Vietnam standout country in Southeast Asia for luxury retail: Savills

Vietnam, along with Singapore and Thailand, is viewed as a standout country in Southeast Asia for luxury retail, according to Nick Bradstreet, head of Asia-Pacific Retail at Savills.

“They all share growing economies and expanding high net worth populations, including a widening profile of luxury hotels and members clubs. As a result, several luxury retailers are focusing their attention on them," Bradstreet noted.

Experts at Savills said that Vietnam, along with other vibrant economies in Asia-Pacific remains relatively bright in the global retail landscape, although growth is moderating.

They noted that new players are entering the luxury segment in Ho Chi Minh City although mid-range retail properties for lease in the city and affordable brands are facing challenges due to economic impacts.

Influx of luxury brands

In the last six months of 2023, renowned luxury brands in fashion, jewelry, cosmetics, and watches entered HCMC, including Loewe, Van Cleef & Arpels, and Breitling. These brands have strategically chosen prime locations in District 1, such as Union Square or along Dong Khoi Street. According to Savills HCMC Retail Leasing team, the late-year period will see increased dynamism in the luxury retail segment with the opening of new stores.

Tran Pham Phuong Quyen, retail leasing manager at Savills HCMC, highlighted the growth of a wealthy consumer class and its openness to spending on luxury and branded products that will continue to drive this segment.

“We cannot overlook the development of retail distribution conglomerates in Vietnam, which, with their strong capabilities and significant market share, have persuaded many luxury brands to enter the Vietnamese market,” Quyen added.

Another factor contributing to the vibrancy of upscale and luxury retail is the availability of high-quality retail spaces in HCMC. According to Quyen, after several prime locations completed renovations and upgrades, there are more high-quality retail spaces in suitable locations that align with the business strategies and needs of luxury brands.

According to Savills Global Luxury Retail Outlook 2023 report, excluding the Chinese market, Asia had a 12% share of the total luxury retail openings globally in 2022, and Southeast Asia is a region with strong growth potential.

Medium-term pressures

Alongside these positive developments, Savills experts also identified challenges in the market during the economic slowdown.

According to Quyen, mid-range brands in HCMC are experiencing a decline in sales by 20% to 30% compared to the previous cycle. This is because consumers in this segment are more sensitive to price. During challenging economic times, they tend to be more cautious with their spending and carefully consider price factors when shopping.

To address this, brands and retailers are launching promotions to stimulate demand and accelerate the consumption of inventory before 2024.

The HCMC Department of Industry and Trade acknowledges that retail played a significant role in driving economic growth in the first nine months of 2023. In this period, total revenue from retail sales of goods and consumer services in HCMC is estimated to have hit VND871 trillion ($36 billion), up 8.6% year-on-year.

Simon Smith, head of research and consultancy at Savills Asia-Pacific, stated that retailers face economic challenges in the short to medium term and the threat of e-commerce to asset owners has not gone away. Online shopping habits became more entrenched around the region during the pandemic. This means shops and shopping centers should provide more experiences to attract and retain shoppers.

“Inflation is pushing up construction and labor costs, so asset owners must hope that retailer confidence will continue to grow and support rental growth,” he said.