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#MarketInMinutes: Ha Noi Retail Q4/2021

Although most retail establishments in Ha Noi were shut for much of 2021, there were positive signs of recovery in the last quarter. According to Savills Q4/2021 market report, increasing consumer demands and changes in consumption trends will be beneficial to long-term market recovery.

 

Ha Noi’s Retail Landscape in 2021

Retail performance throughout Viet Nam was knocked by the pandemic. In 2021, Viet Nam’s retail sales of goods and services reached VND 4,790 trillion, representing a -3.8% decrease year on year (YoY). In Ha Noi, retail sales dropped by -4.6% in 2021 as many retailers were forced to close or suspend business activities because of the pandemic.

The closures and poor performance were reflected in the overall market performance. According to Savills Q4/2021 market report, retail occupancy dropped to 92% in the last quarter, equivalent to a decrease of -2 ppts quarter-on-quarter (QoQ) and YoY. With the prolonged lockdown, many tenants were forced to leave their physical stores or vacate early.

By type of retail project, the occupancy rates in retail podiums dropped the most as new projects entered with high vacancy rates.

By offering, non-essential businesses such as gyms, F&B stores, and beauty services were the first groups to have their activities interrupted. As a result, many of these stores were under great pressure to pay rent as they were not earning revenue, and many were forced to close.

Retail Trends for 2022 and Beyond

Since early October, commercial activities reopened in Ha Noi, allowing the market to show signs of recovery in the last quarter. In Q4/2021, the GRDP index (Gross Domestic Product per Region) and retail sales increased by 6.7% and 8.5%, respectively. This performance was an indication of the market improving. Ultimately, increasing consumption and capital expenditure, along with a vaccinated population, are key to long-term retail recovery.

E-Commerce

E-commerce is set to be a trend that outlasts the pandemic. While online retail boomed during the pandemic because of social distancing restrictions, there has been a long-lasting change in consumer behaviour due to the flexibility and convenience online shopping offers. According to Vietnam Credit, e-commerce in Viet Nam grew by 18% YoY in 2021, making Viet Nam the fastest growing e-commerce market in Southeast Asia.

According to Euromonitor International, the value of non-store retailing grew by 24% per annum (pa) between 2017 and 2021. This is monumentally more than store-based retailing, which grew by 2% pa. These shifts in consumer behaviour, coupled with the prolonged lockdowns, meant that many businesses, including leading F&B brands like Starbucks, The Coffee House and Phuc Long, reduced their physical stores and focused on online delivery platforms.

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Multi-Functional Shopping Malls

As customers have access to many retail channels such as e-commerce, shopping centres can no longer solely provide traditional shopping options. Instead, malls must satisfy shopping, entertainment, social and dining demands. Although multi-purpose malls already exist, they will become more popular. The market, and the product offering in malls, is changing as more traditional offerings (fashion, cosmetics, furniture, and electronic goods) has decreased by -14% over the last two years and replaced with non-shopping services.

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Healthcare

Another growing trend is the increasing demand (and supply of) health-related products and services. According to an InFocus survey in October, the sector is one of only three to record positive consumption growth in 2021, and this momentum is expected to continue into 2022. Currently, pharmacy brands, Pharmacity for example, are capitalising on this trend and have massive expansion plans. The increasing demands for healthcare products will create expansion opportunities for services such as fitness centres, spas, and clinics.

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