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Due to the reduction in income, Dang Hoang has been forced to reduce spending on three regular items: dining out, coffee and fashion from the beginning of the year to now.
Dang Hoang (31) works in advertising in Ho Chi Minh City. In the past six months, he no longer buys brand-name clothes like before, but looks for cheaper clothes to wear in the live broadcast room. He also saves money on coffee by switching from luxury beverage chains to mid-range beverage chains.
However, he has cut back the most on eating out at restaurants. “I’ve prioritized cooking at home and eating out less often, in part because I’m making less money,” he said.
Deng Huang is not special. A report by market research firm NielsenIQ Vietnam said that 62% of consumers surveyed in the first quarter chose to cook at home to save money, and 32% said they reduced dining out. The proportion of respondents who chose these saving methods has continued to rise since the middle of last year. In addition, 16% of respondents said they reduced grocery purchases and 50% did not buy luxury goods, an increase of 6 and 8 percentage points respectively from the third quarter of 2023.
People shop at a supermarket in District 3 in January 2023. Image: Qingdong
In the past six months, the seriousness of the Vietnamese people has been clearly felt by retail and service enterprises. Han Sovy, director of external affairs at Cosmodern, an e-commerce platform specializing in selling domestically designed fashion (local brands), admitted that purchasing power has slowed down since the middle of last year.
“Big and well-known brands are still selling, but much slower than before. Some newly established small brands have temporarily stopped selling,” he said.
PCS Sports and Events Company, which provides coaching and fitness services, said its business performance showed signs of decline in the first half of 2024. “People are tightening their spending on non-essential activities such as exercise and sports,” said founder and CEO Trong Nhan.
The second quarter survey report released by the Ho Chi Minh City Business Association (Huba) earlier this month showed that while more than 57% of businesses were operating steadily, 30.4% reported a decline in revenue. Among the main difficulties pointed out, “reduced consumer demand” received the highest consensus, reaching 64%.
The decline in purchasing power has led to an increase in inventories, up to 34%. “Due to weak demand and people’s reduced income, the trade and retail sectors have not grown much. In general, businesses are facing difficulties due to the lack of markets,” Hu Ba representative reported at the 6-month socio-economic conference of the Ho Chi Minh City People’s Committee, July 1.
Also at the meeting, Statistics Office Director Nguyen Khoang said that consumption in the second quarter showed signs of slowing down compared with the first quarter. Since 2019, after excluding the factor of price increases, consumption in Ho Chi Minh City has only increased by 3%. Compared with the pre-Covid-19 outbreak, it has halved.
Foreign businesses doing business in Vietnam are also cautious. Specifically, the Business Confidence Index (BCI) recorded by the European Business Association in Vietnam (EuroCham) fell slightly from 52.8 in the first quarter to 51.3 in the second quarter. The EuroCham report said, “Spending levels and business activity showed positive signs, but developments were not uniform across sectors.”
Data from the General Bureau of Statistics showed that in the first six months of this year, after deducting inflation, total retail sales of goods and income from living services still grew by 5.7%. However, compared with the 8.8% growth in the first half of 2023, the growth has slowed down.
SSI Securities noted that retail sales data showed that consumption during the April 30 holiday was not too sudden. At the same time, the underemployment rate for working-age people and the youth unemployment rate both rose in the second quarter. These labor force data will affect household income.
Spending in Vietnam is expected to improve in the second half of this year, but it will require businesses to adapt and stimulate demand. PCS CEO Trong Nhan predicted that the situation would change in a positive direction by the end of the year, but not dramatically. He chose to focus on improving service quality and human resource expertise to retain and attract customers.
Han Sovy said brands on Cosmodern previously usually priced each product at around VND1 million. “Some brands plan to launch more reasonably priced collections, combined with promotions and offline sales in the market,” he said.
Meanwhile, Ms. Nguyen Cao Ngoc Dung, Senior Manager for Market Development of Retail Measurement Services at Nielsen IQ Vietnam, suggested that retailers need the “5 right” points of sale, products, prices, display formats and demand stimulation activities.
The company’s research shows some trends, such as Vietnamese consumers have become accustomed to the existence of new brands and new products, but are not as eager to experience them as before. At the same time, they are very interested in prices, especially the price changes of the products they choose to buy. In addition, customers also tend to increase their consumption in convenience stores and minimarts.
In addition to local consumption power, the purchasing power brought by the recovery of the tourism industry is also a channel that can be sought to be utilized. According to the General Statistics Office, the number of international tourists in Vietnam exceeded 8.8 million in the first half of this year, an increase of 58.4% over the same period in 2023 and more than 4% higher than before Covid-19.
On Klook Vietnam service booking platform, booking demand from Vietnamese tourists in the first six months increased 1.7 times compared with the same period in 2023. Seizing this opportunity, Nguyen Huy Hoang, CEO of Klook Vietnam, said that the platform continues to stimulate summer demand and offers 1,000 rewards for more than 10 destinations. They also work with card issuers, banks and e-wallets to offer discounts and rewards on weekends.
From a macro perspective, in Ho Chi Minh City, the economic hub where Dang Hoang lives, works and consumes every day, Nguyen Khac Hoang, director of the Statistics Office, said that to stimulate consumption, “people must have income, tourists must have a place to spend.” Therefore, more solutions than promotional campaigns are needed.
At a meeting earlier this month, Phan Van Mai, chairman of the Ho Chi Minh City People’s Committee, in addition to instructing departments to increase public investment and solve business difficulties to promote overall economic development, also asked the Ministry of Tourism to find solutions to retain international tourists. That is, the city evaluates tourism effectiveness not by the number of arrivals, but by the number of stays and nights spent. “Customers stay in Ho Chi Minh City for an average of three days during their 12-15 day trip to Vietnam, so how can we increase their stay here to five days?” he said as an example.
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