Modern Vietnam’s Economy: The Rise of the Distribution Chain

HO CHI MINH CITY – Yoga students have to walk past blue and green iguanas and pots of hummus at the entrance to get to Hanna Nguyen’s home studio. Nguyen has started offering training classes by turning the ground floor of his house into a business, while the family live upstairs. The Vietnamese have been doing this for centuries – working on one floor, sleeping on another – but the 21st century has brought new competition: chain stores.

Nguyen competes with Elite Fitness, California Fitness and Yoga, and other big gym brands that were almost non-existent ten years ago.

Hers is a shared house, between work and personal, old and new. Downstairs, she sells homemade kombucha and smoothies to yoga practitioners. Upstairs is her teenage son, who has no interest in the family business and favors syrupy smoothies sold in 24-hour stores.

“I prefer comfort, home-made and local,” Nguyen said on a bright afternoon by the pool, teaching aqua yoga.

But, as with his son, tastes change across the nation of 98 million people.

National and international franchises have established themselves in Vietnam, standardizing grocery stores, dentists, car washes – even street food.

To take a key indicator: the explosion of mini markets crowding out family stores is one of the most obvious signs of changing consumption patterns in Vietnam. The number of people who said they recently visited a store like 7-Eleven or Circle K jumped to 57% in 2020, from just 6% in 2016, according to the Nielsen market research. In contrast, the use of traditional stores contracted by 2.5% from 2018 to 2019. Nguyen sees it as part of a way of life among young people like his son. They hang out in air-conditioned Ministops, go to Starbucks to see and be seen, or take selfies in Vincom malls.

Customers turned to brands for their familiarity and consistency in everything from Spanish Zara clothing to Singapore’s Crystal Jade restaurants.

It’s a far cry from the old way of doing business in Vietnam. Locals used to settle in by renovating their living room or renting a low storefront nearby. They would put up signs, naming the new business after their address or their own first name, and they would soon become the neighborhood cafe, pharmacy or clothing store.

But corporate brands are replacing those old family businesses, a transformation that has taken decades. Today, in this communist country that long ushered in capitalism, there seems to be a business chain for every type of business under the sun: Co.opmart has outstripped wet markets, Kofi Kai coffee, and sandwiches. Nha Trang park their sidewalk carts next to unnamed carts, and Kim Dental competes with family medicine practices.

Call it Vietnam’s chain-ification.

“The Vietnamese market is the promised land for retail chains,” Le Hoang Long, senior manager of Nielsen, told Nikkei Asia. He said the chain store trend is remarkable because it covers such a variety of industries, from maternity wear to health products.

“No other market in Southeast Asia has such a dynamic,” he said.

Each country has seen the franchise boom at a different time and pace. The time has come for Vietnam. Fueling consumption, the country has recorded the strongest per capita economic growth among Southeast Asia’s six major economies since 2017, according to data from the Asian Development Bank released in April.

With more income, Vietnamese demand better and more consistent quality of products and services, said Vi Ton, founder of Beyond Creative Agency, a marketing and design company.

“Even though the price is a bit higher, people are willing to spend,” she said.

Inequalities are growing, but those who can afford it are looking for companies that behave responsibly when it comes to workers, the environment and product safety, she added. Distrust of food safety, in particular, has grown in recent years as locals discovered banned chemicals in their instant noodles, coffee or shrimp.

Facebook said in a 2020 report on the six largest economies in Southeast Asia that brand preference is highest in Vietnam, where 54% of people are inclined to buy more established brands, compared to 45%. in Malaysia and 43% in Thailand.

“People tend to [be] willing to try and change brands, “Ton said.” They want to make sure that if they pay more, it will pay off for the environment and for society. “

Big brands may be a sign of the times, but Nguyen, the yoga teacher, hopes there will still be room for local businesses, where traders know the names of customers or don’t care. ‘they sometimes run out of time to foot the bill.

At her home, customers buy tote bags made by people with disabilities and call Nguyen for random neighborhood advice, such as where to find a notary.

“The reason we do home yoga is because we want us to feel right at home,” she said as she served her guest a peach-colored kombucha.

She avoids mass products like ice cream and syrup-based smoothies. Nguyen understands, however, why her son and many others of her generation consume it: even she’s willing to admit it, the smoothies are tasty and convenient.

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