will not only be relieved in this market but will have a pervasive impact globally. New orders from the main export market are expected to accelerate from the second half of 2023, which will help reduce concerns about inflation, unemployment and economic recession, gradually stabilize income and bring Vietnam into the economic cycle. new consumption period. In addition, the year-end shopping season will also stimulate vibrant shopping needs of consumers, helping businesses in the retail industry improve their business picture and regain growth momentum.

In the medium and long term, the Vietnamese retail market is considered to be a market with great attractiveness and great development potential. The market size is currently up to 142 billion USD and is forecast to increase to 350 billion USD in the next few years. The return of international tourists to Vietnam this year and the growing trend in the future will strongly support the retail industry. Another favorable condition is that Vietnam is at the peak of its demographic dividend. Large and young population with 100 million people, population size ranks 15th in the world, population structure is in the golden age, with over 60% in working age, rapid urbanization is taking place. driving the consumer class in recent years. In general, in the long term, the development potential of the retail industry will become increasingly large. A growing economy, large and connected population, urbanization, increasing average income and higher living standards are favorable factors supporting the growth of Vietnam's retail market. Male.

Consumption trends

In the context of the market moving in the direction of buyers, any "move" of retail businesses requires a deep understanding of shifts in consumer behavioral trends and the ability to Sensitively identify new trends. Meanwhile, fluctuations in socio-economic conditions at home and abroad in the recent period, along with the rapid and strong pace of the Fourth Industrial Revolution and the demographic change of the class Consumption creates increasingly expanding and diverse demand, which can lead to major impacts on the structure of consumer goods and the retail industry.

Top 5 priorities of consumers when choosing where to shop

Figure 4: Top 5 priorities of consumers when choosing where to shop

Source: Vietnam Report, Retail Industry Consumer Survey, August 2023

The recent increase in financial pressure has pushed consumers to shop more selectively, apply many different strategies to save costs, but be more rational in the trade-off between price and attributes. product uniqueness. Vietnam Report's consumer survey results conducted in August 2023 show aspects of product quality (53.4%), product variety (47.2%), and reputation of brands. Retailers (41.5%) are the top priorities influencing the decision to choose where to shop, followed by promotional programs (37.3%) and the store's geographical location (34 .7%).

In fact, at any time, price is always a concern for consumers. In difficult times, the price factor is paid more attention and is a sensitive issue to purchasing power. Not only that, with more and more choices, consumers not only compare prices of different products but also look for the best deals from many different stores and across different purchasing channels. . Therefore, although not the number 1 priority, having many incentive programs, promotions, and consumer support is still in the top 5 priorities when choosing where to shop for customers.

With a clearer sense of value, consumers are increasingly demanding more stringent product quality, from use, origin, expiration date or safety... to ensure they receive the best value for their customers. the amount of money I spent. In addition, providing a variety of goods has become a factor in building the strong competitiveness of retail businesses, by allowing consumers to search and compare products to find their choice. Choose the one that best suits your needs and preferences. Notably, compared to the 2022 survey results, factors related to the reputation and brand image of retail businesses have increased their influence on consumers' decisions to choose where to shop when the ratio The proportion of customers prioritizing this aspect increased sharply from 11.1% to 41.5%. Consumers trust and prioritize shopping in places with large brand coverage, famous in the industry, good reputation for product quality, customer service, and business ethics, demonstrated through many products. channels, such as quality certificates, and positive reviews from previous customers... In addition, location close to home/workplace and convenient transportation are important priorities for consumers when choosing a location. shopping because it brings convenience, saves time, as well as the opportunity to inspect products directly before buying.

Adaptive strategy

Following the fast-paced business environment with strong impacts from technological advances, increased competition, data explosion and new customer tastes, retail businesses are also proactively making moves to pivot. strategic axis to adapt and change with current trends, changes in consumer habits and culture.

Figure 5: Top 6 key strategies of retail businesses in 2023

Source: Vietnam Report, Retail Business Survey, August 2023

With the goal of strengthening the position of the retail chain and meeting the flexible shopping needs of consumers, multi-channel strategy is considered a top priority for retail businesses. As attracting and retaining customers becomes difficult in the face of limited spending, retailers need to take advantage of the strengths and advantages of all retail formats. Reinventing distribution channels will likely create positive changes. While online platforms have the ability to reach a wide range of customers, physical stores bring intangible values ​​from the experience, especially for the high-end segment. Therefore, retail businesses expect that these channels will complement each other and that operating a variety of sales channels will contribute to optimizing processes, increasing interaction capabilities as well as making optimal use of resources. customer data to be able to provide effective support services or personalized promotions based on shopping history... Creating a seamless shopping experience, as well as allowing consumers to choose Their favorite channel for product research, purchase, and delivery drives satisfaction and builds strong relationships between customers and brands.

Realizing that weak spending power will still be a big problem in the coming time, 63.9% of businesses in the industry said they will continue to implement consumer stimulus programs and competitive pricing policies. membership program… to improve purchasing power. It's important to note that not all promotions are effective. Therefore, businesses also conduct market research activities, apply technology and data to learn about consumer preferences and reactions to different advertising strategies in order to build a plan. Feasibility. At the same time, focusing on cost control to optimize profits is an important solution pointed out by retail businesses this year. With many difficult market conditions, the direction is to focus on in-depth development, optimize store operating costs, inventory, product categories and logistics costs, save money and be ready to cut operating costs. Action against inefficient stores is considered a practical strategy.

The impact of difficulties in the recent period also partly affected the capital and costs for increasing the digitalization of operating activities of businesses in the industry, especially for small and medium-sized businesses. fit. However, in general, businesses still affirm that this is an inevitable trend. Although it may increase costs, in the long run it will help retailers cut costs and reduce operational risks. Therefore, even though the number of priority businesses decreased by 7.7% compared to last year's survey, this strategy still maintains its position in the top 3 key strategies of businesses.

Regarding information quality, a business is considered "safe" when the ratio of positive and negative information difference compared to the total amount of encrypted information is 10%, however the "best" threshold is reached. is over 20%. Among the enterprises studied, 56.7% of enterprises met the threshold above 20%; 66.7% of businesses achieved the 10% level, down 14.8% and 13.8% respectively compared to the 2022 research period. Cases related to the leaders of some large businesses in the past year The past has partly dragged down the information quality of retail businesses in 2023.

In general, in the context of many unknowns affecting the socio-economic situation, the retail market and the position of retailers may still change. Competing with core advantages, keeping pace with changes in the consumption picture, effectively taking advantage of support policies and adjusting growth strategies to suit market trends is not only not only helps businesses overcome the low consumption period but also positions the business for success when entering a new consumption cycle.