The advantages of joining new-generation free trade agreements such as the EU-Vietnam Free Trade Agreement (EVFTA) are expected to provide a fresh impetus for the local retail market to grow following a gloomy period caused by the COVID-19 pandemic, according to insiders. 

Japanese retailer AEON plans to open its sixth shopping mall in Vietnam this year

Economists believe that the success Vietnam has achieved in containing COVID-19, coupled with the implementation of new-generation FTAs, will help the country become a magnet for foreign investors.

FDI inflows are projected to continue pouring into the domestic retail market, which is widely considered the most attractive business in Southeast Asia.

At present, the coverage rate of the modern retail system in Vietnam is much lower in comparison to that of regional countries.

Most notably, the proportion of modern retail system in the country accounts for only 25%, in comparison to the Philippines with 33%, Thailand with 34%, Malaysia with 60%, and Singapore with 90%.

Furthermore, local household spending is projected to increase by an average of 10.5% annually and is set to reach US$714 per month this year, with plenty of scope for foreign investors to fully tap into the lucrative retail market.

Positive signs come after the Vietnamese retail market has attracted a number of popular retailers from the Republic of Korea, Thailand, and Japan in recent years.

Despite numerous challenges posed by the COVID-19 epidemic, several Japanese investors have begun pouring investment capital into the country in an effort to expand production and business.

UNIQLO, a well-known Japanese global apparel retailer, serves as an example as it has continuously inaugurated stores nationwide, with four stores opening the door at major shopping centres in Ho Chi Minh City and Hanoi by June.

Moreover, Japanese retailer AEON has also unveiled its plans to open a sixth shopping mall in Hai Phong later this year, with investment totaling approximately US$190 million.

Similarly, other retail brands such as Ministop, 7-Eleven, and FamilyMart continue to have long-term investment plans to expand their chains in the country.

In addition to these existing brands, the Vietnamese retail market is expected to welcome futter luxury fashion brands and accessories as these segments are less affected by the COVID-19 pandemic.

Pham Ngoc Thien Thanh, deputy director of Research and Consultancy Department at CBRE Vietnam, says there are positive signs ahead with foreign brands returning to gain insights into the Vietnamese market. Indeed, the majority of these new brands are focusing on fields such as shopping, sports, fashion, health, and beauty.